8JULY 2024OPINIONIN MYBy Joao Galvao, Managing Director, Head of Trade Finance Sales, Americas, Standard Chartered BankWhile a US recession may prove to be insignificant or likely avoided entirely, the geopolitical outlook inspires caution, and companies engaged in global trade would do well to take a closer look at their financial supply chains to ensure they're well-equipped to deal with the impact of growing trade tensions. The majority of economists believe that the US will avoid a recession. Though there are signs of better-than-expected GDP growth, a surprisingly strong job market, and a healthy level of consumer spending, the economy is still reeling from the consequences of successive interest rate hikes and stick-high inflation.Against a backdrop of global macroeconomic uncertainty, especially considering geopolitical tensions and the possibility of material shifts in trade policies with an unprecedented number of elections this year including US, the outlook presents a worrying scenario for companies. Corporations face the challenge of higher working capital and greater risk mitigation needs, while simultaneously striving to strengthen their supply chains to unprecedented levels of resilience.While a 2024 downturn is unlike. There is consensus that the supply chains are shifting, and planning and preparation will be key in establishing a more resilient and diversified supplier base to navigate any `known unknowns.'The good news is that companies today have more time to do so than in prior years of crisis, such as in 2008 when the events were fast and tumultuous, surprising many companies and leading to a rushed implementation of strategies and solutions to mitigate the impact.Given the volatile situation today and lessons learned during the financial crisis and pandemic era, it is prudent that companies act now to gear up for the impact of a period of disruption on their supply chains. Regardless of whether or not we enter a recession, there is a consensus that credit markets will continue to tighten, which is particularly concerning for small and medium-sized enterprises (SMEs), and in turn the supply chains to which they provide vital inputs.Trade Finance Matters During the 2008 financial crisis, large investment-grade companies came to the aid of their suppliers by issuing letters of credit, providing down payments on purchase orders, and extending various other kinds of working capital support to sustain their global supply networks.Although some of these measures were far from ideal from a treasury management perspective, they helped to accelerate the importance and implementation of trade finance solutions. BUILDING RESILIENT SUPPLY CHAINS AMID ECONOMIC AND GEOPOLITICAL UNCERTAINTY Joao Galvao
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