Capital Structuring Opportunities in the Post Pandemic Global Supply Chain

What role can the financial system play in improving post pandemic global supply chains?

The pandemic has distorted and disrupted global supply chains. Shelves stand empty and inventory to sales ratios plummet. Manufacturing, construction, retail and wholesale trade are especially hit. Business activity is likely to reduce and prices are increasing in lumber, in consumer goods and other sectors.  Scarcity in semiconductors and the auto sector is now very evident.

I have been dabbling off and on trying to properly frame and then answer a perplexing question : What role can the financial system, and in particular global banks, play in improving post pandemic global supply chains? I conclude that the biggest opportunity lies in capital structuring opportunities.

To support my conclusion I explain how i went about it.

UNCTAD has excellent reports and statistics on global and regional trade flows which provided a wonderful sense of magnitude and context. I also examined literature suggesting that supply chains have become global, fragile and sophisticated ever since China joined the WTO. The basic economics literature and bargaining theory outlines conflicts of interest in trade.

With this background, I now am able to demonstrate that there is a huge opportunity for capital structuring & cost of capital arbitrage within international trade. I explain this with a customer view and financing cost of supply chain perspective and then conjecture on the value-add a global bank (or financing institution) can bring. This value-add can be through participating in supply chain financing cost of capital arbitrage, providing as yet undiscovered financial solutions, creating new mechanisms for driving working capital, driving down cost of goods sold, as well as providing the lubricant to immunize supply chains – which in turn will drive more sales and promote global trade growth.

Author: Sameer_Jain

Partner. Sameer Jain is founder of FinTech ActiveAllocator.com, the world’s first portal that seamlessly integrates traditional, illiquid and alternative investments within portfolios. Prior to this he was Chief Economist & Managing Director at AR Capital. Before that he headed Investment Content & Strategy at UBS Alternative Investments. At UBS, he served as a non-voting member of the Wealth Management Research investment committee, and as a capital allocator was responsible for all illiquid investing including fund manager selection and due diligence across the platform. Prior to UBS he headed product development & investment research at Citigroup Alternative Investments that managed over $75 billion of alternative investments across hedge funds, managed futures, private equity, credit structures, infrastructure and real estate. Here he led a team that developed proprietary models for portfolio strategy and asset allocation with alternative investments, provided investment support and research to pension plans, sovereign wealth funds, endowments as well as internal clients including Citi Private Bank. Before this he was with Cambridge Alternative Investments and SunGard (System Access) where he travelled to over 80 countries for work across Europe, Asia, Middle-East and Africa. He has written over 30 academic and practitioner articles on alternative investments with thousands of downloads at SSRN, presented at over a hundred industry conferences and has coauthored a book, Active Equity Management. Mr. Jain has multiple degrees in engineering, management, public administration and policy and is a graduate of Massachusetts Institute of Technology and Harvard University. He is a recipient of the Alfred Sloan Fellowship and subsequently was a Fellow of Public Policy and Management at the Harvard Kennedy School of Government for a year. He holds Series 7 and 66 securities licenses.

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