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Thursday, October 23, 2014

List of the 15 Banking Groups Now Live on BPO

This list includes 6 of the top 15 Trade banks (based on Cat 7 traffic)

ANZ - Australia & New Zealand Banking Group
Bank of China
Bank of Tokyo-Mitsubishi UFJ
Bangkok Bank
BNP Paribas
China CITIC Bank
CIMB - Commerce International Merchant Bankers Berhad
Commerzbank
Hua Nan Bank (Head Office: Taipei )
Korea Exchange Bank ( KEB )
Maybank - Malayan Banking Berhad
Siam Commercial Bank ( SCB Thailand )
Standard Chartered Bank ( SCB )
Türkiye Is Bankasi ( Isbank )
UniCredit

Information as at October 16, 2014 supplied by SWIFT

Plenty of banks to turn to for this service if yours is a laggard.

Ron Wells

Sunday, October 19, 2014

Routine Counterparty (CP) Credit Risk Reviews – Alternatives Proposed

Does ‘an Annual Review for every CP’ make sense?

Most text books and training sessions, hence most in-house credit policy documents, stipulate that every customer (and often suppliers as well) should be reviewed as to credit worthiness at least once every year. Such a review usually coincides with publication of annual financial statements by the Counterparty (CP).

This methodology harks back to the early half of the 20th century, after WWII, when change was linear (slow but steadily positive) and most Counterparties published audited financial statements or were fully covered by acceptable collateral.

Apart from the odd market collapse, each of which was discounted as an aberration and after which the steady state resumed, most CPs’ businesses progressed from year to year. Therefore the annual review merely served to satisfy auditors and bank regulators that enough diligence was being applied to keep the creditor companies and banks respectively safe from suffering excessive bad debt.

As we approached the second millennium, by the Gregorian calendar, the linear progress steady-state had evaporated but even as we draw near to 2015 most corporate and bank policy documents still require annual credit risk reviews for all Counterparties or Clients.

Credit Risk Review Policy Revision Recommendations

Regarding the timing and required depth of CP Credit Risk reviews each organisation should adopt a policy appropriate to its particular circumstances. Therefore this discussion highlights some alternative policy approaches in order to provide ideas to be considered by policy makers.
It is submitted that the most appropriate approach for a business to adopt may be the application of a different assessment and review policy to each of several sub-portfolios identified within the overall counterparty array.

TO READ THE FULL ARTICLE CLICK HERE

ALTERNATIVE RISK ASSESSMENT AND REVIEW POLICY OPTIONS DISCUSSED IN THE ARTICLE

Why not a ‘no credit analysis or review at all’ policy?
1. Building a sub-portfolio of diverse counterparties that are not financially transparent and/or are ‘start-ups’
2. Restricting CP exposures to a ‘short-list’ of what are considered low risk entities.
What about the 80% of Counterparties that warrant regular review?
1. Proposed Review-Minimum Policy for Relatively Minor Exposure CPs
2. Review Policy for CPs that do not Qualify for the Review-Minimum treatment

What about CPs that are Margined, should they be treated differently?

The Article Conclusion

The identification of sub-groups within your risk portfolio and application of the appropriate review policy to each will both improve the efficient use of expertise and reduce risk overall.

Adopting this approach will enable internal credit risk assessment and management experts to dedicate more time to monitoring higher risk counterparties and the relevant business environment. To read the article click here.

Thursday, October 2, 2014

To retain talent the role demands of Finance must change, by David Axson

In the linked video Dave Axson discusses the rôle that Finance Professionals should be allowed to play in businesses in order to retain and attract the talent that they so desperately need.
Dave Axson is author of The Management Mythbuster (John Wiley & Sons 2010) and MD of Accenture.

“What we are dealing with today is an environment where there are many more variables that could potentially impact your business. Twenty to twenty-five years ago you were concerned about your competitors down the street…..” click this link to view this short but interesting talk.

Monday, September 29, 2014

Eminent Prof. of Credit Management Recommends ‘Credit Risk Management – The Novel’

The Professor of Credit Management and MSc Finance, Programme Leader at a prestigious UK University, and Programme Leader for the Singapore Accountancy Academy (SAA-GE), has read and now recommends ‘Credit Risk Management – The Novel’.

To advise her decision she wrote as follows: “I have recommended your book to a few libraries and added it to my recommended reading (other reading) list.”

The printed version of Credit Risk Management – The Novel (Part One) is now available from eStoreT3P, Amazon.com and 11 country specific Amazon websites. It can also be purchased through the CreateSpace eStore.

This paperback version is available worldwide in other retail book stores; place your order with your favourite bookstore today.
The ISBN13 is 978-0-9576279-2-5.

This is not a text book, it is a story that follows the day to day work of a credit risk management team as they face and overcome various challenges. You are invited to 'listen in' to their conversations and read the outline of the solutions they employ. The detail of their solutions appears at the end of the book so reading the detail is optional.

There is a parallel story that follows the adventures of James E Cricket an Agent of the Office of Peace, which provides an undercurrent of twists and turns.

The Novel doubles as a reference book, which will be useful if you meet credit management challenges similar to those solved by the fictional credit team.

See: http://www.barrettwells.com to read a Five Star reader review posted on Amazon.com.

Tuesday, September 9, 2014

Ode to LCs past and BPOs to come

Do you have BPO?
What's BPO?
I'll take that as a NO
BPO replaces SBLCs
BPO-Plus replaces DocLCs
BPO Reduces Costs
Improves Working Capital!

Why haven't I heard of BPO?
'Cause your TF Banker is afraid
Afraid to spill the beans.
Why?
'Cause it threatens his/her job
Oh, I shall find another bank
a BPO friendly bank

Where can I find a list?
A BPO ready bank list?
At SWIFT.com you'll find a list
A BPO ready bank list :o)

I can't find the list
The BPO ready bank list
It's hidden on SWIFT.com
Search for 'BPO Market Adoption SWIFT’
To find the BPO ready bank list

Monday, September 1, 2014

Bank Payment Obligations (BPOs) – Basics for Corporates

Whether you are a Seller or Buyer of goods this article provides the basic information you need in order to start replacing Standby Letters of Credit and/or Documentary Letters of Credit (LCs) with the BPO or BPO-Plus process respectively.

You can download a copy of this article by clicking here.

Why bother to make the change?
Companies that adopt the BPO and/or BPO-Plus processes are able to capture a number of benefits from the BPO system; for example:
• Improved cash flow management based on certainty as to when invoice payments will be credited.
• Reduced document handling – whether paper or electronic – since purchase orders and invoices are keyed into the system and communicated automatically; via one or two banks in nanoseconds. The SWIFT system is exceptionally secure and reliable, and covers more than 10,000 financial institutions and corporations in 210 countries
• Reduced information discrepancies and/or reduced time involved in identifying and correcting mismatched data. The BPO system automatically matches buyer and seller data against the Purchase Order/Contract baseline and provides various reports
• Better payment protection (for the seller) compared to a Standby or Documentary Letter of Credit; with reduced costs and handling required on both sides of a transaction
• Access to financing options is improved for both buyer and seller

According to an article that you can find with this link.

“This process (the BPO & BPO-Plus) results in a fully electronic alternative to the letter of credit (LC), which will enable efficiency gains, working capital reduction and cost saving. This electronic alternative can be processed in a much shorter time than traditional, paper-based LCs – estimates are as low as 10-15 days. Reduced processing times result in significant cost savings: Brazilian mining company Vale estimates that a combination of electronic bills of lading and BPOs is saving it $37 million per year on its exports of iron ore to China alone.”

The BPO Train is leaving the station, so you better hurry to catch it… or risk being left in the LC dust by your competitors…

It is understandable that many Trade Finance Bankers will resist the switch to BPO and BPO-Plus but it would be preferable for them to accept that BPO related changes are unstoppable. The sooner Bankers accept that and start to make the necessary changes in their careers the better, delay will only mean more painful and difficult changes will have to be made later.

In 2000 Gary Hamel wrote in his book ‘Leading the Revolution’: …”change has changed. No longer is it additive. No longer does it move in a straight line. In the twenty-first century, change is discontinuous, abrupt, and seditious. We now stand on the threshold of a new age – the age of revolution. In our minds we know the new age has already arrived; in our bellies, we’re not sure we like it. For we know it is going to be an age of upheaval, of tumult, of fortunes made and unmade at head-snapping speed.”

In fact it was in 2000 that TradeCard brought its solution to market, a product that BPO more than resembles, it virtually mirrors. Admittedly it has taken 14 years for the BPO to become a globally viable LC alternative but the challenges overcome in terms of proving the technologies involved, agreeing standards and putting in place internationally accepted rules have been formidable.

The prize for banks and users (exporters/sellers, importers/buyers and traders) is significant.

On the other hand there will inevitably be losers, mainly those who have built a career on the basis of UCP expertise; bankers, consultants, trainers and academics. The losers’ whose ‘cheese is being moved’ can denounce this development, and try to derail or delay the transition, but like blowing against the wind such efforts to maintain the status quo will prove fruitless in the end.

Today one can be a Kodak strategist until one’s world falls apart when the ‘digital camera producers’ destroy the business and associated jobs, or one can recognise the signs and start searching for ‘new cheese’. As Lynda Gratton wrote in ‘The Shift – The Future of Work is Already Here’: “In a world of more and more complex technology, it is the highly skilled, or what I call those with serial mastery, who will always find work.”

Those who do not notice their 'cheese' disappearing and do not set out to find ‘new cheese’ (a new expert occupation) will, I’m afraid, find it difficult to maintain their current standard of living.

William Gibson in 1993 famously said: “The future is already here — it's just not very evenly distributed.”

Ron Wells

Friday, August 22, 2014

The BPO & Friends have a Stranglehold on the LC and will soon finally lay it to rest…

Read why every business that accepts Standby Letters of Credit as collateral cover (security) for its sales transactions should switch to requiring Bank Payment Obligations (BPOs).

Discover how the BPO-Plus (BPO & Friends) will gradually but inexorably replace transaction related Documentary LCs over the next five years or less. The considerable rewards intrinsic to using BPO and electronic documents in combination are available to every trading partnership today; you should be benefiting.

To read the full article click here.

Ron Wells

Ron Wells is a B2B counterparty credit risk and trade finance practitioner and author of “Credit Risk Management – The Novel (Part One)”. This is not a text book, it is a story that follows the day to day work of a credit risk management team as they face and overcome various challenges. You are invited to ‘listen in’ to their conversations and read the outline of the solutions they employ. There is a parallel story that follows the adventures of James E Cricket, providing and undercurrent of twists and turns.

Ron also wrote “Global Credit Management – an Executive Summary” published by John Wiley & Sons. His books are sold by Amazon.com and other retail outlets.