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VALUE PROPOSITION


The Recipco solution is designed so that it:
  • Generates a new source of working capital directly from available capacity, thus
  • Facilitates treasury and cash management by reducing reliance on cash, bank credit, traditional sources of trade finance, and fluctuations in the foreign exchange markets;
  • Increases sales and market penetration by listing capacity available for sale through Recipco;
  • Lowers operating costs and increases revenues through the acquisition and sales of goods and services at advantageous prices, made possible by the non-monetary trading of capacities that have different contribution margins;
  • Improves capacity utilization, and thus helps avert closures of production facilities in periods where purchasers have limited access to cash;
  • Enhances margins for high liquidity producers by selling to, and procuring from, higher margin producers.

Relevance in situations of constrained cash or credit

Recipco provides an innovative liquidity management solution that makes it possible for organizations to reduce their dependence on cash reserves and bank credit by enabling them to create new sources of working capital from their available capacity.

This solutions allows Recipco Participants to use their available capacity to acquire required goods and services that they normally would have to purchase for cash. The overall impact is improved utilization of capacity, increased working capital, expanded purchasing power and ultimately a conservation of cash and credit resources.

Symmetrically, Recipco Participants can also benefit by being able to sell to customers who may otherwise be at risk of reducing or canceling purchases due to cash or credit constraints.

In this manner, the Recipco model represents a protection not only against reduced purchasing abilities due to constrained cash or credit, but also against declining sales due to customers having less access to cash or credit.

The ability to convert available capacity, for which the production infrastructure is already present, as a means to procurement through Recipco, constitutes an alternative source of financing or credit. This source of financing is independent of cash reserves, credit ratings and foreign exchange rates. By reducing the need for cash and for lines of credit, a Recipco Member can focus its cash utilization on payroll or debt servicing, and could even improve not only its statement of cashflows but even its overall credit rating.

Margin Differentials and Capacity Utilization

In general, margins vary in inverse proportion to liquidity, which is itself comparable to capacity utilization. For highly liquid, commoditized products, where almost all capacity is utilized, margins are razor-thin, whereas margins are much higher in industrial sectors where excess or perishable capacity is common.

Thus, a producer from a high-margin sector can maintain or improve profitability even while reducing margins when there is an increase in capacity utilization beyond that corresponding to a determined price.

Conversely, a producer from a high-liquidity, low-margin sector can improve its margin by shifting part of its production from the very tight cash market to selling through Recipco where it can essentially sell at a premium in the non-monetary market, versus using cash. The opportunities arising from these margin differentials constitute the fundamental micro-economic value proposition of trades made through Recipco.

Growing Sales and Market Share

Recipco constitutes an additional distribution channel for selling products and services. More specifically, a seller can differentiate himself from competitors who are not members of Recipco, by being able to make non-cash sales to a client who otherwise may not have been able to purchase due to lack of cash or credit.

When selling to an enterprise having lower margins, the seller is able to make his offer more appealing by allowing the buyer to enhance his own margin.

Conversely, when selling to a Recipco member having higher margin, it is more likely that this buyer member would be in a situation to prefer not using cash; companies with high credit ratings and strong cash positions tend to be low-margin providers of highly liquid, commoditized products.

Social Purpose and Impact

Recipco has created a non-inflationary, private sector alternative mechanism of exchange based on under-utilized or otherwise available production capacity that helps participating entities (private corporations, government institutions, inter-governmental or non-government organizations) overcome lack of access to cash and/or access to conventional forms of credit or trade financing. This mechanism creates liquidity in a more fair and equitable way, thus encouraging broader participation in global trade.

The potential Social Purpose Impact of the Recipco solution on today's and tomorrow's global economy include:
  • Encouraging meaningful and sustainable participation in the global economy by emerging markets or others whose core economic capabilities are offset by an unfavourable situation in regard to their national currency;
  • Stemming job losses and improving corporate and/or government revenue in recessionary times;
  • Increasing contributions to social purpose undertakings in the form of a new source of working capital, contributions in capital or in products and services, including the creation of a Social Purpose Fund;
  • Multiplying the social benefits of international trade through FairTrade; and
  • Reducing global waste while eliminating many types of fraud through transparency.

By turning capacity into working capital, Recipco creates many potential social benefits. Most notably it can help enterprises in both emerging and mature markets:
In emerging markets, it helps businesses overcome currency risks and participate fully in the global economy.
In mature economies, it helps to stem job losses and to utilize capacity to improve corporate and/or government revenue especially in times of recession or of declining demand in general.
In all markets, it can inject additional working capital while increasing transparency and reducing fraud and corruption. Furthermore Recipco can promote the contributions to social purpose organizations by turning unused capacity into a new source of donation capital.

Capacity Management

For the higher-margin producers, a higher capacity utilization would be derived from being able to sell both to cash-strapped clients and to high liquidity clients who would appreciate the opportunity to improve on their margin.

Both for high-margin and low-margin producers, the ability to mine the data to determine the demand for their products, and to conclude trades for significant portions of their available capacity, constitute a capacity management tool. It is envisaged that major producers could enter into trades structured like forward transactions (not futures trades, because the trades made through Recipco entail actual delivery of products and services) and allow for medium to long term capacity planning.

With this value-added capacity planning feature in mind, trading activity is more likely to feature a relatively small number of trades, but of high value. This is reinforced by the design of the Recipco solution to be a platform for the exchange of actual products and services, as opposed to trading in assets with intrinsic value: this should make speculative trading activities unappealing and rather than being a volatile, high-volume environment for trading, the Recipco model is designed to be more of a platform to support member enterprises' strategic management of production, resources, infrastructure building and pricing. An intrinsic benefit of the capacity management value proposition is to help avoid closures of production facilities and the resulting layoff of human resources.