Flying high in independent trade
GTR talks to Kamel Alzarka, chairman of trade services provider Falcon Trade Corporation, about the vision and motivations behind the company’s dynamic ascent.
Falcon Trade Corporation’s founder and chairman Kamel, or Kaz, Alzarka is 36 years old in September. Yet the company he founded is already into its second decade. In that time he has developed the company into a trade services specialist with around US$1bn turnover – aimed at providing tailored financial, commercial and logistical solutions for a range of cross-border trade situations.
While trade finance is an arena used to boutiques – whether commodities traders, forfaiters, advisory houses or credit insurance brokerages – it is rare to come across a company that can offer all these elements, as well as pre-shipment and post-shipment finance, Islamic finance, receivable finance, documentary credits, open account, and other structured solutions.
Falcon’s breadth in this respect is due to its approach of partnering with importers, exporters, intermediaries and financiers to structure solutions for their clients.
“We are not selling a series of products and trying to fit all situations to what we have in our tool box,” says Alzarka. “We are an important strategic partner able to look at and assess situations and provide tailored solutions. This is a fundamental difference.”
Alzarka obtained a degree in International Trade and Finance from the Paris Business School, before working at Crédit Lyonnais. He established Falcon Trade Corporation in 1996 after formulating a vision of excellence regarding the provision of trade services – a vision that has turned Falcon into a billion dollar turnover company.
We caught up with him at his office in London.
GTR: What made you choose trade finance as a career
Alzarka: I was drawn to it at business school because trade is about real life – the real world. I found that fascinating – its tangibility, the fact it meant something.
I also realised the potential. I realised that the classic commodity trading houses had become financial engineers and thought it was possible to offer the same or better service to clients across different sectors – regardless of the underlying product.
I also realised that this is a US$4tn-6tn per year industry, so there was plenty of opportunity to build a large and diversified portfolio. I believed I could make a difference to the industry, and that is what I have been trying to prove for the last 11 years.
GTR: Why set up FTC
Alzarka: I wanted to do things my own way. I had a clear strategy and vision for FTC. And, looking back now, I feel that I have achieved my initial objectives. Creating a company has allowed FTC to be more inventive in its approach and to really make a difference to the way that trade is financed, whereas – according to our clients – other partners can be more restricted to more classical methods and off the shell solutions.
GTR: Owning your own company inevitably involves a huge time commitment. Would you say that you are a workaholic
Alzarka: Not really. I believe in organisation and in delegating work to the right people – giving them appropriate responsibilities. But it is important to give adequate direction to your colleagues, and that means you must understand what they are doing – you can’t delegate to the point you let go.
GTR: And where do you see yourself in 10 years
Alzarka: I see myself still being at FTC, but I anticipate it becoming a much bigger organisation. It has taken us 11 years to reach a US$1bn turnover and, in 10 years time, I see Falcon becoming a multi-billion dollar company, leveraging on its size and reputation.
Recently, we have been approached by private equity people who see potential in the business, but even if I was to sell the majority of FTC, I think I would always keep a finger in the company. I am dedicated to trade finance and cannot see any other option but to work in this arena.
GTR: How does your being independent benefit the customer
Alzarka: We have a very deep and specific knowledge of the industry. This means that we don’t look at deals from one specific angle. We have a wide range of possibilities since we are not married to anyone or offering only a limited range of products. This allows us to structure solutions for clients using the very best options from different providers. Meanwhile, others are stuck with a limited tool box.
Also, we are keen to take on deals and turn them around immediately. And we do not shy away from the most difficult deals – quite the opposite, we see them as opportunities.
Finally, we work with both big and small clients, and we are able to bring overnight solutions to them: removing the obstacles in terms of getting things done rapidly.
GTR: Are there any restrictions in terms of product
Alzarka: The only products that we don’t deal with are regulated products such as chemicals or dangerous products such as military goods. Other than that we are very open – including steel, hydrocarbons, cotton, softs, capital goods, textiles, and plant machinery.
GTR: You have a strong track-record in the Middle East, so what is your view of Islamic trade finance
Alzarka: The primary objective of trade services is to facilitate trade, and it is imperative that providers do not lose sight of this. Shariah-compliant instruments are in greater demand than ever before, and the market has responded by offering an increasing variety of trade services solutions that are compliant with the principles of Islamic law – including FTC.
Yet the reality is that the delivery of Islamic solutions can miss the point, which is to enable a trade to happen, fast, while maximising margins and removing certain risks.
And it should also be shariah-compliant. In other words, the Islamic element forms just one part of a term sheet, albeit an important one. If you aim first to meet Islamic laws and only then address the need to remove trading constraints and improve cashflow it is likely to cost more and fit badly.
GTR: And what is your strategy in terms of expanding into Asia
Alzarka: Recruitment is always central to our expansion plans. We seek to employ new, highly-qualified people who can bring clear added value to the group and our customers.
We also have an individual country approach, starting with Malaysia and Indonesia, and then moving onto Thailand, Vietnam and the Philippines. Yet we also remain focused on building on our success story in established market, which means creating serious added value for our existing clients before we start looking at new markets.
GTR: You recently employed Peter Watson: a sales specialist. What was the thinking behind that
Alzarka: It is essential that we promote ourselves effectively. We need to reach the right customer with the right people and the right approach in order to convey our message. Peter is doing a great job – not just recruiting top sales people but building a reporting system that can deal with the flow of information required when creating and managing a Rolls Royce of a sales force.
Because Falcon is a young, fast growing, company, it is essential that all of our employees are effective.
GTR: How does Falcon deal with the growth of open account trading
Alzarka: Open account trading is a very big opportunity for us – a major growth area for 2007 and 2008. A few years ago we developed new structures to allow us to offer financing against open account trading: an important step given the exponential growth in open account trading as part of the globalisation process.
GTR: Has the declining relative popularity of documentary credits made structured solutions more difficult to provide
Alzarka: The admin is actually a lot easier now, but the risk mitigation part is more complicated. There is more risk on the balance sheet, but at the same time, there is more opportunity too. The key is to be flexible and adaptable – something our structure allows.
And documentary credits are still growing, just not as fast as open account. Indeed, the market is becoming more sophisticated, which means off-the-shelf solutions will no longer do – even for the mid-market.
Certainly, doc credits will remain an important part of the business because there is more uncertainty in the world we live in, as well as more trade.
GTR: What is the outlook for emerging market risk
Alzarka: It remains volatile. We have seen it lately with Iran and Sudan. When I started my career Iranian risk was very high. Then everyone wanted Iranian risk and it went to 2% or lower. Now we have seen it climb to double figures again. Yet this is a strong opportunity for us and a clear case where our independence allows us openings that others would shy away from. We are very bullish on Iran. If you see Iran as a problem then you should talk to us.
On the other hand, the GCC market is more sophisticated – it is very mature and liquid. So we see ourselves more as a trading partner here, rather than a solution provider.
GTR: How is commodity market volatility impacting the trade finance arena
Alzarka: There is always a lot of volatility in the commodity markets, yet our role as provider of trade solutions is to offer techniques that can mitigate the risk. Again, it becomes more of an opportunity than a handicap.
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