For SMEs to have better access to more markets and capital, more data needs to be made available but in markets like the US and Switzerland there are no requirements for private companies to publicly disclose any data on financials, growth or metrics that would be helpful for lenders/investors or customers to have in making decisions.
Marc Barrachin, Head of New Product Development S&P Global Market Intelligence joins us for a quick chat to talk about how this is leading to a better acceptance of alternative data and modeling techniques. Catch the complete QnA:
Can you tell us a little about yourself Marc? We’d also love to hear about S&Ps latest coverage expansion…
I joined S&P Global 4 years ago to lead innovation in our risk services business and then expanded to look after new product development across the division. I love looking at and identifying big amorphous problems and building solutions to address those problems. The SME initiative is one of S&P Global’s major strategic initiatives with a focus on helping our customers get access to more differentiated data and insights on small and medium companies. This will enhance their ability to effectively increase their business and decrease their risks with these private businesses. This year we have released expanded coverage of 10 million companies with financials via our desktop and feeds well as new risk analytics on over 50 million companies via our Credit Analytics business.
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Can you share some thoughts on the state of SMEs in today’s global economy from some of your recent findings?
SMEs have been and continue to be a driver of global economies, whether it is innovation or employment. We can look at SMEs with different lenses: The retail SMEs we interact with in our daily lives. You have the SMEs that are privately funded and building new products/services for different segments. And obviously the SMEs corporations do business with such as suppliers. We see signs of stress across all three. Although private equity funds have more dry powder than ever (over $2 trillion as of the start of 2020, sources: McKinsey, MPD partners), deal activity is down. If you look at suppliers of airlines, cruise companies, or restaurants (and many other industries) you know the challenges. To add numbers to this, the Paycheck Protection Program in the US involved so far 4.5 million loans totaling over $511 billion (source SBA).
How is the Covid-19 pandemic impacting growth in this space- how are you seeing companies pivot during this time to try to ensure a sense of business continuity?
The need for our customers to have better insights on private companies only continues to grow – across use cases (supply chain intelligence, counterparty credit risk, underwriting & surveillance, business development) and geography. The challenges of private company data are many: massive number of companies, global fragmentation of sources, general lack of data in many geographies, poor quality and timeliness of reporting. And it gets more critical as you layer on the pandemic. We have seen some regulators easing reporting requirements for smaller companies, for example in all major European countries -UK, France and Germany- insolvency moratoriums were implemented to give SMEs breathing space and to buy time to see fiscal and monetary policies have an impact. At the same time, this naturally means that data is missing to make informed decisions. This pushes us to consider alternative data sources to capture behavioral changes ahead of potentially delayed filings.
Can you talk about the future of SMEs / Private Companies in the global tech and specifically European market…how will this space shape up in the next few years?
I am born and raised in Europe but have been in the US for many years now. If we believe what we read, then one would think that the US dominates the rest of the world in tech/fintech innovations. But if you closely look at the European landscape you can see a great number of startups/challenger models really getting sticky. Many of these are working in the financial sector and are establishing European wide operations or even expand overseas; great examples are the Swedish Klarna, the German N26 or the British Transferwise. The decentralized nature of Europe allows for a truly diverse set of origins, with strong hubs in London and Berlin but also a lot of innovation coming from smaller towns and cities.
Before we wrap up, would you like to share specific finance management or business tips for Marketing and Sales or Finance teams struggling through this uncertain time due to the Covid-19 pandemic?
During these unprecedented times, flexibility and adaptation are critical. If something doesn’t work, then change. Sounds like a platitude but it is important. No one can stay complacent: because we have done something and it worked for years doesn’t mean it will continue to do so.
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Finally I would say that we should not lose our common sense. It is easy for our emotions and uncertainties to taint our decisions. But as professionals you know your business better than anyone.
S&P Global Market Intelligence is a leading provider of actionable intelligence on the global financial markets and the companies and industries that make up those markets. S&P Global Market Intelligence is a division of S&P Global, which provides essential intelligence for individuals, companies and governments to make decisions with confidence.
Marc Barrachin, Head of New Product Development S&P Global Market Intelligence