Asia – the view from America
Cheryl Sill manages Bank of America‘s global trade group. Elliot Wilson caught up with her in Hong Kong recently at the end of an extensive Asian tour of offices. She explains why the bank is putting Asia centre stage in its trade strategy.
Cheryl Sill has responsibility for the Global Trade Group, which advises Bank of America’s clients around the world to effectively manage their supply chains and unlock working capital. She directly oversees 68 trade sales associates in the US, and works closely with Bank of America’s international regions operating in 44 countries to deliver solutions.
Sill’s various roles at Bank of America have included global trade product head, during which her team introduced the bank’s first global internet-based trade systems. GTRcaught up with her in Hong Kong on the last leg of a whistle-stop tour of Bank of America’s Asia operations.
GTR: What is the reason behind your visit to AsiaAmerica back home
CS: The trip will help me build an end-to-end view of our global business operations. It gives me an opportunity to view what is going on in all of our regions – Asia, Europe, the Middle East, Africa, and Latin America – and to put all of our strategies into context. It has also enabled me to listen to the evolving needs of our clients and to ensure we provide the best possible service.
GTR: What changes have you seen in Asia since your last visit
CS: The world is getting smaller and buyers and sellers are getting closer. The business is being transformed, so there is a need to transform ourselves to cater to our customers. There’s the need to look at the risk management system, too, which tends to get overlooked during any upturn.
We are seeing a strong continuation of trends – particularly stronger integration between the world and Asia.
Cross-border trade is on a steep upward curve. Bank of America, being a US-based bank, serves a deep set of clients. We bank 98% of the US Fortune 500 and 80% of the Global Fortune 500 list, but back home we [bank] everyone from the big multinationals to the little guys.
And increasing cross-border trade is affecting all of our clients – from the big to the small. They need to compete in the global economy, and they need help from their partners, both in banking and in trade finance.
GTR: How many of your core clients, at all levels, need greater and more sophisticated trade finance tools as their Asia business increases
CS: On the import side, if companies are just selling and sourcing in the US everything is very straightforward. But more and more companies are moving offshore.
Around 87% of middle-market companies in the US are now doing business internationally, and we need to find solutions for them, whether it’s goods procurement or expanding their international sales in Asia.
On the export side, these companies want to reduce their international risk, improve their efficiency and DSO (days sales outstanding).
GTR: What challenges lie ahead in Asia for you and for your clients
CS: One main challenge for the customer is the lead time in terms of sourcing product. And many big US companies are focused on total landed cost – the cost of originating products, warehousing and shipping them, and providing financing and insurance. Their job is to find the lowest cost possible or maximise delivered profit. But they all have to master globalisation.
GTR: What do corporations worry about most – what gives them shivers down the backbone
CS: You see companies that engage with big trading companies in Asia, and then look to shift to direct sourcing [of commodities and products]. For these companies there is still a fear of the unknown, of getting to know people.
But as they [corporations] go forward, they need to compete; they need to know how to go directly to suppliers.
GTR: What has been your assessment of China: how it is growing, and how you and your clients fit in there
CS: There is huge activity and investment in China – clients need foreign exchange, treasury and repatriation advice, pretty much everything. One of the biggest trends in trade there now is a shift in terms of payment methods being used. More clients are buying and selling on open account rather than on letters of credit or trade.
Buyers and sellers are getting to know each other better; buyers in particular now expect increasingly sophisticated services there. Chinese and foreign banks are now facing a huge challenge – how to finance international trade.
My impression from China and from our clients is that new solutions are being devised and then executed, yet many still worry about risk. There are two main forms of risk – that the supplier will deliver the goods as expected, and that the US customer will pay for the goods.
And there is a massive amount of trade that needs to be financed. We are seeing US clients extending their terms – improving the working capital of the buyer. So someone needs to provide financing to the seller and that is a need that is growing.
We are also seeing an unbundling of letters of credit. Customers want payables to be outsourced; and they need financing at the lowest cost possible. They want transparency of trade, visibility to their supply chain. It’s basically taking a service that works, and then unbundling it, seeing what parts of the letter of credit are still needed, and folding that into an improved business process.
GTR: Judging from what you have learned on your current trip, how do you see trade and trade finance developing in Asia
CS: Lots of clients and their trading partners have fragmented processes, and the data they are dealing with is not synchronised. One department is doing procurement; another is doing logistics; yet another is in treasury and export credit management. There are lots of departments doing different tasks and they are aligned to different metrics.
But with our connectivity there is more chance for our clients to deal directly and efficiently with their customers and suppliers than ever before. It’s expensive getting everyone accustomed to this trade nirvana – for many of our clients it’s like preparing for a big mountain climb. We help them organise themselves internally – it’s like setting up a base camp. The best clients align their objectives then look to complete them in order.
GTR: What else do clients increasingly demand from their bank in Asia
CS: They want to understand cost and value procurement and treasury. They want to extend their payables [but] many US clients say their suppliers always want to be paid immediately.
Once companies get their goals aligned things tend to work, but for companies that are newer to the region it takes time to get up to speed. Event tracking; landed cost; supply chain financing; tools to enable companies to lower costs and enhance visibility – this is what they want.
GTR: It’s very easy in Asia to find cost spiralling, even as trade and the potential for profit-making increases. What is Bank of America focusing on first and foremost in Asia
CS: We have a strong focus on cost and efficiency, and we see that in our efficiency ratios. We strive to be the lowest cost provider, always focusing on value for our clients. We are also focusing on innovation so that our clients can improve their efficiency and see more value from us as their banking partner.
As new solutions come to bear, we have to manage our costs. We do have some issues – how to control costs, and where and how to deliver the best service.
GTR: How are the services you offer around the region changing – particularly when it comes to local clients
CS: We are seeing more receivables financing – when there’s an open account, there is no bank guarantee sitting behind it. There’s a big increase around the globe in receivables.
Other trends include a growing need for, and use of, electronic information. We’re the US leader in terms of moving clients from paper to electronic information and transaction services.
In China and many markets in Asia and around the world, there is still a reliance on paper. But suppliers and banks are very interested in moving toward electronic-based settings. It’s not going to be an immediate switch for many companies, but I see it on a short-term horizon.
GTR: Are trade financing needs growing in both directions: into Asia and from Asia to the wider world
CS: Last autumn we saw the pace of US exports to Asia growing faster than did American imports from Asia. It’s a very exciting new trend, and it helps out our trade imbalance and enables a more healthy trade picture to develop. We are helping US clients to sell into Asia – helping them with their electronic information flows, and helping to finance them ourselves.
It’s not just about natural resources or communications but also all forms of information technology. The fastest export sectors for US clients are natural resources, technology, commodities and manufacturing equipment, all of which allow China and India to develop.
Infrastructure exports are getting bigger, and US clients are benefiting from the huge growth in the Chinese and Indian middle classes, particularly when catering to the consumer and retail space.
GTR: What do you see as the difference between those two Asian giants, China and India
CS: They’re very different, they really are. US-China trade is focused around consumer goods. US export trade to China is broad and deep around natural resources, technology, equipment and commodities.
But India is a much more different equation. It’s a huge outsourcing story, with a large service sector, with an economy that needs more products to build out its infrastructure and to cater to the needs of the consumer. There’s also a fast-growing demand for consumer goods.
The service economy is very big in India, and technology just continues to grow. It has an English-speaking workforce which is very well trained. We have lots of offices over there – a long trading history in the country.
GTR: How is your joint venture with China Construction Bank (CCB) progressing
CS: With CCB we are looking to strengthen our cooperation in global treasury services to provide new value to our clients. We also have a strong relationship with correspondent banks in China, as do other banks. To have a vibrant trade and trading system we need relationships with major banks around the globe to serve the comprehensive needs of our clients but it’s a fantastic opportunity to have a special relationship with CCB.
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