29th June 2023: Navigating Bank Failures, Alternative Funding Waves, and Geopolitical Currents in Credit

?? Welcome to this week's Baker Ing Bulletin!

Here's a brief update on key developments impacting our world of credit this past week. Let us know in the comments: What stories are on your mind as a credit professional right now?

To find out what we think this all means, head over to our blog on The Evolution of Credit in the Face of Financial Disruption:?https://bakering.global/2023/06/the-evolution-credit-in-the-face-of-financial-disruption/

?? Facing the Fallout of Potential Bank Failures ??

As the ominous clouds of economic uncertainty gather, the Federal Reserve painted a grim picture of potentially significant losses for major US banks in a hypothetical doomsday scenario. This isn't just about numbers; it’s about the ripple effects that could lead to credit tightening and impact businesses at every level. A robust credit risk assessment, dynamically adapted to the evolving circumstances, is the armour that businesses need. Diving deeper, it is imperative to evaluate the financial health of our clients through meticulous analysis, including stress-testing under adverse economic scenarios. This is the time for portfolio diversification across sectors and regions, as a guard against concentrated risks. To navigate through, we'll need robust credit risk assessment, dynamically responding to the ever-changing tides.

?? The Rising Tide of Alternative Funding ??

There was a reported shift towards alternative funding sources. This change is not just a different way of funding; it's an entirely new ecosystem with diverse and potentially riskier credit portfolios for businesses. The antidote to this is cultivating a deep understanding of these alternative sources, discerning their risk profiles, and grasping the implications on a client's creditworthiness. Regularly keeping an eye on our clients' financing mix, and adroitly adapting to changes, will be woven into the fabric of our risk evaluation process.

?? Brexit and the Supply Chain Challenge ??

Brexit continues to reshape UK manufacturers' relationships with EU supply chains. Brexit is not just a political change; it's an economic hurricane that continues to reshape UK manufacturers' relationships with the EU. Possible disruptions in cash flow due to this seismic shift can have cascading effects on credit standing. To weather this storm, businesses must delve into an in-depth analysis of clients’ supply chains, understanding the intricate relationships and dependencies. This is especially vital for businesses heavily reliant on cross-border supply chains, as they stand at the crossroads of geopolitical changes. Discover how to secure your supply chains amidst the Brexit whirlpool

?? Navigating the Current of Trade Disputes ??

Trade disputes are not just policy disagreements; they are currents that can steer markets. The EU’s rebuff of the US offer to terminate the steel tariff dispute is emblematic of the power that geopolitical movements wield over market volatility. Our credit strategy should encompass geopolitical risk evaluation, which will shape how we view clients operating in or dependent on sectors embroiled in disputes. This calls for a prudent approach in determining credit limits and terms. Learn how to navigate these disputed waters with us.

?? Unearthing Opportunities and Risks in the Energy Sector ??

Rapid changes in the energy sector due to China's energy overhaul and India's planned battery subsidies point towards heightened credit risk. The energy sector is like a chameleon, with rapid changes being the only constant. This necessitates an astute, sector-specific risk assessment approach, taking into account the unique risks and opportunities in the energy sector, influenced by regulatory changes and market volatility.

In the wake of this week's Baker Ing Bulletin, the astute reader may recognise an urgent call for a renaissance in credit strategy - one that embraces a multifaceted and fluid approach to risk management.

The bank failures point to the fragility of the traditional pillars we lean on. Alternative funding, meanwhile, showcases the emergence of a more democratized yet mercurial financial ecosystem. Brexit and trade disputes equally underline how political machinations can abruptly alter the trading environment.

Here lies the crux: B2B trade credit is no longer just a financial tool; it’s a constantly evolving organism that feeds on geopolitics, innovation, and global trends.

Companies must now be both economists and diplomats, understanding not just balance sheets, but global currents. They need to build strategies that are both deeply analytical and remarkably agile, ready to embrace new funding avenues and preempt geopolitical quakes.

In essence, the landscape dictates a metamorphosis from a number-crunching accountant into a worldly strategist - one who sails the treacherous waters of global finance with an astute eye on the horizon and a versatile hand on the helm.

As always, we value your input – so feel free to share with us your thoughts and the stories that are keeping you engaged.

Trade credit dynamics move quickly. Stay ahead with Baker Ing - visit?https://lnkd.in/eGtpFDJS?for in-depth insights and analyses.