1. Socialising Working Capital-Trends And New Models
Igor Zax, CFA

2. Credit Crunch-Where are we?
Credit losses only mildly increased so far, while financial markets expect massive increase over time
This expectation is likely to become a self fulfilling prophesy

3. Working Capital Financing and Insurance
Trade Receivables
% Insured
% Financed
Europe 35 5 UK 30 6 US 4
In Europe, credit insurance is extremely important
Good news if you have it- you may have a high quality asset (despite some cuts in cover)
But your supplier may not be the one making decisions

4. Working Capital Management
If you can get paid quickly, do so, but mind the cost (EPD may eat your margins)
Finance receivables if you can - and utilise your credit insurance to arrange funding
Manage your inventories
Be careful with late payment - today people assume worst
But try to encourage supplier to extend terms, especially if they still able to insure/finance.

5. Platform Company Concept
Where should working capital be?

6. Distribution example Supplier Distributor Credit Insurance? Factoring?
Securitisation?
What credit limit?
Sell
purchase
Supplier
Distributor
Payment
Risks:
Distributor credit risk
This risk may be highly concentrated
Customer credit risk (if distributor has little capital)
Product liability (any case)
Provides:
Marketing/Sales
Logistics
Service
Working Capital Finance?
Risk mitigation???
Diversified risk?
Low concentrations?
Single vs. multi tier?

7. Distribution example Supplier Distributor-now agent? Credit Insurance?
Factoring?
Securitisation?
What credit limit?
Sell
Supplier
Provides:
Marketing/Sales
Logistics
Service
Collections?
Performance risk mitigation?
Distributor-now agent?
Diversified risk?
Low concentrations?
Single vs multi tier?
Low working capital needs

8. Why Do You Need Working Capital-Business Model?
Working Capital needs are related to business model, not necessarily value added
Supplier’s prime concern now is risk
Variety of legal structures to mitigate risk, while reduce working capital needs
Similar models can be applied to contract manufacturing, printing, material processing, etc.

9. Thank You
Igor Zax, CFA