Orbian’s Approach to Supply-Chain Finance
by Andrew Notman, Group Treasurer, Orbian
Orbian is the world’s leading provider of supply chain processing and finance solutions. It was launched in 1999 as a co-venture between Citibank and the German technology giant, SAP.
Orbian is now a privately held company with headquarters in Norwalk, Connecticut USA, and its European office, which includes the systems development, the operations centre and the entire Group Treasury operation, situated in the City of London.
Orbian offers a multi-currency financing service and capability to its current and prospective clients.
The first customers of Orbian were initially corporate customers of banks, but the demand for supply-chain finance (SCF) solutions has grown and Orbian is now successfully developing an international network of corporate clients, offering an innovative financing solution that provides attractive benefits to both ‘buyers’ and ‘suppliers’ who are mutually engaged in trade transactions.
Orbian successfully launched the first proprietary US Capital Markets funding program in 2005, providing cost-effective receivables finance benefits to its customers, and is well positioned to continue its growth. Combining the capital markets capability with traditional bank lending arrangements gives Orbian the ability to deliver a very unique bank-neutral financing capability to a broad range of clients.
Orbian has made significant investments in technology and general infrastructure, so that it now offers a multi-currency financing service and capability to its current and prospective clients, on a global basis. The organisation presently serves 29 Fortune 1000 buyer clients and thousands of supplier clients, located in more than 30 countries around the world. The equivalent of more than US$22 billion in trade flows has so far been processed through the Orbian platform without error - a remarkable achievement in itself.
Orbian combines its state-of-the-art payment and settlements platform with its innovative funding capability to deliver a mutually beneficial supply-chain finance solution to buyers and suppliers alike. Some of the benefits include, but are not limited to: improved working capital management and margins; interest cost reduction; credit exposure elimination and immediate cash-flow improvement. These are all achieved through:
- Innovative approach to receivables discounting;
- Efficient raising of funding on the international capital markets;
- Efficient bank-neutral funding arrangements;
- Pricing that is based on the credit rating of the buyer, instead of the supplier;
- Effective management of cash movements for both buyers and suppliers.
The fundamental issue of traditional trade finance
Orbian offers a unique and highly effective solution to the classic challenges of managing trade payables and receivables, in the underlying payment, settlement and finance processes. There is more to this issue than the natural working capital management tension relating to the timing of payments:
- Suppliers naturally would like to be paid rapidly, to minimise their financing costs, and also to minimise credit exposure so that their working capital is not tied up for relatively lengthy periods;
- Buyers of course have no compelling reason to impair their interest income/expense performance by making payments earlier than they have to; yet
- Each party is reliant on the other to sustain a competitive advantage in the market place.
Beyond this, there lies an equally profound issue, which is the impact of buyers’ and suppliers’ credit ratings on their cost of capital and their ability to raise funding. Orbian’s supply-chain finance approach serves both parties’ optimisation objectives through a process of collaboration. This collaboration creates efficiencies through an environment where buyers and suppliers engage in pro-active dialogue culminating in an agreement in which both parties share the derived financial benefits, thereby strengthening their long-term relationships.