Now there are 16 Banking Groups Live on BPO

This list includes 6 of the top15 Trade banks (based on Cat 7 traffic)

ANZ - Australia & New Zealand Banking Group
Bank of China
Bank of Tokyo-Mitsubishi UFJ
Bangkok Bank
BNP Paribas
China CITIC Bank
CIMB - Commerce International Merchant Bankers Berhad
Commerzbank
Hua Nan Bank (Head Office: Taipei )
Korea Exchange Bank ( KEB )
Maybank - Malayan Banking Berhad
Siam Commercial Bank ( SCB Thailand )
Standard Chartered Bank ( SCB )
Türkiye Is Bankasi ( Isbank )
Turkish Economy Bank Inc. ( TEB )
UniCredit

Information as at November 17, 2014 supplied by SWIFT

As you can see there are plenty of banks to turn to for this service if yours is being unhelpful.

Ron Wells

A Novel about Credit Risk Management ... No way! How can that work?

Credit Risk Management - The Novel (Part One) presents two cracking good stories for your enjoyment and enlightenment.

It is the first narrative non-fiction novel to feature the true to life experiences of a team of professionals managing business to business credit risk, day to day. This is intertwined with a parallel story that follows the adventures of Credit Exec and Secret Agent, James E Cricket, which provides an undercurrent of twists and turns.

Click this widget to browse inside a sample of this unique and innovative book, satisfy your curiosity….



Visit and follow the James E Cricket fictitious celebrity Facebook page to learn more about his early life, and other useful posts at www.facebook.com/jamesecricket.

List of the 15 Banking Groups Now Live on BPO

This list includes 6 of the top 15 Trade banks (based on Cat 7 traffic)

ANZ - Australia & New Zealand Banking Group
Bank of China
Bank of Tokyo-Mitsubishi UFJ
Bangkok Bank
BNP Paribas
China CITIC Bank
CIMB - Commerce International Merchant Bankers Berhad
Commerzbank
Hua Nan Bank (Head Office: Taipei )
Korea Exchange Bank ( KEB )
Maybank - Malayan Banking Berhad
Siam Commercial Bank ( SCB Thailand )
Standard Chartered Bank ( SCB )
Türkiye Is Bankasi ( Isbank )
UniCredit

Information as at October 16, 2014 supplied by SWIFT

Plenty of banks to turn to for this service if yours is a laggard.

Ron Wells

Routine Counterparty (CP) Credit Risk Reviews – Alternatives Proposed

Does ‘an Annual Review for every CP’ make sense?

Most text books and training sessions, hence most in-house credit policy documents, stipulate that every customer (and often suppliers as well) should be reviewed as to credit worthiness at least once every year. Such a review usually coincides with publication of annual financial statements by the Counterparty (CP).

This methodology harks back to the early half of the 20th century, after WWII, when change was linear (slow but steadily positive) and most Counterparties published audited financial statements or were fully covered by acceptable collateral.

Apart from the odd market collapse, each of which was discounted as an aberration and after which the steady state resumed, most CPs’ businesses progressed from year to year. Therefore the annual review merely served to satisfy auditors and bank regulators that enough diligence was being applied to keep the creditor companies and banks respectively safe from suffering excessive bad debt.

As we approached the second millennium, by the Gregorian calendar, the linear progress steady-state had evaporated but even as we draw near to 2015 most corporate and bank policy documents still require annual credit risk reviews for all Counterparties or Clients.

Credit Risk Review Policy Revision Recommendations

Regarding the timing and required depth of CP Credit Risk reviews each organisation should adopt a policy appropriate to its particular circumstances. Therefore this discussion highlights some alternative policy approaches in order to provide ideas to be considered by policy makers.
It is submitted that the most appropriate approach for a business to adopt may be the application of a different assessment and review policy to each of several sub-portfolios identified within the overall counterparty array.

TO READ THE FULL ARTICLE CLICK HERE

ALTERNATIVE RISK ASSESSMENT AND REVIEW POLICY OPTIONS DISCUSSED IN THE ARTICLE

Why not a ‘no credit analysis or review at all’ policy?
1. Building a sub-portfolio of diverse counterparties that are not financially transparent and/or are ‘start-ups’
2. Restricting CP exposures to a ‘short-list’ of what are considered low risk entities.
What about the 80% of Counterparties that warrant regular review?
1. Proposed Review-Minimum Policy for Relatively Minor Exposure CPs
2. Review Policy for CPs that do not Qualify for the Review-Minimum treatment

What about CPs that are Margined, should they be treated differently?

The Article Conclusion

The identification of sub-groups within your risk portfolio and application of the appropriate review policy to each will both improve the efficient use of expertise and reduce risk overall.

Adopting this approach will enable internal credit risk assessment and management experts to dedicate more time to monitoring higher risk counterparties and the relevant business environment. To read the article click here.

To retain talent the role demands of Finance must change, by David Axson

In the linked video Dave Axson discusses the rôle that Finance Professionals should be allowed to play in businesses in order to retain and attract the talent that they so desperately need.
Dave Axson is author of The Management Mythbuster (John Wiley & Sons 2010) and MD of Accenture.

“What we are dealing with today is an environment where there are many more variables that could potentially impact your business. Twenty to twenty-five years ago you were concerned about your competitors down the street…..” click this link to view this short but interesting talk.

Eminent Prof. of Credit Management Recommends ‘Credit Risk Management – The Novel’

The Professor of Credit Management and MSc Finance, Programme Leader at a prestigious UK University, and Programme Leader for the Singapore Accountancy Academy (SAA-GE), has read and now recommends ‘Credit Risk Management – The Novel’.

To advise her decision she wrote as follows: “I have recommended your book to a few libraries and added it to my recommended reading (other reading) list.”

The printed version of Credit Risk Management – The Novel (Part One) is now available from eStoreT3P, Amazon.com and 11 country specific Amazon websites. It can also be purchased through the CreateSpace eStore.

This paperback version is available worldwide in other retail book stores; place your order with your favourite bookstore today.
The ISBN13 is 978-0-9576279-2-5.

This is not a text book, it is a story that follows the day to day work of a credit risk management team as they face and overcome various challenges. You are invited to 'listen in' to their conversations and read the outline of the solutions they employ. The detail of their solutions appears at the end of the book so reading the detail is optional.

There is a parallel story that follows the adventures of James E Cricket an Agent of the Office of Peace, which provides an undercurrent of twists and turns.

The Novel doubles as a reference book, which will be useful if you meet credit management challenges similar to those solved by the fictional credit team.

See: http://www.barrettwells.com to read a Five Star reader review posted on Amazon.com.

Ode to LCs past and BPOs to come

Do you have BPO?
What's BPO?
I'll take that as a NO
BPO replaces SBLCs
BPO-Plus replaces DocLCs
BPO Reduces Costs
Improves Working Capital!

Why haven't I heard of BPO?
'Cause your TF Banker is afraid
Afraid to spill the beans.
Why?
'Cause it threatens his/her job
Oh, I shall find another bank
a BPO friendly bank

Where can I find a list?
A BPO ready bank list?
At SWIFT.com you'll find a list
A BPO ready bank list :o)

I can't find the list
The BPO ready bank list
It's hidden on SWIFT.com
Search for 'BPO Market Adoption SWIFT’
To find the BPO ready bank list

Bank Payment Obligations (BPOs) – Basics for Corporates

Whether you are a Seller or Buyer of goods this article provides the basic information you need in order to start replacing Standby Letters of Credit and/or Documentary Letters of Credit (LCs) with the BPO or BPO-Plus process respectively.

You can download a copy of this article by clicking here.

Why bother to make the change?
Companies that adopt the BPO and/or BPO-Plus processes are able to capture a number of benefits from the BPO system; for example:
• Improved cash flow management based on certainty as to when invoice payments will be credited.
• Reduced document handling – whether paper or electronic – since purchase orders and invoices are keyed into the system and communicated automatically; via one or two banks in nanoseconds. The SWIFT system is exceptionally secure and reliable, and covers more than 10,000 financial institutions and corporations in 210 countries
• Reduced information discrepancies and/or reduced time involved in identifying and correcting mismatched data. The BPO system automatically matches buyer and seller data against the Purchase Order/Contract baseline and provides various reports
• Better payment protection (for the seller) compared to a Standby or Documentary Letter of Credit; with reduced costs and handling required on both sides of a transaction
• Access to financing options is improved for both buyer and seller

According to an article that you can find with this link.

“This process (the BPO & BPO-Plus) results in a fully electronic alternative to the letter of credit (LC), which will enable efficiency gains, working capital reduction and cost saving. This electronic alternative can be processed in a much shorter time than traditional, paper-based LCs – estimates are as low as 10-15 days. Reduced processing times result in significant cost savings: Brazilian mining company Vale estimates that a combination of electronic bills of lading and BPOs is saving it $37 million per year on its exports of iron ore to China alone.”

The BPO Train is leaving the station, so you better hurry to catch it… or risk being left in the LC dust by your competitors…

It is understandable that many Trade Finance Bankers will resist the switch to BPO and BPO-Plus but it would be preferable for them to accept that BPO related changes are unstoppable. The sooner Bankers accept that and start to make the necessary changes in their careers the better, delay will only mean more painful and difficult changes will have to be made later.

In 2000 Gary Hamel wrote in his book ‘Leading the Revolution’: …”change has changed. No longer is it additive. No longer does it move in a straight line. In the twenty-first century, change is discontinuous, abrupt, and seditious. We now stand on the threshold of a new age – the age of revolution. In our minds we know the new age has already arrived; in our bellies, we’re not sure we like it. For we know it is going to be an age of upheaval, of tumult, of fortunes made and unmade at head-snapping speed.”

In fact it was in 2000 that TradeCard brought its solution to market, a product that BPO more than resembles, it virtually mirrors. Admittedly it has taken 14 years for the BPO to become a globally viable LC alternative but the challenges overcome in terms of proving the technologies involved, agreeing standards and putting in place internationally accepted rules have been formidable.

The prize for banks and users (exporters/sellers, importers/buyers and traders) is significant.

On the other hand there will inevitably be losers, mainly those who have built a career on the basis of UCP expertise; bankers, consultants, trainers and academics. The losers’ whose ‘cheese is being moved’ can denounce this development, and try to derail or delay the transition, but like blowing against the wind such efforts to maintain the status quo will prove fruitless in the end.

Today one can be a Kodak strategist until one’s world falls apart when the ‘digital camera producers’ destroy the business and associated jobs, or one can recognise the signs and start searching for ‘new cheese’. As Lynda Gratton wrote in ‘The Shift – The Future of Work is Already Here’: “In a world of more and more complex technology, it is the highly skilled, or what I call those with serial mastery, who will always find work.”

Those who do not notice their 'cheese' disappearing and do not set out to find ‘new cheese’ (a new expert occupation) will, I’m afraid, find it difficult to maintain their current standard of living.

William Gibson in 1993 famously said: “The future is already here — it's just not very evenly distributed.”

Ron Wells

The BPO & Friends have a Stranglehold on the LC and will soon finally lay it to rest…

Read why every business that accepts Standby Letters of Credit as collateral cover (security) for its sales transactions should switch to requiring Bank Payment Obligations (BPOs).

Discover how the BPO-Plus (BPO & Friends) will gradually but inexorably replace transaction related Documentary LCs over the next five years or less. The considerable rewards intrinsic to using BPO and electronic documents in combination are available to every trading partnership today; you should be benefiting.

To read the full article click here.

Ron Wells

Ron Wells is a B2B counterparty credit risk and trade finance practitioner and author of “Credit Risk Management – The Novel (Part One)”. This is not a text book, it is a story that follows the day to day work of a credit risk management team as they face and overcome various challenges. You are invited to ‘listen in’ to their conversations and read the outline of the solutions they employ. There is a parallel story that follows the adventures of James E Cricket, providing and undercurrent of twists and turns.

Ron also wrote “Global Credit Management – an Executive Summary” published by John Wiley & Sons. His books are sold by Amazon.com and other retail outlets.

Forcing Banks to increase Capital is driving them to take on more risk, sowing the seeds of the next crises.

GARP (the Global Association of Risk Professionals) today forwarded members the following link to a Bloomberg report that notes the “Fed’s Bubble Busting in Junk Loans Seen Failing as Sales Surge” see: http://www.garp.org/risk-news-and-resources/risk-headlines/story.aspx?newsid=114766

While the article includes various explanations as to why Financial Institutions (FIs) are taking on highly risky assets at an alarming rate, and why regulators seem impotent to reign in this dangerous trend, one important underlying cause is not mentioned – the Capital Paradox.

Karamjeet Paul, in his important book ‘Managing Extreme Financial Risk’ describes the Capital Paradox thus:

“If (a Financial Institution) adds capital, then it needs to generate higher earnings to cover the cost of incremental capital. The quest for higher earnings requires the institution to take on more risk to generate these earnings, as risk management primarily drives the current revenue model. In turn, higher risk creates the need for more capital. Therefore, the industry’s dependency on increased capital to maintain the current revenue engine is not sustainable.” Chapter 11 at 11.2

In fact herein lies a dual paradox; since FI executives are measured by return on capital, increasing the capital drives, even licences, the executives to buy and invent more risky financial assets.

Regulators are driving FIs to increase their capital in order to strengthen their ability to survive the next crises, which will be driven by a tail-risk event (occurrence of a negative Black Swan event) a phenomenon Mr Paul calls an Unquantifiable Uncertainty.

Since Banks/FIs changed their revenue model from one based on intermediating loans to one of intermediating risk, they have become risk traders rather than lenders. Funding is provided by ‘the market’ so banks merely underwrite the investment risks, and then trade away risk they cannot afford to hold. This is the revenue model that led to the development of the subprime mortgage market and related complex products. In brief, FIs no longer invest in real businesses directly, they invest in financial instruments.

Unfortunately for the world at large FI Regulators still focus their post 2008 risk management strategies on Quantifiable Uncertainties; those uncertainties (risks) that can be quantified with 99% confidence by use of VaR (Value at Risk) models. Such models ignore the ‘outliers’, the risk instances that occur beyond the third standard deviation. FIs and Regulators are so star-struck by the precision of these models and the multiple academic degrees in quantum physics held by the builders of these models that they tend to forget that the models all contain one dangerous assumption.

The assumption that the future will resemble the past and nothing that has not occurred in the past will occur in the future; however Unknown Unknowns have occurred frequently in the past four decades with devastating financial impact globally.

In his book Karamjeet Paul offers a practical approach to managing an FI’s Tail Risk associated with Unquantifiable Uncertainty, which is well worth serious consideration.

As a reviewer of Mr Paul’s book notes on the jacket; “Managing Extreme Financial Risk should be required reading for regulators, board members, CEOs, and CFOs of large financial institutions.”

In closing it is depressing to think that the words of Henry Ford who said; “A Business that makes nothing but money is a poor kind of business,” so aptly describe the role adopted by too many of today’s global FIs. So many talented and dedicated individuals work hard in those FIs but essentially participate in producing nothing of value, nothing real.

BarrettWells

Welcome to the beginning of the Machine Age – How will you and your 8.2bn neighbours be gainfully employed?

“Organisations will always strive to replace replaceable elements with cheaper substitutes.

I (Seth Godin) grew up in a world where people did what they were told, followed instructions, found a job, made a living and that was that. Now we live in a world where all the joy and profit have been squeezed out of following the rules. Outsourcing and automation and the new marketing punish anyone who is merely good, merely obedient, and merely reliable. It doesn’t matter if you’re a wedding photographer or an insurance broker; there’s no longer a clear path to satisfaction in working for the man. The factory – that system where organised labour meets patient capital, productivity-improving devices, and leverage – has fallen apart.” (Seth Godin, Linchpin: How to drive your career and create a remarkable future.)

“Just having a job in the future will be a challenge, as machines take over more and more menial work. The key to having a job in the future is to be able to do something machines can’t do.” (Gerd Leonhard, Presentation at Fort Collins Start-up Week, Reported by Steve Porter of InnovatioNews)

Machines have taken over jobs for over 150 years, what’s different now?

To learn the answer watch a 15 minute TED Talk by Andrew McAfee, titled ‘What will future jobs look like?’ via this link: http://on.ted.com/j0JVk

How will the mass of people be gainfully employed in 2025 and beyond?

If people are not earning money they will not be able to buy goods and services, so all the efficient production by machines will not find a market. Who will have a job, and how can we ensure that we are in that group?

Lynda Gratton in her book ‘The Shift: The Future of Work is Already Here’ published in 2011 notes:

“In a world of more and more complex technology, it is the highly skilled employees, or what I will call those with mastery, who will always find work.”

Writing about the year 2025 she continues later, “With the emergence of mega-cities, instead of connected parts the suburbs are increasingly becoming slums. Far from claiming their own purpose and identity, these concentrated areas of ‘surplus humanity’ exhibit intense poverty and little direction. This disconnection has been exacerbated by vast urbanisation that has seen millions of people leave the land, hoping for a better life in the cities. As the slums around Mumbai or Johannesburg will attest, these hopes are rarely realised.”

SURPLUS HUMANITY!

The term ‘surplus humanity’ is jarring; although taken from the ‘downside’ 2025 scenarios presented by Lynda Gratton it is nevertheless a ‘wake-up call’.

It is clear that having a general skill in future will increasingly mean competing for employment with five billion equally capable and equally connected people, as well as robots and computers. Therefore the need to cultivate mastery – the ability to add value that no one else can match – in a series of fields over a career will be essential.

A career will likely span, not 35 years but up to 50 years, as life expectancy lengthens towards 100. Certainly the days of starting a first job with a corporation and leaving your career to the corporation to decide, then retiring on an adequate pension at 60 or 65 ended more than 20 years ago.

Sadly many companies still see the advantages of having employees think that that is the contract; at the same time corporations have no intention to return such ‘loyalty’. When it no longer suits the next quarter results to retain an employee, or indeed a whole division or business line an unceremonious parting swiftly ensues. In any event the half-life of a successful business model is now three to five years. Therefore most will fail and put all employees out of work well before retirement. Unfortunately the majority of corporate leaders are too busy managing their personal financial affairs and internal politics to focus on continuously transforming the business to ensure survival.

Lynda Gratton’s book gives the reader an opportunity to imagine what a work-day in 2025 could be like. Also provided is guidance as to how to prepare in order to ensure a positive rather than a negative future in work. See: http://www.lyndagratton.com

William Gibson was inspired in 1993 when he said, “The future is already here — it's just not very evenly distributed.”

Look around, see what is already happening and position yourself and those you care about to ensure the best possible future outcome.

BarrettWells

Global Credit Management receives 5 Star Reader Rating

On 27 April 2014 a reader awarded Global Credit Management an Executive Summary, published by John Wiley & Sons and written by Ron Wells, a Five Star Rating and commented:

Good book, easy to read and very useful.

The book is a very good addition to my current study in credit management and I would recommend it to any credit manager or professional who wants to become credit manager. The book is written in a nice way and the subjects are short, but concise, which makes it easy for a study.

The review appears on the Amazon.co.uk website.