The challenge

To support its procurement with global suppliers, BG Singapore required a tailor-made trade finance, foreign exchange and commodity hedging solution to cater for its diversified needs for trade settlement, FX risk management and commodity price risk management.

The solution

The solution is deployed in both Singapore and Shanghai Free Trade Zone (SFTZ) as two business processing centres to connect global resources with the group, leveraging the bank’s comprehensive product services and broad network advantage. Margin financing is provided by OCBC Bank to facilitate customer’s overseas commodity hedging need through OCBC Securities, thus saving costs compared with hedging through overseas suppliers.

The trade and FX solution offers BG Singapore greater flexibility in bills processing, procurement settlement and FX management. The company is free to select the trade settlement model according to the actual financing cost and exchange cost and could select different processing units according to the actual trade scenarios. For example, it could select letter of credit (LC) or back-to-back letter of credit (BBLC) model to ensure document safety or document against payment (DP) model to save finance costs under rising USD interest rates. The company could also select either processing unit to execute FX hedging as foreign currency (FCY) funds could be freely transferred between the Shanghai Free Trade Unit (FTU) and the Singapore account.

The solutions also improve business efficiency with simplified procedures in both Singapore and the Shanghai FTU. For example, Shanghai FT bank account enables the company to collect bills in any footprint city of the bank within China. Any import bills to be processed in the Shanghai FTU can be directly submitted by overseas suppliers to Beijing and the main port cities in North China including Tianjin and Qingdao, thus significantly shortening bills transportation time, saving bill finance costs and mitigating risks for logistics delay during emergency lockdowns. FX transactions in both FTU and Singapore can be freely executed, significantly improving deal processing efficiency.

Best practice and innovation

The deployment of the bank’s network in both Singapore and FT China with combined trade, FX and commodity hedging solutions offers BG Singapore convenience and benefits in the following:

1. Combining a trade, FX and commodity hedging solution in Singapore and China FTU supports the company’s requirements as it can select different trade settlement models under various macro environment and different trade scenarios. The solution also provides an alternative to execute FX hedging and commodity hedging.

2. Providing greater flexibility, cost savings and improvements in transaction efficiency with highly simplified business procedure, supported by the favourable policies of Shanghai FTU and Singapore and the bank’s network advantage.

3. The deployment of different booking units in Singapore and Shanghai FTU ensures business continuity in any nationwide emergency crisis such as the recent pandemic.

Key benefits

• Cost savings.

• Process efficiencies.

• Risk mitigated.