Finance | 3 Minute Read
Organizations that move money through the international monetary system know the inherent risks associated with currency value fluctuations, payment delays and the associated losses on accounts payable and receivable. They also suffer through the daily difficulties of payment scheduling, currency management, currency risk, payment reconciliation and reporting for both accounting and legal requirements.
Many corporate executives are hard-wired to default to their bank for international payables and receivables. However, traditional banks not only charge a high rate, they are not designed to mitigate the risks of currency value fluctuations or handle exchanges in nearly every country. An integrated global payment solution that mitigates these costs and risks must be central to the business plan of every organization from start-ups to large publicly traded multinationals. The global payment solution must drive down payment transactions costs, provide instant settlement in local currencies, hedge currency risk and convert an expense into a revenue generation event.
Critical Mission Consulting approaches risk mitigation as a means of unlocking venture value and unleashing revenue potential. To accomplish our goals, we formed a strategic partnership with AFEX Global Payment Solutions. AFEX is a global payment industry leader with offices around the globe and a financial technology solution that allows complete integration with a company’s existing accounting and legal systems. AFEX has a payment solution for our clients in all sectors, including but not limited to, import/export, claims management, education, corporate service providers, freight forwarders, funds and wealth managers, NGOs and charities, real estate, travel and entertainment. Critical Mission Consulting, powered by AFEX, is not a traditional bank.
Our technology delivers more capabilities than conventional banks with superior, high-touch, customer service. Critical Mission Consulting, powered by AFEX, payment solutions include:
The Critical Mission Solution, powered by AFEX, fintech solution is plug and play (no costly integration or proprietary software required). Their expertise streamlines integration into your current system, creating opportunities to scale via a suite of API’s or batch processing. Alternatively, payments can be managed via AFEX’s secure online user interface. Speed, accuracy and value protection is the oil that keeps accounts payable and receivable moving smoothly.
The strategy of CMC is to identify every available device to drive down risk and costs and drive up value for every venture. The launch of our integrated global payment system is precisely the type of risk mitigation tool our clients demanded, and we delivered.
To learn more visit our Global Payments Solutions visit our landing page at CriticalMissionConsulting/AFEX.
For more information or to schedule your no cost no obligation international payments analysis, contact an advisor Request AFEX Info.
AFEX is a leading global payments specialist, offering tailored solutions since 1979. We serve more than 35,000 clients from offices across EMEA, APAC and the Americas, facilitating payments in over 100 currencies to 180 countries every day. Our unmatched global payments infrastructure provides extensive payment rails, including same-day and real-time payments. By combining forward-facing technologies, including our customizable, flexible APIs, with end-to-end support and personalized risk management strategies, AFEX helps clients and partners around the world manage global payments efficiently and securely.
CMC is a recognized business strategy leader providing business management and boutique risk mitigation tools to build organizational value since 2013. From new venture start-ups to established publicly traded businesses, CMC employs insurance, currency, and information technology solutions to enhance valuation, shift risk and strengthen credit for bond issuances and capital raises. Our team, comprised of entrepreneurs, tax & legal advisors, and C-suite executives, with decades of experience on “both sides of the table,” enhance strengths and identify risks to position clients for financial success.
A conversation with Nemo Perera of Edge Management on the efficacy and necessity of Performance Guarantee Insurance (PGI) when seeking financing for green technology projects during a global pandemic.
Q: First question, Nemo, before we jump into green tech and financing – is performance guarantee insurance real and if so, where has it been all this time?
A: Great question. I get asked this every day – more than once. Yes, PGI is real. While there have been some costly, off the shelf products in the market for years, Edge Management in close partnership with double A rated global insurance companies, makes it possible to for us to create a bespoke insurance product for many different types of ventures and deal structures, allowing for both risk mitigation and credit enhancement. Edge has been binding these policies for some time now but the recent Covid-19 pandemic and the ensuing market uncertainly and hesitancy to deploy capital has put PGI front of mind for many investors, borrowers and lenders.
Q: Moving now to green tech, why the sudden boom in interest and how has this impacted PGI?
A: Interest in green technology projects is indeed growing. A confluence of factors is driving this, including aggressive corporate and government renewable energy goals and investor demand for “green” bonds and exposure to companies with credible environmental, social and governance (ESG) policies. Historically, investors appreciate that many green technology projects are based on proven technologies, have existing supply chains and established demand all of which make financing these projects relatively straightforward, even in these times.
However, in response to the massive amount of demand for new green projects, and the current pace of technological and economic change, companies are rolling out green projects that employ novel technologies and can require new types of supply chains and offtake markets. Lenders see these projects as risky, and since many banks are tightening lending standards due to the Covid-19 pandemic, financing them is a challenge. These are the reasons why Edge GreenTech has developed Performance Guarantee Insurance which is a multi-factor risk management solution, to reduce the risks of these new, green technology projects and secure advantageous financing.
Q: Can you give us an idea of the size, scope and scale of the green tech market and what’s driving it?
A: The extent of demand for green technology projects can be seen in forecasts for electricity generation. BloombergNEF, a research arm of Bloomberg LP, estimates that global electricity demand will rise 62% by 2050, requiring $13.3 trillion worth of new investment in generation. The firm expects most of this will be invested in wind and solar generation projects. The urgency for green technology projects is one reason why the Covid-19 pandemic has not seriously dampened interest in them. At the end of July, ESG-targeted exchange-traded funds had grown to approximately $100 billion in total assets. Meanwhile, two of the world's largest asset managers, BlackRock and Pimco, have joined Climate Action 100+, a group of institutional investors with a total of $47 trillion dollars in assets under management. The group is pressuring the world’s top greenhouse gas emitting companies to achieve net zero emissions by 2050, a goal that will require massive investment in green technology to accomplish.
Q: Can you also speak to the bond market as it relates to green technology and how PGI comes into play?
A: Not surprisingly, the green bond market has also been booming, despite the pandemic. According to market data firm Refinitiv, the first quarter of 2020 saw a slight drop in green bond issuance compared with 2019, but a sudden uptick in April brought proceeds for the first 5 months of the year to $53.3 billion — a 3% year over year increase. Unfortunately, green bond financing is often not appropriate for complex, limited recourse project financings. Typically, companies have hired banks to structure, manage and lend to these projects, often with a bond takeout of the institutional term loan once the facility was running profitably. Banks are better suited to both initial and ongoing credit evaluation and oversight than are bond buyers, who outsource that work to ratings firms. But banks, unlike bond investors, have been retrenching during the pandemic. In the second quarter, two-thirds of the banks surveyed by the Federal Reserve tightened their loan standards. Over a third said they were tighter than at any time in the last 15 years.
So, the challenge for green technology project companies is to reduce the uncertainty inherent in these novel projects, boosting their credit profile so that they can achieve attractive financing from wary banks or in the capital markets.
Edge's PGI product risk manages the supplier, process and offtake aspects of the project using bespoke insurance facilities for each. Edge can then provide an overarching layer of insurance to cover any other risks, thus protecting the project's profitability and creditworthiness. It is with this comprehensive approach, leveraging Edge's risk assessment and mitigation expertise, that PGI adds its real value. If the project company has already identified a potential lender or equity investor, Edge PGI facilitates the deal by providing, essentially, a synthetic financial guarantee. If not, Edge can use the approach to secure an investment-grade rating, allowing the project to fund itself in the bond markets.
Q: Can you give us an example of a green tech deal where PGI was utilized?
A: One of the first PGI beneficiaries was a company seeking $300 million for two renewable diesel facilities. Since this was a pre-revenue situation, financing options were scarce. Edge structured a PGI program that provided an overarching umbrella coverage that guaranteed the projected revenue of the two facilities for the next 10 years. The PGI program underwrote every aspect of the operation, including the novel technology that would ultimately drive its revenue. Leveraging this coverage and its proprietary ratings model, Edge was able to secure an investment-grade rating, and the project obtained financing from lenders at an attractive rate. It plans to follow up with another $200 million in bonds. Financing novel green technology projects was always challenging. The pandemic has made some aspects of it more difficult. However, a well-crafted risk management tool like Edge PGI can help companies clear hurdles and develop profitable green projects that will be sorely needed in the coming years.
Q: Can you give us a timeframe to put PGI in place for green tech deal?
A: Once the feasibility work is done we can have the necessary policies in place in a matter of weeks.
Businesses have expended significant time and capital to create a robust online presence. Now the economy is at a standstill with uncertainty about how and when business will get back to normal or a new normal. During this time, it is critical to evaluate your media strategy and online presence.
It should go without saying that this is a sensitive time. As much as you want to keep your business operations active, what you say and how you say it could make or break you. Press PAUSE and take time to think about your communications – this is not a time to take advantage of the crisis to improve your bottom line. Some thoughts about media strategy and crisis messaging:
It can’t be stressed enough that during this unique, shared, universal crisis that everyone is in the same boat. This crisis isn’t just your crisis. The standard “crisis management” rules are a good baseline; however, your media strategy must be aligned with more than protecting the bottom line. It should be forward looking to foster an enduring brand and corporate culture.
The current Covid-19 crisis is fracturing the workplace and having dramatic consequences for managers and employees. There are financial, technical and cultural challenges. The traditional office, with clear hierarchies, must now function in the virtual space. Yesterday you might have had a seat at the head of the conference table and now you are just another head in a teleconference box. The virtual space gives the impression of many among equals. That, however, is not reality nor is it the reality that will drive a productive remote workforce.
If you were a senior executive or manager yesterday, you are still so today. You have a team to lead and now, more than ever, it’s imperative to ignore the traditional labels and cues associated with “being the boss” and rise as an effective leader.
With the workforce on lockdown and constrained by remote work, it’s imperative to exercise the leadership skills that will guide the team through the crisis.
General Stanley McChrystal has a distinguished military career rooted in his effective leadership. He has written often about the traits of a leader. In his book, Team of Teams: New Rules of Engagement for a Complex World, he writes: “Purpose affirms trust, trust affirms purpose, and together they forge individuals into a working team.” You and your team are in this crisis together. Your leadership will pave the way to coming out of it intact.
Remote work is nothing new. Recent Census Data reveals that 5.2% of workers in the US work from home and 43% worked from home on periodically. The coronavirus, however, has generated a seismic shift in these numbers across the globe as nearly every worker with a job is doing business from established or make-shift home offices. Organizations of every size have the C-suite, managers and employees working remotely.
The technical infrastructure for virtual work has more or less been in place for years, however, the sudden shift from workplace or no workplace has had a profound impact on leadership, management, employee engagement, HR, and culture. Instead of break room gossip sessions, sneaking out for a cigarette, constant interruptions by colleagues and seemingly unproductive meetings, the workplace is now contending with kids, dogs, slamming doors and embarrassing teleconference moments. This is the new normal and normalizing it will be critical to success.
During this crisis, communicating to employees about the expectation for how remote will be conducted and what the rules of the new road will be are essential. As social distancing sets in and behaviors change due to a lack of social and physical engagement, both positive and negative “workplace” behaviors will emerge and reveal themselves on conference calls and teleconferences.
Communication is the key for remote work to be successful especially in a time of global health and economic crisis. Employees can perform if provided the tools but how they perform and interact will be driven by strong leadership. Here are a few good guidelines for managers and employees alike to promote a safe and productive virtual workplace:
Distance doesn’t mean the workplace culture has to fall apart. Evidence suggests remote work can increase productivity and employee happiness. The goal now is to ride out the crisis, keep the team engaged and productive. If you lead, the team will follow.