Risk in Trade Finance and Trade Finance Products

Transcription

1 Risk in Trade Finance and Trade Finance Products A 2-day course This course can also be presented in-house for your company or via live on-line webinar The Banking and Corporate Finance Training Specialist

2 Course Overview Trade Finance remains the engine at the heart of global economic growth with China still probably the most important participant. Commodity Finance sits at the heart of this trade dominated by oil and gas which according to some estimates, accounts for as much as 70% of all commodity trade. Global trade is reckoned to be worth $40 trillion and growing. Trade finance is an interesting risk paradox. It has always been a business area where credit losses are typically Course very Overview low (mainly fraud in practice), fee income opportunities are high and some of the products are very efficient users of capital. On the other hand it is a very high risk area for Financial Crime. It is estimated that as much as $2trillion is laundered annually, much of it using trade finance. Regulators and law enforcement agencies believe that if it is made as difficult as possible to launder money through banks, this could help stifle crime. Banks are expected to do their bit and this is having a significant (but manageable) impact in most banks. With trade typically transiting several countries, with different regulations and different regulatory standards, it is very difficult to manage the risks with precision. This remains a product offering that is watched very closely by regulators and policed ruthlessly (when it comes to sanctions) by OFAC. This practical two day trade finance course is designed for relationship managers and those working in sales or supporting the sales team together with colleagues from credit department, responsible for approving trade finance propositions. It concentrates on risk identification and mitigation as well as how to explain the wide range of the Bank s Trade finance services. It focuses particularly on risk assessment, delivery, need identification, and selling opportunities. The course encourages delegates to see issues from both the client s and the bank s relationship manager s viewpoint. The aim is to provide high quality trade finance services to the bank's clients in a seamless and helpful manner and to assist delegates understanding of the trade flows and the precise nature of the banking risks undertaken. The course will also demonstrate the self-liquidating short term nature of most trade transactions. A clearer understanding of the actual banking risks should mean profitable business and earnings opportunities will arise as a natural consequence. The course encourages trade finance specialists to become user friendly general practitioners, rather than specialist custodians of knowledge, which can sometimes be the case from the client s viewpoint. All clients want value for money services. This course aims to encourage delegates to deliver it. Your Facilitator Has over 40 years in the banking and trade finance sectors. His career was spent initially with Lloyds Bank plc and then as a main board director of a specialist London based merchant bank. He has delivered numerous successful public courses on this topic as well as in house trade and commodity financing programmes at an advanced level for Bank of China, HSBC, Royal Bank of Scotland Group, Lloyds TSB, Commerzbank, Garanti Bank as well as all the leading South African and Nigerian Banks He is an approved external master trainer for the world s largest trade finance bank and has trained extensively in the UK, USA, Europe, Scandinavia, Africa, Asia and the Middle East. Methodology: The course will be run as a workshop style classroom session, with detailed examples. Delegates are free to bring their own cases/examples to the sessions. Level of Preparedness: Beginners are welcome although a very basic working knowledge and understanding of the methods of financing International Trade would be helpful.

3 Course Content Trade Finance Overview Historical evolution and current developments in the market place 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 account Risk Ladder and review of traditional trade products Risk The Critical Issues 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 Review of Key Products The challenge to banks of disintermediation How does your customer analyse his risk? Which products does he use and why? Cash in Advance - summary Open Account summary - the biggest risk challenge for seller and the bank Collections summary - Outward & Inward / Clean & Documentary Letters of Credit - summary - (covered in detail below), import and export 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 Risks inherent in Payment in Advance: Avoiding unhelpful retrospective advice Case Study How can the bank assist when there is no obvious role?

4 Risks inherent in Open Account Trading: 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: 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: Do we need 100% security cover? When and if will this be 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

5 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 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 and Risk Migration Mechanics of Securitisation Factoring and Reverse Factoring Mechanics of Factoring and Invoice Discounting 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

6 Case study How to use these techniques to establish a base relationship with a target client Advisory Services Core offerings Trade intelligence Payments & collections Trouble shooting Progress chasing Translation and exposure risks Counter party 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 Commercial & Risk Q&A Course Conclusion and Review / Feedback Tailored Learning All of our training courses can be tailored to suit your company s exact training needs. We will work closely with you to help develop a training programme with content that is unique for your organisation. Please us on enquiries@redcliffetraining.co.uk for more information E-Learning This course can also be presented as a bespoke e-learning programme created by you to fit your exact requirements.