Financial intermediaries

Market professionals include the banks and specialist financial intermediaries mentioned above, firms that one would not automatically classify as investors, although they will also have an investment objective. Their time horizon will range from one day to the very long term. They include the proprietary trading desks of investment banks, as well as bond market makers in securities houses and banks who are providing a service to their customers. Proprietary traders will actively position themselves in the market in order to gain trading profit, for example, in response to their view on where they think interest rate levels are headed. These participants will trade direct with other market professionals and investors, or via brokers. Market makers or traders (also called dealers in the United States) are wholesalers in the bond markets they make two-way prices in selected bonds. Firms will not necessarily be active market makers in all types of bonds smaller firms often specialise in certain sectors. 

The steady rise of the other industrial (i.e., the nontelecom and nonauto sectors), reflected the aforementioned desire to diversify the companies funding sources away from banks as well as the need to finance mergers. We should not take the bank disintermediation story too far, however. The idea seems attractive. Banks, as financial intermediaries, stand between lenders and borrowers of funds. To earn a profit out of these activities, they take a margin from the difference between their cost... 

Berlin, M. (2003) Trade credit why do production firms act as financial intermediaries Business Review, 3, 21-28. 

Fisman, R. and Love, I. (2003) Trade credit, financial intermediary development, and industry growth. The Journal of Finance, 58 (1), 353-74. 

E-trading platforms. Because of the neutrality they offer to suppliers and custom-rs, the natural owners of the e-trading platforms will be independent companies. However, any intermediary wiU depend on the support of major industry players on the suppHer or customer side. The independent entity could, like Enron, also provide special financial skills outside the core competence of chemical companies. Chemical companies would be well advised to apply the same equity-holding approach to e-trading platforms as described above for e-exchanges. 

To effectively assess the costs and benefits of multi-channel distribution, manufacturers and intermediaries alike must understand the cross-channel tensions that can arise. The desire to use multiple channel types may ultimately compel a manufacturer to redefine its relationship with its intermediaries, with careful attention to the division of labor and any associated financial terms. Indeed, the management of channel conflict is a key B2B concern that will profoundly influence supply chain success in the age of eBusiness. 

Given the probability of occurrence of the initiating event, which is supplier non-performance, and the probabilities for the various intermediary events, we can calculate the probability of occurrences for each of the end states or outcomes. Furthermore, each of these end states may result in different levels of supply shortfalls and financial cost. Hence, given the probability of each end state and the supply shortfall or financial cost for each end state, we can calculate the expected shortfall or financial risk for the non-performance of a given supplier. Such an analysis can be repeated for each supplier, and the least risky supplier can be identified as the one whose non-performance results in the least expected supply disruption or least expected financial loss. 

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