Trade Finance Masterclass

At an Advanced Level, delegates are assumed to know how trade products work (although a quick refresher is possible) and are invited to consider how trade is financed by their clients’ perspective in the non-textbook real world. This will help delegates to understand the way the market works in practice. This holistic approach (which doesn’t ignore or undervalue the key analytics) also helps to better understand the key trading client’s actual funding and other needs and should enable delegates to serve them more efficiently and hopefully profitably.

For example, 85% of global trade by volume is conducted on open account terms which the textbook indicates carries the highest risk for the seller. Most sellers are content to live with this risk –this course explains why and how. Another example is confirmation of L/C’s. Many confirmations are now used mainly to short circuit the payment cycle rather than just cover off issuing bank risk. Again the course explains why.

It remains fair to say that Trade Finance has been “re-discovered” by many leading institutions. It is a product that if done well, has always generated strong revenues-often non funds based –and traditionally has exceptionally low credit losses (on a portfolio basis). Most global banks are able to apply very low probability of default ratios and usually lose as much to fraud as to actual credit losses.

The major challenge to trade finance in recent times has been the impact of Financial Crime Compliance and Sanctions. Whilst credit losses and hence credit risk is low, FCC risk is very high because of the increasing tendency for global trade to pass through more than one country, use different modes of transport, use different currencies and transit through some regions where money laundering controls are not as strong as in others. This makes the audit trail very challenging.

The Objectives of the course are to empower participants to

:•Understand how trade finance works at an advance level by going beyond just a list of payment methods and their features

•Appreciate how customers perceive risk •Understand why open account trading dominates

•Appreciate why letters of credit refuse to die, despite numerous predictions to the contrary

•Explore the current market place and the impact of current global trends

•Appreciate the trade finance cycle including break even analysis

•Realise why financial crime compliance & sanctions are now mainstream considerations

•Understand the risk based approach and the impact on trade finance•Get to grips with DDD, FATF, TI, CPI and their impact

•Understand and identify the traditional risks•Review the key products and how the customer analyses his risk•Master an understanding of the supply chain management and finance•Learn about the traditional letters of credit and the four contract concept

•Explore standby letters of credit which dominate bank supported trade

•Learn about exporting finance issues and controlling credit exposure•Explore the effective use of collections for short-term finance

•Get to grips with the international demand and contact guarantees/bonds•Learn about the commodity sector and its players

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