According to recent figures from the World Trade Organisation (WTO) global trade is set to decline by around 9% in 2009 compared to last year. We have all read about the causes – from falling demand to the tightening of credit lines and a general loss of confidence.
But in these difficult times, what does this mean to those involved in the finance of trade? What action or precautions need to be taken by banks, importers, exporters, freight forwarders and every other specialist involved in the finance and international trade? The key point is that the risk of not being paid for shipped goods is increasing. This is precisely why the demand for traditional trade finance products is increasing. Exporters are no longer as comfortable selling on open account because, even if they have a trusting relationship with the buyer, they do not want to take the risk that the buyer will be out of business before payment is made, or that the delay in receiving a payment will adversely affect their own cash flow.
Because of this, buyers and sellers are turning to the banks for Guarantees, Letters of Credit, and other traditional products to provide security of payment. But it is important to remember that while this takes much of the risk away from the trader, the risk of non-payment is now carried by the banks.
Another risk factor to sellers lies in the commodities markets. In an era of falling commodity prices, some buyers are happy to get out of commitments to pay for goods if the same commodities can be sourced elsewhere at better prices. In these situations, it can be in the buyer’s interest that trade documents are noncompliant, so that payments linked to the contracts are not made. But if the nominated bank pays the seller and the issuing bank refuses the documents, then it is the nominated bank that loses out.
In the good times, documents are presented to banks, and sellers get paid. But these days everyone is watching the detail far more closely. In such times, it becomes vital that compliant documents be presented, and equally important that the banks examine the documents carefully and correctly.
The sellers’ skills in preparing documents, and the banks’ skills in examining documents are vital. In an environment of intense scrutiny, trade finance staff (both in exporting companies and in banks) must be equipped with the skills to do their jobs correctly.
It is more important than ever to invest in staff development and training for employees to attain the necessary skills. But with revenues and profits falling, one of the first things to be cut is often training, travel and associated expenses. Companies do not want the additional overheads associated with seminars, specialist courses and conferences. So how is it possible to develop staff and at the same time control costs?
The answer lies in technology. There is no longer a need to spend large sums on travel and expenses, everything can be done at the employees’ own office workstation. The internet allows training to be brought to the staff rather than taking staff to the training. Early computer-based training was essentially the presentation of books on screen, with the trainee flipping from page to page, but things have moved on a long way from this. Using modern graphical programming and the power of the internet it is now possible to deliver rich interactive training anywhere in the world. In fact, online training offers significant advantages over face-to-face training.
One of the key benefits is consistency. You are assured that every learner is hearing exactly the same message, and consistent guidelines are given to all.
If you can be sure of the quality of the content, you are guaranteed the message is not being lost in delivery.
And because each trainee is in control of his or her own training, with the opportunity to revisit sections at will, each has the ability to set their own pace of learning, rather than pace themselves to the average of a group.
Contemporary online training also allows interaction with course leaders and other trainees through chat rooms, web conferences and other communications possibilities offered over the internet. Complex simulations can be created to place the trainee in lifelike environments which allow for the practise of what they have learned in a protective environment, without any real risk or exposure.
Now is a key time to invest in staff skills, not only to mitigate risk but also to achieve a competitive advantage over rivals. In difficult times customers are much more discerning. If you can show your staff are well trained and more capable of delivering the best quality of service, you will win the business and there is no reason why this investment should break the bank. By investing wisely in modern technology, it is possible to make your employees the best in their business within a budget that is tailored to the current market conditions.
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