Inside Trading

The pandemic, subsequent supply chain shortages and the escalation of the Russian/Ukraine conflict, flowed by the war in Gaza have refocused attention on supply chain resilience.

Today, it is commonplace to get comment like: “it is just in case” in the logistics and supply chain management. The globalization followed by a certain degree of deglobalization have completely changed the rules. The whole concept of supply chain management has morphed into a focus on how to be resilient and the capacity to mitigate disruptions and significantly limit the impact of those that could occur, as well as related risks and costs. l) supply chain. How could we secure it further from a treasury sideTime, speed, security, costs and resilience are becoming the key targets for an efficient (financia? Again, and as always by automating processes and digitalizing them. Good news, there are available smart solutions on the market.

The current context

The context of globalization is complicated and affected by many of the events mentioned in our introduction. The world’s largest economic blocs (i.e. US? EU & China) are locked in an escalating tripartite tariff war. UK left the EU; Pandemic saw unprecedented disruption to the flows of good around the world. National security and decarbonization have emerged as priorities in stark competitive with free trade. The winds of change are blowing through the global trading system. The states try to be more resilient and to ensure that supply chain is robust and continue to deliver energy, food and consumer products around the world. Increasingly “resilience” means capacity to withstand climate shocks such as floods and tornados. In this complex, fast-moving and politically sensitive environment, time is money and efficiency are a “must”. This means automating processes that are all too often manual, slow and inefficient. And this is where technology comes to the CFO's and treasurer's rescue, providing the automation that has been lacking.

Trade finance automation

Further automating trade finance processes may empower treasury. What is searched is a better global control on all processes, stronger internal controls and higher visibility of the bank guarantees and credit facilities across partner countries covered. Technology enables to have a centralized, structured process in place with clear workflows, standardized data reliability and real-time, secure accessibility across multiple regions. As a result, treasurers may improve productivity in several European countries and by empowering them to streamline their operations, they can focus on growth and efficiency. Today, we have platforms and solutions for all guarantee tracking and related activity, with real-time bank connectivity and full visibility of credit lines and utilization., such as RIVO (from SURECOMP). Bank guarantee management must be automated, structured and issuance accelerated. To enhance the whole supply chain, the CFO’s realize the weight of finance elements. They absolutely need solutions to address these efficiency and optimization challenges and solutions to get faster onboarding and cost-efficient tools, to also scale-up operations and follow business growth.

The trade finance digital transformation is also a journey in itself

To remain competitive, European companies must embark on this digital journey and include their trade finance operations. The pain points and too manual or too paper-based processes must be reviewed first. Treasurers must leverage technologies and, if, and when possible, restore / install more trust in trade. Even at the time of deglobalization, international trade remains essence of the modern economy, yet executing a trade transaction remained too complex and cumbersome, for too long. Corporates rely on the exchange of multiple paper documents between multiple parties. As for cash management automation or FX currency automated management, it is time to improve semi-manual processes generating inefficiencies, error-prone and risky operations, leading to unnecessary delays, time lost and extra-costs potentially impacting the whole supply chain. Because of a too decentralized trade finance global process across multiple banking partners, across several jurisdictions also gives rise to challenges. Absence of visibility and control of credit lines and liquidity can create unnecessary risks.

Regulations to help more efficient trade finance

Regulators and international bodies such as the ICC are trying to act to reduce these delays, which are incompatible with international business, to compete with Asians and Americans. We can see the ICC joining forces with other organizations to defend more fluid, frictionless business (e.g. Electronic Trade Documents Act or Model Law on Electronic Transferable Records). This ETDA enables the legal recognition of trade documents such as bills of lading and bills of exchange in electronic form which are deemed to have the same legal significance of their paper equivalent. It is anticipated that this move could help save billions of currency units in lost revenue due to the ongoing use of paper documents by companies. The UNCITRAL so-called MLETR is a uniform model law that has been adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 2017. Its scope is to allow the use of transferable documents and instruments in electronic form. Transferable documents and instruments typically include bills of lading, warehouse receipts, bills of exchange, promissory notes and cheques. National Law qualifies a document or instrument as transferable. As we can see, the legal sometimes must help make possible what the technological can deliver by authorizing and supervising it. Transferable documents and instruments enable to request delivery of goods and payment of a sum of money based on possession of the document or instrument. However, it has been difficult to reproduce the notion of possession, which has to do with control over tangible goods, in an electronic environment. This MLETR addressed that legal gap. Under MLETR each dematerialized document does not need to be managed in a separate information system, but the same system could manage multiple documents, or also all documents related to a business transactions. This may enable to merge logistics and supply chain, or even commercial and regulatory documents, in a single electronic transferable record. The ultimate goals are saving time and therefore money, while securing operations and modern platform now help achieving these objectives. Solutions, like toe one mentioned above for example, permit seamless, sustainable trade for companies, whatever their size, not only the largest ones. Challenges are often higher in smaller structures and needs bigger for automation. These solutions efficiency is based on a large network of banking partners across the globe to remove barriers and frictions, while enhancing collaboration and even co-creation. Treasurers dream of a centralized digital hub through which entities, partners and banks can communication and exchange in real-time to execute a trade finance transaction in the most efficient way. All these automated processes must eventually integrate and interfaced to the Treasury Management System, ideally with a central approval and amendment processes, with real-time notifications, credit limit and fee management. Having a guarantee bidding process integrated, allowing treasury to (re)view price comparisons and choose the best pricing from core banking partners would be the cherry on the cake. As all businesses, it starts with key partners, ready to play the game, to co-create and collaborate, to differentiate offers. Sustainable processes, not only in trade finance, are the objective to reach. Technology must be dedicated to serving the interests of finance, which is itself a support vector for international commercial operations. By acting and automating the processes involved in trade finance, the treasurer can become the essential business booster, creating real added value that benefits the whole group.

François Masquelier, CEO of Simply Treasury
Luxembourg, August 2024