As trade finance shifts increasingly to open accounts, companies are actively connecting with their buyers and suppliers to strengthen links and enhance working capital. Trade finance service providers have also been evolving over the years to meet the changing requirements of clients, and this has been especially true since the outbreak of the Covid-19 pandemic.
The global health crisis resulting from the pandemic and its disruption of supply chains that have impacted the cash flows of businesses across the region have also illustrated the need to accelerate the digitization of trade finance processes.
But even before the pandemic, the importance of having a digital strategy for trade finance processes was deftly illustrated by several winning solutions in The Asset Triple A Treasury, Trade, SSC, and Risk Awards 2020. And this year’s winning solutions span the gamut of digitalization.
Bank of America delivered a winning working capital solution for PTT Exploration and Production (PTTEP) of Thailand by integrating an automated artificial intelligence-driven solution with its account receivables process that enabled the company to enhance the accuracy of reconciliation and improve reporting. This also allowed PTTEP to achieve a more accurate and timelier snapshot of its account receivables position that translated into more accurate cash flow forecasting.
CITIC Metal Group of China used digitizing trade process to improve operational efficiency and shorten the turnaround time for letter of credit (L/C) issuances. This solution also involved service provider DBS applying a process that allowed CITIC Metal to execute real-time trade transactions and obtain faster funds settlement. The company also gained a greater visibility of its trade transactions, centralized reconciliations, and a streamlined operational flow between Hong Kong and Singapore.
PT Central Proteina Prima of Indonesia, another DBS client, combined APIs (application programming interfaces) with its enterprise resource planning (ERP) system to allow it to initiate L/C issuance applications and receive real-time notification of incoming import bills directly through the ERP system without having to login to multiple platforms.
In other winning trade finance solutions, CPI Ronghe Financial Leasing of China secured receivables financing with a recourse facility. The tailor-made solution provided by Deutsche Bank involved a three-year financing facility, against a pledge of the lease receivables, with the repayment structured in line with the lease amortization schedule.
For another Chinese leasing company, Tianjin Rail Transit Group Financial Leasing, Deutsche Bank implemented a payable finance solution in which the bank provided a two-year financing backed by a corporate guarantee from Tianjin Rail. It was a multi-recourse credit enhancing facility with the primary recourse to the client as borrower and the secondary recourse to the parent group via the corporate guarantee.
The Pran Group of Bangladesh engaged Standard Chartered for a trade finance solution that increased its working capital funding through a partnership with CDC Group, a UK development finance institution, which acted as a risk participant, to expand its sales in the international markets. The structure was a US$45 million invoice financing facility that allows for other risk participants with appetite to join the programme as the client’s working capital requirements increase.
Another solution from Bank of America allowed Hyundai Motor Group (China) to support the continued expansion of its export business through a short-term loan. The solution improved Hyundai’s operational efficiency and the appropriate management methods on foreign exchange risk that met its hedging requirements.
These winning trade finance, working capital and risk management solutions were among the over 300 reviewed by the board of editors at The Asset during the rigorous evaluation process for The Asset Triple A Treasury, Trade, SSC, and Risk Awards 2020. More winning solutions will be featured in the coming weeks.
To see the Best trade finance, working capital and risk management solutions, please click here.
For more details about the awards, please click here.
For more information about receiving the awards, please contact email@example.com.
To revisit some of our previous stories on the solution trends shaping treasury departments in Asia please read more below: