This issue’s question

“There is an ongoing digital revolution in the supply chain finance space. What should treasurers be aware of?”

Axel Hauke

Treasury Manager

Agrocorp International Pte Ltd

The first half of 2020 brought tremendous change to Singapore’s trade finance eco-system. Several high-profile fraud cases (ie Hin Leong, Agritrade) and government-imposed lockdowns due to the global pandemic led to significant changes in banks’ handling of deal compliance and documentation work-flows. The ensuing “forced” acceleration of the digital revolution created challenges and opportunities for all stakeholders along the value-chain. Early adopters of new technologies had a head start when it came to adjust and take advantage of this new reality.

We at Agrocorp greatly benefitted from our experiences in pioneering blockchain-based trade finance solutions. We developed in partnership with DLT Ledgers and major banking institutions such as DBS and Rabobank, a platform that replaces traditional paper-based trade documentations with digital API interfaced applications which guarantee trust, traceability and transparency by utilising a blockchain architecture.

The project created a good foundation for the year 2020. We had completed a full review of technological bottlenecks between our treasury and operations departments and external stakeholders. The close coordination with our banks and suppliers had given us a great understanding of each other’s needs and constraints.

Two important lessons emerged: first, the digital revolution was primarily held back by bureaucratic inertia, and not by a lack of technological solutions. Second, creating the right company culture that encourages and rewards innovation is the key driver for corporate change. Both points proved essential when the pandemic counter-measures hit our day-to-day operations.

Disruption in the flow of physical documents meant intense pressure on everyone to migrate to digital solutions like e-signatures and submission of electronic trade documents via bank portals. Sending most staff to work-from-home, while these process changes occur, required our colleagues to quickly adapt and shape solutions to reduce delays and disruptions. Our long-standing practice to embrace and drive change paid off and earned us praise across our business partners.

The pandemic also caused a highly volatile macro environment accompanied with reduced risk appetite by our banking partners. The Singapore market felt special pressure this year due to significant losses in commodity trade finance fraud cases in the first quarter. Banks introduced additional compliance checks, causing longer trade document turnover times. For those who embrace technology, the impact can be lessened and a client can differentiate itself to the bank.

Another benefit to digital integration of the supply chain is that both buyers and sellers can optimise working capital and improve liquidity. Buyers can also create more robust supply chains by leveraging their access to cheap finance to support key suppliers and have increased levels of transparency in first, second, and even third-tiers whilst enabling more accurate forecasting and greater predictability.

Widespread industry adoption of new technologies like blockchain enable integration and seamless data transfer between parties, as well as reducing delays and effort, and increasing the ability to demonstrate provenance and sustainability. During the peak of COVID-19, we managed to move 14.3% more product compared to the same period last year. We saw the biggest improvement in rice, oilseeds, feed, cashew and cotton, as these products rose more than 40%.

For Agrocorp, we weathered the storm exceptionally well, managed to reduce our documents collection times with the help of our business partners and win new business in times when our competition pulled back.

Peter Jameson

Head of Asia Pacific Trade & Supply Chain Finance, Global Transaction Services

Bank of America

Digitalisation in supply chains is not new. What is new, however, is the pace of that change – the speed at which new technologies are emerging and being adopted has intensified. The pandemic has also catalysed that change as companies accelerate digitalisation initiatives as they adapt to working from home and realise that a lack of digitisation can lead to supply chain processes grinding to a halt.

Even today, many organisations retain a surprising number of inefficient or paper-based processes, which simple, well-developed and accessible digitisation capabilities can help to automate.

There are many immediate and practical opportunities for treasurers to digitalise the processes they have with their banks. They can leverage new tools to manage onboarding documentation digitally and use eSignature to accelerate the legal documentation cycle. While electronic payments are not new, many trade and supply chain finance capabilities have traditionally remained highly paper-based. Now companies can use character recognition technology to move from paper to image to data-based communication, shortening cycle times, eliminating cost and reducing risk.

Treasurers should also focus on the “back to basics” approach of driving manual and paper-based processes out of their supply chains. Simple digitalisation initiatives can remove many dependencies from supply chain processes, improving agility, reducing risk, and ensuring the continuity of treasury processes regardless of physical locations. Most importantly, such digitalisation initiatives lay important groundwork to prepare for future innovations – like DLT – by having already automated and streamlined a company’s supply chain and the financial processes that sit around it.

Global supply chains are very complex and one of the key challenges lies in digitalising the end-to-end value chain. There are diverse constituents, often in countries with disparate rules, practices and standards. End-to-end automation is at the mercy of the least sophisticated actor in the supply chain, often determined by local market rules. Where standards and platforms exist, it’s often a battle between you adopting mine, or me adopting yours.

This has impacted uptake and eroded the benefit of digitalising global supply chains. But as more regulators and other players recognise the importance of digitisation as a way to keep economies moving, we should expect to see more of a drive to align legal and regulatory standards to facilitate greater – and more consistent – digitalisation of all the participants in a supply chain.

Conclusion

Digitalisation is also only one of the many drivers influencing supply chains today, which treasurers need to consider: reshoring, geopolitical uncertainty, shifting supply chains, and driving sustainability to name just a few.

The pandemic has emphasised the importance of digitisation, moving it from being merely a driver of incremental efficiency to an imperative that could determine whether a company has the ability to continue operating in the face of significant global disruption for them, their counterparties and their banks.

Finally, it is not all about new, revolutionary technology. Those will continue to emerge and evolve; but many of the opportunities for treasurers are much closer to home – as simple as continuing to drive paper-based and other physical processes out of the financial supply chain.

Steve Scott

Head of Asia Pacific

Taulia Inc.

As the COVID-19 pandemic continues to create economic chaos worldwide, treasurers must look for ways to ensure the financial standing of their companies remains strong. Having full visibility into the company’s finances is critical for treasurers to ensure there is enough liquidity to support day-to-day operations.

Fintechs across the world are stepping up to provide solutions to challenges like real-time visibility of cash flows, visibility into the strength and resilience of suppliers, and the levers with which to control working capital can support treasury operations. These solutions can de-risk treasurers’ work by making sure they have a complete view of both expenditure and upcoming income to enable them to make adjustments.

Gone are the days when treasurers have to rely on spreadsheets and reports to manage cash forecasts, daily transactions and working capital targets. A new generation of tools driven by today’s technology, which fully integrate into ERP systems, are available for treasurers to improve efficiently and effectively as they navigate through the new working world. A best-of-breed technology solution includes features such as cash flow management and supply chain management to help paint a holistic picture of the company’s finances.

• Cash flow management – treasurers need full visibility into the cash flow of the business. Having visibility will help them to make quick decisions, which is essential in the current economic environment. Access to a solution will ensure that a treasurer spends their time on more valuable and strategic tasks, as opposed to manual data entry and management of spreadsheets and documents.
• Supply chain management – treasurers need to ensure that a healthy supply chain remains operational and all regional compliance is being followed. A technology solution helps to streamline and automate current processes, such as checking the status of invoice payments, which is costly and time-consuming.

The digital revolution in the world of supply chains will continue to gain traction as the world adjusts to life during, and after, the COVID-19 pandemic. Processes and operations that can be automated will help treasurers to focus on their bottom line: to ensure there is enough liquidity to survive and thrive during all business cycles. Going digital is no longer just a phase, it is here to stay and treasurers need to implement solutions that will change their work for the better.