Trade Finance Overview
- Current marketplace
- US & Chinese relations
- Brexit – becoming the UK’s Hotel California
- Belt and silk road influences
- Broad principles of trade finance
- Parties to a transaction
- Roles, obligations, interests
- Typical users of trade finance products and services
- Payment mechanisms
- Trends – Migration to open an account
- Risk Ladder and review of traditional trade products
Risk – The Critical Issues
- Risk appetite –set by the board
- Annual operating plans – should reflect risk appetite
- Understanding, identifying and managing risk
- Risk ladder and trade products
- Sovereign, Political / Country risk
- Institutional risk / Bank risk
- Corporate and other critical risks
- Importer and Exporter’s risk – delivery, quality, payment etc
- Risk mitigation, management and transfer
- Risk migration versus commercial necessity
- Managing risk within open account trade
Case Study – the impact of risk on trade – the often differing bank & client’s perspectives
Financial Crime Compliance & Sanctions
- Why does this matter? Why is trade finance considered a high risk?
- Understanding the risk-based approach
- TI CPI, FATF, Wolfsberg, ICC, OFAC and other influencers
- EDD, DDD and the need to obtain a clear line of sight across the value chain
- Money laundering methodologies – how is it done?
- Documentary fraud
- PEPS
- Sanctions overview
Case Study: Delegates will be asked to consider a real case to identify FCC risks and suggest how they may have been managed and mitigated
Review of Key Products
- The challenge to banks of disintermediation
- How does your customer analyse his risk?
- Which products do they use and why?
- Cash in Advance - summary
- Open Account – summary – the biggest risk challenge for the seller and the bank
- Trade debt insurance as a mitigant
- Collections – summary - Outward & Inward / Clean & Documentary
- Letters of Credit - summary - (covered in detail below), import and export
- Risks and opportunities – bank versus client perceptions
- Marketing possibilities and opportunities
Case Study – How does your client choose to trade – what would you prefer?
Regulatory and Trade Conventions and Their Role in Risk Migration
- Incoterms - the list
- Incoterms the impact
- UCP 600
- URC
- URDG
- Other Significant Publications
Risks Inherent in Payment in Advance
- Definition and explanation
- Risks
- Mitigation techniques
- Migration techniques
- Risk/reward consideration
- Commercial tug of war
- Avoiding unhelpful retrospective advice
Case Study – How can the bank assist when there is no obvious role?
Risks Inherent in Open Account Trading
- Definition and explanation
- Risks
- Mitigation techniques
- Migration techniques
- Risk/reward consideration
- Commercial tug of war
- Granting buyer/supplier credit
- Why is it any different to domestic trade?
Case Study - how do we fund this client preferred method of trade?
Risks Inherent in Collections - Clean & Documentary
- Definition and explanation
- Risks
- Mitigation techniques
- Migration techniques
- Risk/reward consideration
- Commercial tug of war
- Granting buyer/supplier credit
- What is the real point of a clean collection?
Case Study – Imports are easier to fund using collections than exports – discuss?
Risks Inherent in Letters of Credit
- Definition and explanation
- Risks
- Mitigation techniques
- Migration techniques
- Risk/reward consideration
- Commercial tug of war
- Do we need 100% security cover? When and if will this is relaxed?
Letters of Credit (L/Cs) - Additional Mechanisms
- Transferable L/Cs
- Revolving L/Cs
- Evergreen L/Cs
- Standby L/Cs
- Back to back structures (brief intro)
- L/C & Bill Discounting
- Avalised bills
Case Study – This is by far the easiest and safest trade instrument for clients and the banks. With the exception of Standby L/C’s why do conventional L/C’s account for less than 15% of all trade?
Financing & Managing Import Trade Risks in Challenging Markets
- The value chain – bank perspective versus client perspective
- Structured vs. traditional trade finance
- Risk analysis of a trade import deal looking at
- Credit risks
- Product risks
- Transactional risks
- Price risks
- Performance risks
Case study example – consider a hypothetical case
STF – Risk Management in Financing Export STF
- Prepayment
- Pre-export
- Pre-shipment
- Post shipment
- When do sales actually become debtors?
- The reality of title and control
Case Study – L/C backed STF is easy to fund. How do we handle Open Account?
Risk Assessment for Credit Analysis and Application Purposes
- Analysing the trade flows
- Break-even analysis
- Assessing facility size and structure
- Identifying and mitigating the risks
- Gearing, repayment, profitability and liquidity
- Specific lending with identifiable maturity dates
- Appreciating and controlling sources of repayment
- Security – Is the last resort in practice despite CCCPARTS
Case Study - How can we re-learn short term TF skills and trade cycles and move away from the omnibus overdraft?
Effective Use of Collections for Short-Term Finance
- Using collections as financing opportunities
- Identifying and mitigating risks
- Maintaining control
Case Study – for example
Introduction to International Demand and Contract Guarantees / Bonds
- URDG758
- Scope and Application – an introduction
- Different types - Bid, Performance, Advance payment, Warranty and Retention bonds
- Risk Migration – the challenge of unexpired bonds/guarantees
- Opportunity spotting
- Standby L/C’s (SBLCs) as Risk mitigators
Case Study – a construction client’s needs
Receivables Financing, Invoice discounting and Risk Migration
- Mechanics of Securitisation
- Factoring and Reverse Factoring
- Mechanics of Factoring and Invoice Discounting
- Recourse, non-recourse, disclosed, confidential
- Setting lending limits including a “haircut” Role of Credit Insurance
Case study – example
Introduction to Innovations In Risk Management and Migration
- Silent confirmations
- Silent Payment Guarantees
- CTN options
- Purchase and sales ledger options
- Bank Assisted Open Account
- Securitising funds flows, future flows, receivables and inventories
Case study – How to use these techniques to establish a base relationship with a target client
Advisory Services
- Core offerings
- Trade intelligence
- Payments & collections
- Troubleshooting
- Progress chasing
- Translation and exposure risks
- Counterparty risks
- Export & import specialist advice
- Credit insurance
- Other services
Introduction to ECA’s – Risk Transfer from the Bank to insurance Sector
- Credit Insurance
- Political Risk Insurances
- ECA structures
- Intermediation by ECA’s
- UK Government Schemes
Other Risks
- Forex
- Correspondent banking
- Fraud
- SWIFT Payments
- Offshore banks
- Complex structures
- Financial engineering requests such as Repo’s
Course Conclusion and Review / Feedback