advanced trade finance - redcliffe training...countertrade overview – when to use pitfalls and...

The Banking and Corporate Finance Training Specialist

Advanced Trade Finance

This course is presented in London on:

07-08 February 2018, 14-15 November 2018

http://redcliffetraining.com [email protected]

+44 (0)20 7387 4484

▪

Course Overview

Participants will: Explore the current market place including Brexit, Trump and the traditional bands of

clients Learn about financial crime compliance & sanctions 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 within the supply chain management and finance Learn about the traditional letters of credit and the four contract concept

Explore the standby letters of credit and their history & origin 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 guaratees/bonds Learn about the commodity sector and its players

Your course director has spent more than 40 years in the banking and financial sector, much

of it in a senior managerial/Director role. He is a former Institute of Banking Lecturer, having gained distinctions in the exams. He is a subject matter aspect on all aspects of retail,

corporate and global banking, including risk management and regulatory compliance. He has lectured extensively to both leading global financial institutions and to smaller bespoke specialists. He has delivered extensive programmes in all parts of the world including the

USA, Europe, MENA, Africa and Hong Kong. He is currently an accredited Master Trainer at the world’s biggest global bank.

Trade Finance has been “re-discovered” yet remains a little mysterious. It is a product that

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 general 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. This is not a course about FCC but as trade finance is reckoned to be the main driver for money laundering, it needs to be understood.

To compound matters, many global banks have reduced their correspondent banking networks by up to two thirds – often based on the Transparency International CPI. This

means it is becoming increasingly likely that more than two banks are involved in a transaction, causing delays in processing and frustration for the client. Sight LC’s can take

10-15 working days to be processed when there are two to three advising banks. Of course this has created opportunities for confirmation activities – provided FCC clearance is obtained.

Course Overview

Background of the trainer

Course Objectives


+44 (0)20 7387 4484

Another challenge of trade finance is the tendency for banks to re-invent the wheel by using impressive sounding and not always easy to define marketing names to describe “new” products which are not actually new. “Buyer centric supply chain solution” actually

is the sexier name for reverse factoring.

This practical two day advanced level course will concentrate on what is happening in the market right now leaving delegates with a clear and working knowledge of how trade finance is undertaken in the real world, what actually happens and what are the implications

for all parties concerned.

A good working knowledge and familiarity with International Trade finance is required to derive the maximum benefit from this course.

Course Methodology The course will use numerous case studies and will involve a considerable element of

interactive class discussions. The Director will encourage delegates to question and test their knowledge at each stage of the course. At the end, all delegates will have a clear and full understanding of exactly how LC trade takes place currently across the globe at almost

every level.

The Current Market Place

Recent evolution and current developments The challenge of emerging markets The challenge of China

Brexit President Trump

New products The traditional three bands of clients: Global and Large Corporate, MME’s, the rest! Understanding trade finance at a fundamental level.’

Typical users of Trade Finance products and services

Financial Crime Compliance & Sanctions Understanding the risk based approach

Impact on Trade Finance TI, CPI and its impact

FATF DDD and the need to obtain a clear line of sight across the value chain Money laundering methodologies

Ghost payments and variations Under/over invoicing and variations

Documentary fraud PEPS Sanctions

Risk mitigation, management and transfer

Case Study: Delegates will be asked to consider a real case to identify FCC risks and suggest how they may have been managed and mitigated

Traditional Risks – The Critical Issues

Understanding, identifying and managing risk Credit risk, Market risk & Operational risk

Course Content


+44 (0)20 7387 4484

Sovereign, Political / Country risk

Institutional risk / Bank risk Corporate and other critical risks Importer and Exporter’s risk

Other risks in the transaction and how to mitigate them (transport risk, warehousing, force majeure, etc.)

Risk mitigation, management and transfer Case Study: An example using three different payment methods. Delegates will

be asked to identify and explain what type of client would choose one in preference to the other two and why, to illustrate risks in reality.

Review of Key Products

How does the customer analyse his risk? Which products does he use and why? Payment in Advance

Open Account Collections – Outward & Inward / Clean & Documentary

Letters of Credit (covered in more detail below) Risks and opportunities Control possibilities

Case Study: Showing how clients sometimes see the world of risk in a different

way to bankers.

Supply Chain Management & Finance The origins of SCM and what does it mean in practice

Understanding the issues in SCM – “the tug of war” between supplier & buyer Bringing about a “balance” between parties for effective processing

Understanding about movement of ‘information’ ,’goods’ and ‘cash’ Supply Chain Finance Main SCF models: accounts payable - centric, accounts

receivable, BPO

Review the risk aspects of SCF

Case Study: Showing how Reverse Factoring works and how both Buyer Centric and Seller Centric models are being employed.

Letters of Credit (L/Cs) Traditional L/C’sThe four contract concept Confirmations

Red Clause Green clause

Revolving L/Cs Evergreen Transferable L/Cs

Back to Back L/C structures

Case Study: Showing how different types of LC’s are used, why this is the case and what difference it makes to the risk profile.

Standby Letters of Credit

History and origin The dominant trade finance product


+44 (0)20 7387 4484

Uses Risk management Issue and assessment

Pricing Understanding the applicability of ISP98 and UCP 600 for standbys

Fraud and unfair calling

Case Study: Using a standby in practice

Export Finance issues Looking at the big picture Understanding the purpose of borrowing

Country risk issues

The reality of title and control Negotiation under letters of credit Discounting of deferred payment L/C, acceptance credits (with or without recourse)

Case Study: Delegates are asked to consider how to fund an export order using different types of contract arrangements.

Controlling Credit Exposure – Formulating a Limit

Understanding and explaining the trade cycle The use of time lines

Assessing and appreciating funding gaps

Case Study: Using time lines and facility plotting to spot double finance and identify the actual funding gaps and customer needs.

Day Two:

Structuring Finance for the Trader

Analysing the trade flows Assessing facility size and structure

Specific lending with identifiable maturity dates Appreciating and controlling sources of repayment Case Study: An example of a medium size business using structured finance.

Effective Use of Collections for Short-Term Finance Using collections as financing opportunities Identifying and mitigating risks

Maintaining control

Supporting the Trader Using the goods as collateral

Assessing the value of goods The value of pledges and trust receipts The need for structured lending

Case Study: How to use goods as security for a trade deal.

Warehousing of Goods Warehouse location

Management assessment Legal frameworks Obtaining and retaining title and control

Risks and responsibilities of Collateral Managers


+44 (0)20 7387 4484

Cost versus control

Case Study: Warehousing in practice using a real example.

International Demand and Contract Guarantees / Bonds Scope and Application – an introduction (suretyship v. demand guarantee)

Indemnities versus guarantees Different types - Bid, Performance, Advance payment, Warranty and Retention bonds Rules governing guarantees and bonds

Legal jurisdiction and expiry date issues Value of using URDG 758 – ICC Rules for demand guarantees

Impact of non bank competitors – COFACE, Euler Hermes

Case Study: Using these in practice.

Receivables Financing Mechanics of Factoring and Invoice Discounting Forfaiting – an important adjunct to the TF mechanism

Role of Credit Insurance Mechanics of Securitisation

FCC risks

Case Study: A real example showing how this makes a huge difference to working capital.

The Commodity Sector and its Players

History and origins of the commodity industry Understanding the nature of ’commodities’

Analysing the players – growers / producers; traders and end-users Financing of commodities Looking beyond the balance sheet

Available documentation – taking and retaining title Commodity futures, options and derivatives

Hedging – a critical process in commodity finance Role and function of the exchanges Main risks in the commodity trade (market, fraudulent practices, legal issues, recent

legal cases)

Case study: A large scale commodity deal and how it can be funded at an acceptable level of risk

Countertrade

Overview – when to use Pitfalls and complications

Possible structures and Time management

Syndications When to syndicate

Lead or participant role The completion from capital markets – high yield bonds Selling down exposure

Impact of quasi-governmental agencies Risk/reward analysis


+44 (0)20 7387 4484

Delivering this course in-house for you to a number of participants could be very cost effective.

Case Study: A syndicated deal.

Course Conclusion and Review / Feedback

9:30-17:00

London

Standard Price: £1,050 + VAT Membership Price: £840 + VAT

advanced trade finance - redcliffe training...countertrade overview – when to use pitfalls and...

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