FINANCE & LOGISTICS
exceeded 1.5 million truly highlights the coming of age of this long under-utilised technology. In 2013, there were over 100 new eUCP ePresentations under a letter of credit in one Asian country alone, a figure which looks set to rise sharply this year. While the chemical industry is still in the early
stages of adopting the technology, in the mining industry it is close to becoming the new standard. Last year, for example, one major mining firm dealing in manganese transferred documents relating to around 70% of all its shipments from paper to electronic format. Another exporter – one of the world’s largest
diversified resources companies – radically reduced its reliance on high-risk ‘workarounds’, such as Letters of Indemnity (LOI), to complete the discharge of goods since using electronic presentations. This in turn has accelerated overall cycle times, with end- to-end transactions now completed in just two days, increasing working capital benefits. Crucially, in automating its trade finance workflows, the mining giant has succeeded in reducing its exposure to market movements and volatility.
Minimising Exposure to Risk As well as seeking to speed-up settlements and
mitigate changing market conditions, reducing the risk of fraud and reputational damage can be a driving factor in the business case for using electronic letters of credit and electronic bills of lading. The CFO and corporate risk officer of one large
South American exporter, for example, approached Bolero with the challenge to help it reduce the use of letters of indemnity in its sales process. In particular, the organisation felt that the current system left it too exposed to fraud and, as such, it did not have as much control over the process as it required to meet the stipulations of strict regulatory controls such as Sarbanes Oxley. Recent reports from Singapore of fraud involving an abuse of letters of indemnity further compelled the exporter to remove the unreliable risk mitigation instruments from its business processes. Rather than relying on workarounds to cover for the fact that the documentation wasn’t being sent or received in a timely way, it identified that moving to electronic processes would ensure that files were delivered to the right person and at the right time.
Financial Incentives While mitigating security risk is a viable reason
for using ePresentations, many other firms are prioritising the technology from a process and operational overhead perspective and, increasingly, as a means of accelerating payment and influencing their payment terms. For example, in the case of a major oil company,
the business case for ePresentations focused almost exclusively on overcoming the direct costs it was incurring through being unable to send paperwork and have it with the recipient on time. Meanwhile, from a banking perspective, lenders
of structured credit are realising that there is some interesting collateralised funding that can be done off the back of eBLs, which is increasingly being used to create new financing products around the individual shipment of goods. So while the driving force behind the technology may
differ according to individual business requirement or strategy, the fact that using automated trade finance has proven to rapidly cut dependency on LOI is clearly a universal advantage. In the first six months alone, businesses have reported a 90% reduction in the number of letters of indemnity issued against transactions where electronic presentations and electronic bills of lading were used.
Collaborative Benefits All of this underlines the important opportunity
that exists for chemicals exporters and their trading partners to capitalise on the success already witnessed in the mining industry and embark on the journey towards streamlining
shipping and trade finance workflows. In the first six months alone, businesses have
reported a 90% reduction in the number of letters of indemnity issued against transactions ... In addition to the business opportunities on
offer, from an operational perspective the fact that ePresentation is designed as a mutually inclusive process makes it far easier to implement than some organisations might anticipate. Rather than forcing all parties to converge on a single platform, the collaborative SaaS-based trade finance technology underpinning ePresentation works in conjunction with corporate and carrier communities’ existing systems, reducing many of the barriers to entry and making it possible for more participants in the trade chain to make the most of the benefits it offers. From a budget perspective, the fact that there is
no requirement for large upfront investment means enterprises can use their op-ex rather than cap-ex budgets to fund the technology. Users only need to connect once to gain common access to all other community members, while remaining completely insulated from a trade partner’s specific technology and business processes. •
Tom Rahder is VP product strategy at
Bolero International.
www.bolero.net
March 2014 45
and modernising critical
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