Global Head of Trade Finance
Maersk is an integrated container logistics company working to connect and simplify its customers’ supply chains. As the global leader in shipping services, the company operates in 130 countries and employs roughly 79,900 people.
As Global Head of Trade Finance at Maersk, Vipul Sardana spearheaded the development of a novel, digital trade finance solution for the Danish shipping giant’s customers. The solution has won Sardana’s team considerable praise and, indeed, they were Overall Winner of the Judges’ Choice award in the Adam Smith Awards Asia 2017. He explains the inspiration for the solution and how its development benefitted from his experiences in roles prior to joining Maersk.
Building a company with staying power, one with the ability to withstand change and compete over decades or more, is no easy feat. Being innovative and flexible through the ages are certainly essentials for long-term corporate survival, as is, more specifically, the ability to respond to changes in market conditions and the needs of customers.
All these vital ingredients for long-term success have undoubtedly played their role in helping Danish shipping giant Maersk survive and prosper for over 100 years. They have certainly been demanded of the heavyweight conglomerate over last few years, faced as it has been with a number of big challenges including chronic overcapacity in the global container shipping and consolidation across its industry.
Maersk’s response to those headwinds was to launch “a radical transformation” of its business, a move that has led to a streamlining of its sprawling global empire. Most notably, the overhaul led to it jettisoning its energy-related businesses, including its oil exploration and production unit. It now describes itself as a “fully integrated, highly focused transportation and logistics company”.
Three and half years ago, as the group’s rethink and reorganisation began, a team led by Vipul Sardana began to explore the potential for Maersk to offer a trade finance service to its customers, a ‘one-stop shop’ to help them manage the flow of both goods and money. The resulting digital platform offers import and export financing solutions that enable customers to meet their working capital needs.
Called the Maersk Trade Finance Solution, the novel service has attracted considerable praise and, indeed, was Overall Winner in the Judges’ Choice category of the Adam Smith Awards Asia 2017. “The praise we won really made us feel we had developed something truly innovative. It caught the attention of our customers and peers across the region,” says Vipul Sardana, Global Head of Trade Finance at Maersk.
Sardana says the inspiration for the novel platform came from the company’s customers constantly pointing to trade finance as one of the biggest obstacles for their businesses and, by extension, greater global trade generally. It is an obstacle that comes in many forms. Accessing capital when it is needed is one big hurdle: bank financing has become limited and expensive since the financial crisis, with the credit environment constrained for all except the big multinationals. According to the World Trade Organisation, over half of trade finance requests by SMEs globally are rejected, against just 7% cent for multinational companies.
Another major drag for firms is the fiendish complexity of financial services instruments that support global trade. “If you look at conventional banking instruments that assist global trade, the customers constantly have to choose between simplicity and security, between say open account or letters of credit,” says Sardana.
“Today we have new generation, tech-driven businesses that ensure freedom of choice lies solely with the consumer, and they develop products in line with consumer needs. That recognition helped inspire us to also do better for our customers with trade finance. We appreciated there was this huge gap between our customers’ demands and what they were being offered, that it was something that was crying out for disruption.”
Sardana became convinced that by leveraging Maersk’s global footprint and pedigree – it is the largest container shipping line in the world, with offices in 130 countries and over 100 years of experience in forging solid relationships with customers – the company could co-create solutions with customers for enabling global trade transaction: “Maersk is in a unique position to assess risk differently to the banks. We know the buyers, we know the sellers, we are carrying their cargo on our vessels. We really know what’s in the box and have control over the cargo, which makes financing for our customers simple to action.”
It is also the case that with global trade transactions it is usually shipping lines that generate the most important documents; indeed, most banks rely on that very same documentation to support their financing decisions. “The fact that we have control over that documentation means we are actually part of the trade transaction and not somebody outside it looking at just paper and funding that. That realisation allowed us to do this little experiment, to see if we could bring together the flow of goods and the flow of money, and in the process alleviate one of our customers’ biggest pain points: access to capital. We imagined what a solution would look like if the customers’ logistics partner, that is Maersk, was the provider of their working capital needs. The focus was always on the customers, understanding their needs. They are the ones that really helped us shape the resulting solution.”
The first product note for the solution was a “very bad PowerPoint presentation” and its journey to full commercialisation began with a “very small pilot” in India. Three years on, the Maersk Trade Finance Solution is being offered to the group’s customers in six countries: India, Singapore, The Netherlands, US, UAE and Spain. The simple, user-friendly digital platform has so far provided working capital loans in excess of US$600m to its customers, who continue to report simplicity and time saving compared to traditional trade finance instruments.
“Our customers also consistently rate us over 4.5 on a scale of 5 on user experience. Our focus continues to be on making it simple for our customers to access capital; bundled with world class logistics solutions.”
Customer is king
Sardana joined Maersk six years ago, having previously spent seven years at Bank of America Merrill Lynch where he was Vice President, Operations for Global Trade & Payments. Other previous postings include GE Capital, the financial services unit of General Electric, and prior to that, a clutch of B2B sales roles. His achievements at Maersk, particularly in spearheading the development of the trade finance solution, owe much to the experiences he gained in these previous roles.
“What I was tasked to do three years ago for Maersk was to essentially build a start-up company in a 100-year-old organisation. In a start-up it is critical that everyone on the team understands that sales is everybody’s business and I think my experience in that field played a vital role during the incubation period for the solution, to ensure it had a solid base from which we could commercialise it and take it to where it is right now.”
Equally, his experience of corporate commercial banking whilst at Bank of America Merrill Lynch provided valuable insights into global payments and the blizzard of technological advances being made across the space: “At Bank of America Merrill Lynch I saw the digital revolution that was starting to really impact the retail banking. I also developed a fair idea about the complexity of trade finance products like letters of credit that banks offer to corporate clients.
“My experience at Bank of America Merrill Lynch, and before that B2B sales, really helped me appreciate fully that while both the flow of goods and flow of money are essential for global trade transaction, they invariably run on parallel tracks, never really meeting or talking to each other. And that appreciation fitted perfectly into the opportunity we saw of creating something really unique for Maersk that mixed them together and supported the key element of Maersk’s DNA: to be an enabler of global trade. The project was also an opportunity for us to come up to speed with related sectors like ecommerce and parcel transportation, where companies have succeeded in dramatically simplifying the way they go about their business. We thought, if they can do it, surely we can too.”
The bigger picture
It is two years since Maersk’s Chief Executive Officer Soren Skøu informed the market of the company’s new mission: to become the ‘global integrator of container logistics, connecting and simplifying our customers’ supply chains’. Sardana is in no doubt about how important the new mission is, not just for the company’s customers, employees and shareholders but also for global trade: “It’s a winning combination and has benefitted emerging economies in particular. As enablers of global trade, companies like Maersk have become incredibly efficient and cost effective.”
But Maersk is just one player, albeit a heavyweight one. In considering the bigger picture, he concedes that much more needs to be done by both his industry and institutions, pointing to OECD estimates that 15% or US$100bn per year of the overall value of traded goods around the world is comprised of hidden costs. These are typically associated with manual processes, complex transactions and intensive documentation. “Lowering the hidden cost of trade by just 10% say for an emerging economy like India could help improve its competitiveness and revenues by US$5bn annually. Imagine if we were to do that for the US$100bn of waste that exists today in the ecosystem. The impact would be massive.”
While Maersk’s innovative trade finance solution offers both simplicity and security in one product – the digital solution enables customer onboarding, credit assessment, KYC and transactions – Sardana assures it is only the beginning, or more accurately “the end of a good beginning”.
Like many institutions and organisations worldwide, Maersk has begun exploring the potential of blockchain for trade finance and Sardana has high hopes of the technology. “In global trade currently, there is an inherent trust deficit amongst parties because with trade generally, and trade finance in particular, there are several parties involved in one transaction. And more often than not, they’re not located in the same country or even the same continent. That is why so many checks and balances and controls and documentation exist today. Blockchain could obviate all that. Moreover, the potential of blockchain to create that kind of transparency and trust in a commercial environment could give rise to several new trade products and business models.”
In August, Maersk and IBM announced the creation of TradeLens, a blockchain-based shipping platform jointly developed by the two companies for the world’s global supply chain. Its bold aim is to “promote more efficient and secure global trade, bring together various trade parties to support information sharing and transparency, and spur industry-wide innovation”.
Sardana believes TradeLens has enormous potential to transform the shipping industry. The solution offers secure, real-time end-to-end information about cargo shipments to multiple parties involved in a global trade transaction. Shippers, shipping lines, freight forwarders, port and terminal operators, inland transportation and customs authorities can interact more efficiently through real-time access to shipping data ad shipping documents, including Internet of Things (IoT) and sensor data ranging from temperature control to container weight.
During the 12-month trial of TradeLens, ahead of its launch, Maersk and IBM worked with dozens of ecosystem partners to identify opportunities to prevent delays caused by documentation errors, information delays, and other impediments. One test of the platform demonstrated how it can reduce the transit time of a shipment of packaging materials to a production line in the US by 40%, avoiding thousands of dollars in cost. Through better visibility and more efficient means of communicating, some supply chain participants estimate they could reduce the steps taken to answer basic operational questions such as “where is my container?” from ten steps and five people to, with TradeLens, one step and one person.
It’s still early days for TradeLens, but Sardana says that over 100 organisations have joined and the platform has already processed more than 220m shipping events, including data such as arrival times of vessels and container “gate-in”, and documents such as customs releases, commercial invoices and bills of lading. This data volume is growing at a rate of close to one million events per day.
While Sardana is optimistic about the potential of blockchain he believes any successful commercialisation of the technology will require global participation and collaboration. “Progress is being made rapidly but despite all the excitement, blockchain solutions are still very much in their nascent stage. Ultimately, however, the success and viability of a trusted global ledger will be based on a single factor: scale. Really commercially viable solutions will need to involve entire ecosystems with participants working together around a common vision that benefits all equally.”
Middle stump and mindfulness
Sardana marvels at how quickly technology has so far transformed work and society but is conscious also of the pressures a fast-changing world can impose on individuals. So how does he relax and refresh himself? Well, he follows cricket avidly, but he is even more passionate about meditation, mindfulness and yoga: “I began yoga initially as a tool to help me stay fit but soon realised it is much more than just about the physical and that it also encompasses mindfulness. It is a very holistic process and for me has evolved over the last few years into something which goes beyond the body.
“I do like to invest time in practising it. In a fast-moving world, I find it gives me perspective, enables me to scan the external environment, make sense of it and identify trends and opportunities. I think those abilities are important for evolving as a leader but everyone can benefit from taking the time to clear space in their mind and meditation and yoga can surely help with that.”
Mulling over sage advice he might give to those starting off on the corporate ladder, he considers the path of his own career and experiences garnered before saying: “It’s such a rapidly changing world that I think the one thing that one should not close doors to is learning. That’s my biggest tip to anybody – including myself: never stop learning. It’s critical because the day you feel that you know it all and you’ve learned everything, that is the day when you stop evolving.
“The other bit of advice that I always give to young people, including many here at Maersk, is that your degree is not your career. One needs to constantly evolve and reinvent otherwise you become obsolete. Lastly, I tell them your personal brand is very, very important so invest in it and protect it. Integrity is of utmost importance.”