Ross Wilkinson, Head of Global Accounts, , Bolero
Digitisation of trade finance was a major theme at two significant events in Hong Kong which I attended in April.
The GTR Asia Trade and Supply Chain Finance Conference examined many aspects of supply chain finance including credit insurance, cyber-security, the trade outlook and the current financial landscape.
I was invited to take part in an important panel discussion that considered the aftermath of the notorious Qingdao scandal, which proved to be an electric shock for those still relying on paper to prevent fraud in commodity trading. This scam in 2014 involved the use of fake warehouse receipts to obtain multiple loans totalling perhaps $4 billion and its after-effects still continue to ripple through the trade system.
I was able to make the point that reliance on paper documents is an open invitation to fraudsters when such huge amounts of money are potentially at stake. Fraud involving forgery is not restricted to the Far East – it is going on all around the world wherever paper documents are used. In Australia, for example, bank guarantees have been targeted as vehicles for fraud, particularly in the commercial property market, resulting in severe losses for the institutions or businesses involved.
I explained that while it is important to look at mitigation solutions, the first and most significant step an organisation can take if it wants to cut out opportunities for fraud is to get rid of paper trade documents. This removes the cause and prevents the problem.
At the IACCT and ACT Treasury Forum, digitisation was one of the foremost topics for a roster of senior figures from the treasury world. The primary consideration was the significant move by the Hong Kong government to encourage Multi-national and Chinese state owned enterprises to locate corporate treasury centres (CTCs) within its borders, using incentives such as a halving of the profits tax rate from the standard 16.5 per cent to a concessionary 8.25 per cent.
Technology is a central part of this vision. I participated in a panel discussion on the “Rise and rise of technology in the CTC vision”, making the point that in a big programme of centralisation such as this, visibility is essential, but must be combined with effective scalability. This is where Bolero can help the Hong Kong Monetary Authority as it pushes for CTC adoption on the back of technological innovation.
I acknowledged that treasuries are heavily focused on cash management, which is a major consideration. However, aside from cash, Bolero’s platform has immense advantages to offer treasurers when dealing with international and domestic trade instruments. The digitisation of letters of credit, guarantees and open account collections brings immense gains in efficiency and security.
For treasuries it also enables them to automate compliance with their treasury policies. Each treasury will have its own set of constraints and compliance criteria that relate to both internal and external regulatory requirements. I stressed how when a treasury adopts Bolero’s digitised trade finance platform the solution can be configured, using automation to ensure these important rules are adhered to so that the potentially serious consequences of a breach are avoided.
The push for greater application of digitisation led by Bolero accorded with the views of contributors and speakers right across the event. Many expressed their desire to be free of the spreadsheet, realising its time is up. They emphasised how corporate treasurers want to be liberated from repetitive financial drudgery so they can use their skills and their financial acumen to deliver greater advantage for their employers.
This was a very well-attended event that illustrated the interest that the Hong Kong government has generated in its CTC initiative. It also emphasised how technology will be vital to its success. It remains important in this context for the government to take the lead so that everyone else takes the right decisions.
With so many influential figures in one place, I was able to make some very useful contacts not only within the Hong Kong government, but also with trade finance practitioners, banks and solutions vendors. The Bolero approach to digitisation is one that is high on the agenda in some very significant forums.