The annual GTR Asia event returned on September 8-11, 2020, in an all-new virtual format, to reflect on an eventful year for global trade and developments in the Asian market.
Bringing together an impressive 1,600 participants, the event saw players from local and international banks to multinational corporations and SMEs, independent financiers, commodity brokers and traders, insurers and risk managers, lawyers, consultants, ECAs and multilaterals, join to discuss a wide range of topics, from the impacts on Asia of Covid-19 to the outlook for the rules-based multilateral system in the face of ongoing geopolitical upheaval, as well as the fall-out from recent high-profile fraud cases in the commodity sector.
In this post-conference wrap-up, we bring together some of the main takeaways and key insights.
Counting the costs of fraud in commodity trade finance
Many of the world’s largest trade finance banks have been left asking themselves where things went wrong in Asia following the recent collapse of several notable commodity traders, with concerns since raised that this may only be the tip of the iceberg.
ABN Amro last month announced a complete withdrawal from the trade and commodity finance market, while others – notably Société Générale and BNP Paribas – are consolidating activities or placing a block on new clients.
“My view is that it’s time for a review, a revamp and perhaps even a reboot of trade finance,” said Baldev Bhinder, managing director at Blackstone & Gold, adding that he does not believe the recent issues are common only to Singapore, but instead indicate a global problem in the commodities industry: “If we have learned anything from 2020 is that once liquidity is threatened, we get to see some very ugly sides to trade finance and commodity trading.”
To address this, banks will need to focus more on the upstream part of the transaction rather than solely at their part of the paper trail, as Raj Uttamchandani, executive director at Trade Finance Market, pointed out. “There’s quite a simple answer, which is to look at the transaction itself, which I think is actually missing in terms of what banks do,” he said. “Banks are very good at KYC and AML and looking at limits, and then when you get into the transaction level that is where things can go wrong.”
Insurers, too, will be rethinking how risk is assessed in commodity finance transactions, according to Robert Cooper, regional director of political risk and structured credit for Asia at Marsh JLT Specialty. “Insurers will probably be looking at doing enhanced due diligence on the banks’ processes as to how they are going about approving transactions and as to how the individual transactions are being carried out,” he said, adding that in the case of a trade finance facility with multiple instruments available, underwriters will be looking to put caps on the extent of a facility that can be used for a certain type of instrument.
Sustainability still matters
As countries around the world now look toward a future post-pandemic, the idea of building back better has gained traction, with a window of opportunity opening to leverage the disruption brought by Covid-19 to embed sustainable practices into every level of the economy.
“It is clear to everyone in the world that there is an interconnection between what is happening somewhere else in the world and what is happening in your own country. The need for transparency and mapping supply chains has become vital,” said Roberto Leva, investment specialist, trade and supply chain finance at the Asian Development Bank (ADB).
Forced digitisation brings opportunities as well as risks
If there is one potential silver lining to Covid-19, it is the acceleration of the digitisation of cash and trade activities and a growing realisation of the extent to which traditional paper-based processes are a bottleneck to trade.
“The pandemic has probably achieved more for digitisation in the last few months ironically than collectively we have achieved in the last few years,” said Samuel Mathew, head of documentary trade products at Standard Chartered, adding that he has seen a “huge spike” in interest from clients and counterparties for digital engagement.
However, mass remote working due to lockdowns and restrictions on movement to offices have opened up opportunities for criminal activities and the targeting of corporate cyber-infrastructure, resulting in a sharp rise in attempted scams the world over, as Mark Parr, global director of information technology at law firm HFW, and Oz Alashe, CEO of CybSafe, explained during another session. However, solutions are at hand to shore up home networks against the types of scams being seen, from push payments to fake creditors and tax fraud – as long as they are implemented correctly.