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Trade Finance
Learn essential trade risk mitigation and financing techniques with this in-depth course
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This highly practical and interactive virtual 5 day Euromoney Learning training course conducted by Zoom comprising 25 sessions provides practical, in-depth coverage of international trade and commodity finance. The conflicting needs of buyer and seller are identified and how trade finance provides risk mitigation and working capital solutions for both exporter and importer.
The training covers the importance of Incoterms® rules, the nature of trade documentation, how to maintain control over the goods, the risks faced by exporters, importers and banks, and detailed coverage of the key documentary trade and open account supply chain finance products to include the parties, mechanics, risk mitigating features, optimal structuring techniques, and funding solutions.
Emphasis is placed upon risk assessment, problem solving techniques and deal structuring, through a clear understanding of a corporate’s trade cycle. Great attention is paid to the effective and appropriate use of structured financing techniques in meeting the corporate’s needs for optimal working capital solutions, whilst satisfying the bank’s requirement for controlled lending and credit support.
The course uses extensive case studies1 and exercises to develop the understanding of participants in a practical and engaging way across a range of scenarios on the identification of risk, risk mitigation, structuring techniques, and optimal working capital solutions.Each training session is delivered via a mix of presentational slides, interactive discussion with the trainer, virtual breakout syndicate sessions, and a polling questions running throughout the programme to check the delegates understanding and application of the acquired knowledge.
The course will commence at 08.00am and finish at 16.00pm (UK time) daily, as follows:
Session: 08.00-10.00
Break: 10.00-10.30
Session: 10.30-12.00
Lunch: 12.00-13.00
Session: 13.00-14.30
Break: 14.30-14.45
Session: 14.45-16.00
1The case studies and exercises described are provided for indicative purposes only. The trainer reserves the right of discretion to vary the selection of case studies covered in the classroom depending upon the background, experience, and key learning objectives of the participants in attendance and virtual classroom time availability.
Objectives
By attending this virtual training course, the delegates will be able to:- Describe what trade finance is and why it is required.
- Appreciate key corporate drivers and to satisfy these through the use of trade finance.
- Identify trade risk and how this can be mitigated.
- Describe the methods of payment, their use, risks and benefits to the buyer, seller, and the bank.
- Understand how each of the trade finance products operate and when they should be used.
- Gain an appreciation of how trade finance can mitigate risk and transform working capital.
- Structure documentary credits, standby credits, and letters of guarantee to mitigate risk.
- Appreciate the operation, use, risks, and benefits of specialist types of letters of credit.
- Use standby credits to support receivables financing
- Construct a trade cycle timeline to evaluate type, amount, and duration of trade finance.
- Gather information to thoroughly assess and evaluate a trade proposition.
- Understand the role, key criteria, and risk management benefits of structured trade finance.
- Appreciate why structured trade finance is an alternative to traditional lending assessment.
- Structure a self-liquidating trade finance facility.
- Identify the key differences between a self-liquidating and partially structured facility.
- Describe the different types of payables and receivable finance solutions and when each is used.
- Appreciate the risk and benefits of approved trade payables finance (supply chain finance).
- Understand the products, structures, and risk management in commodity trade finance.
- Lean about recent developments in trade finance.
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Day 1
Session 1
Key client drivers- Conflicting requirements of seller and buyer
- Importance and implications of trade credit: credit risk, liquidity risk
- Working capital optimisation: cash conversion cycle, importance of DSO and DPO ratios
Exercise and Solution: DSO & DPO ratios: assessment & identification of corporate needsUse and assessment of a corporate's key working capital ration's to identify needs, risk & sales opportunities
Need for trade finance- Description of trade finance
- Why trade finance is required: risk mitigation, finance, facility increase
- Importance of trade finance for the seller and buyer
- Types of trade finance and when used: trade services, trade finance, structured trade finance
- Key benefits of trade and working capital finance solutions to the corporate and bank
The trade cycle- Key stages of the trade cydle: risk profile of each
- Plotting the time flow of goods, documentation, and money
- Financing the trade cycle: selecting the optimum type of finance
Session 2
Trade documentation: control, validation, and insurance of goods- Important role of trade documentation in trade finance
- Negotiable documents: function and importance
- Bill of lading (working example): its function and importance in international trade
- Key requirements for goods control and possession
- House and charter party bills of lading: risk appreciation- Missing bills of lading: use of the shipping guarantee (example):
- Other types of bill of lading
- Air waybill (working example): taking control of the goods – practical issues
- Other transport documents (document examples): implications for control of goods
- Cargo insurance (example): key aspects of cover:
- Contracting party: risk implications
- Financier's interest: control over receipt of claim proceeds
- Inspection certification (example): key aspects - its important to risk mitigating
Exercise and Solution: Bill of lading: control of goods
Review of a bill of lading and identification of key areas of risk and control for the financier.
Virtual breakout syndicate session
Session 3
Trade risk identification- Appreciation of risk from the differing perspectives of seller and buyer:
- Financial risk: end-buyer credit risk, country transfer risk
- Political risk: contract and/or payment frustration
- Commercial risk: method of payment, currency, terms, loss or damage to the goods
- Performance risk: supply chain, nature of goods, quality management, timely delivery, dispute, documentary trade product & credit insurance compliance
- Liquidity risk: going concern, credit terms, availability of bank facilities
- Documentary risk: non-complying trade product presentation, export and import clearance
Bank risk identification- Appreciation of bank risk exposure in trade finance:
- Client credit risk
- Respondent bank risk
- Operational risk:
- Compliance risk: trade-based money laundering (TBML)
- Fraud: trade finance abuse
- Legal & security risk: security perfection, ‘lex situs’, trade product governance
- Reputational risk
Transactional risk evaluation (structured finance)- Identification, evaluation, and reliability of the trade transaction:
- Transactional source of repayment
- Seller: risk appraisal
- Goods: risk appraisal
Session 5
Case study and solution: Risk appraisal
Risk appraisal on the funding requirement of a company for the manufacture and export of a machine (part 1).
Virtual breakout syndicate session
Day 2
Session 6
Incoterms® rules 2020- Their relevance and importance to risk management
- Examination of the most commonly used Incoterms®
Case Study and Solution: Incoterms® rules selection
Evaluation of the needs of the seller, buyer and financier prioritising the Incoterms® rules in order of preference from a control and risk mitigation perspective
Virtual breakout syndicate session
Session 7
Methods of payment- Payment “risk ladder” overview: key risk considerations for importer and exporter
Documentary collections (import & export)- What a collection is: description and parties
- When collections should be used
- An appreciation of ICC rules URC 522: key articles are highlighted
- Conditions for document release:
- Documents against payment (DP/CAD)
- Documents against acceptance (DA)
- Bank responsibility: compliance with instructions:
- Release of documents: bank liability for unauthorised release - Bills of exchange (drafts) and promissory note (working examples)
- Schedule of instructions (working example)
- Operational process
- Risk, benefit, and control features
- Dishonour: protest (protest example)
- Financing collections: bill discount, advance against collections
- Advantages and disadvantages
Session 8
Case Study and Solution: Advance against collections
Consideration of the risks and benefits to the bank of an advance against collections financing facility compared with bank overdraft.
Session 9
Bank aval- What a bank aval is: description, parties, use
- Form of bank aval (working example)
- Avalising bank liability: bank requirements
- Operational process
- Optimum aval structure for exporter, importer, avalising bank
Forfaiting- Forfaiting: description & key characteristics: ICC URF 800 appreciation
- Financing (forfaiting) avalised bills: description, key characteristics:
- Primary and secondary forfaiting
- Financier requirements
- Purchase: discount to face value - Risk appreciation and benefit features
Breakout syndicate session
Day 3
Session 11
Letters of credit- What a letter of credit is: description, parties, when used
- ICC UCP 600, ISBP 745, URR 725 rules appreciation
- Key aspects
- Importance of documentation: standard for examination
- Advantages and disadvantages of letters of credit
- Issuing a letter of credit: bank undertaking: risk considerations
- Application form (working example): key bank terms & conditions
- Structure: availability, expiry date & place, document presentation period (calculation)
- Operational process: unconfirmed LC
- Import letter of credit (working example)
- Sight and term credits: contingent and actual bank engagement liability
- Protecting the bank and the applicant: goods control, inspection, insurance
- Bank to bank reimbursement: reimbursement authority, reimbursement undertaking
- Risk, benefit, and control features
- Structuring an import letter of credit: mitigation of risk
Calculation of a letter of credit facility for an importer. Session 12
Case study and solution: Letter of credit application form: issue identification
Review of a completed import letter of credit application form.
Identification of technical irregularities and whether the requested terms comply with the credit facility conditions.
Breakout syndicate session
Session 13
Export letters of credit- Role of the advising bank (advising letter example)
- Nominated bank: role and authority to act
- Confirmation: description, liability, and undertaking:
- Bank risk appreciation and beneficiary risk mitigation: issuing bank, country, documentary risk - Silent confirmation: third party undertaking, commitment to negotiate:
- Terms & conditions - Unconfirmed credits: beneficiary risk exposure
- Operational process: confirmed LC
- Export letter of credit (working example)
- Amendments (example): acceptance and rejection
- Complying presentation: obligation to honour (example payment advice):
- Exceptions to the payment principle - Discrepant presentation: refusal/rejection of documents:
- Common discrepancies, risk implications - Options for handling discrepant documents (discrepancy notice example):
- Applicant’s discrepancy waiver and bank rejection - Risk appreciation: structuring the export letter of credit to mitigate risk
Case study and solution: Export LC: risk evaluation & beneficiary solution
Evaluation of an export letter of credit and identification of risk for the beneficiary.
Recommendation for the restructuring of the LC terms to mitigate risk for the beneficiary and to facilitate financing.
Breakout syndicate sessionDay 4
Session 15
Financing letters of credit- Financing working capital using import letters of credit:
- Usance payable at sight (clause example), refinance - Financing of export letters of credit:
- Pre-shipment
- Discounting and negotiating (with and without recourse): negotiating bank risk - Assignment/allocation of proceeds (working example)
Calculation of the net amount payable to an LC beneficiary on discounting a bank accepted bill of exchange pursuant to a complying presentation of documents.
Session 16
Other forms of letters of credit- Use, operation, and risk appreciation of:
- Oil credits: key aspects, use of LOI (clause & LOI example)
- Transferable letter of credit (working example): transfer request (example)
- Back to back letters of credit: structuring the master and counter credits to mitigate risk
- Revolving letters of credit (clause example)
Calculation of the facility requirement.
Consideration of the risk implications for the issuing bank and applicant.
Breakout syndicate session
Session 17
Standby credits- What a standby credit is: description, parties, when used
- UCP 600 and ISP 98 rule appreciation
- Key aspects
- Operational process
- Commercial standby letter of credit (working example)
- Structuring standby credits (clause examples): risk appreciation and mitigation:
- Claim demand documentation: restricting the claim window to the default period
- Use of reduction in value clauses to mitigate risk
- ‘Evergreen’ clause; use, operation, and key considerations
- Governing law & jurisdiction: importance - Use of a commercial standby credit to support a working capital solution (case example)
- How a standby credit differs from a documentary credit and demand guarantee
Discussion
Session 18
Demand guarantees- What a demand guarantee is: description, when used
- Key aspects
- URDG 758: appreciation and use
- Application form (example): key bank terms & conditions
- Direct and indirect guarantees: parties and operation
- Counter guarantee (example): nature, role, and risk implications
- Types: bid, advance payment, performance, and payment
- Advance payment guarantee (working example) - Text: defining the bank’s parameters of liability: standard, regulatory, and private texts:
- Key clauses: guarantee text construction - Claim demand: operation, bank responsibility:
- Extend or pay
- Examination: complying presentation requirements - Risk appreciation: unfair calling, foreign laws and usages, validity period, cancellation
- Structuring guarantees to manage risk exposure
Session 19
Structured trade finance- Structured trade finance: description and use
- When and why deal structuring should be used: bridging the ‘credit gap’
- Key aspects of credit assessment: differences to traditional balance sheet assessment
- Exercising control: goods, documentation, and money
- Types of structure: self-liquidating, partially structured
- Facility structure: key controls
- Structuring each stage of the trade cycle: controlling the nature of risk exposure
- Trade loans: refinance/repayment aligned to the trade cycle:
- Drawn down documentation
- Managing risk exposure: use of facility sub-limits - Taking security over the goods: importance of ‘lex situs’: pledge and trust receipt:
- Reality of security - liquidation of goods
Identification of the trade cycle funding gap.
Calculation of the facility requirement.
Session 20
Case study and solution: Structuring a trade finance solution
Identification of the risks on the importation of frozen chicken meat and its sale on extended credit terms.
Formulation of a trade finance solution.
Breakout syndicate session
Day 5
Session 21
Payables finance- Forms of payables finance, and when used:
- Advance payment/prepayment to the supplier
- Pre-shipment finance: purchase order finance, funding the manufacturer - Risk appreciation and structuring
- What approved trade payables finance is: description, parties, when used
- Key aspects
- Supply chain finance platforms: bank proprietary, open third party platform (multi-funded)
- Operational process
- Criteria for invoice approval
- Financing (supplier invoice debt purchase and prepayment)
- Implementation:
- Buyer credit risk approval
- Buyer agreement to reimburse bank for approved supplier invoice settlement
- ‘On boarding’ suppliers - Benefit and risk appreciation: debt classification & financial statement disclosure
Case Study and Solution: Structuring of a payables funding solution
Formulation of a funding solution for the manufacturer of a machine which mitigates the risks identified in the earlier session (part 3).
Breakout syndicate session
Session 23
Receivables finance- What receivables finance is: description, parties, when used
- Nature of debt and implications for finance
- Sales invoice: assignment of debt (clouse example) - Validity and legal enforceability of the trade receivable:
- Proof of delivery: importance of the Incoterms® rule - Debt purchase Vs advance of funds
- Disclosed and undisclosed facilities: deciding factors, risk implications
- Drawdown documentation
- Prepayment: determining the prepayment percentage: credit risk, dilutions
- With and without recourse finance: repurchase events
- Control and capture of the trade receivable
- Credit insurance: use and evaluation (schedule working example):
- Joint insured and loss payee policy endorsements: description and comparison - Types of receivables finance:
- Specific debt purchase: insured and uninsured
- Portfolio purchase
- Factoring: difference between factoring and confidential invoice discounting - Risk assessment:
- Seller: debt turn, concentration, dilutions, contra trade, encumbrance, nature of goods, performance (credit note history), collectability of debt, fraud
- Debtor: credit risk, political and country risk, dispute
- Collectability of debt: legal right to recovery - Audit: key aspects
- Off-balance sheet finance: asset and liability de-recognition: ‘true sale’ of the debt
Case study and solution: Receivables finance: structuring an insurance-backed solution
Structuring of an insured receivables finance solution for the sale of vehicles to a buyer in Africa on three years trade credit.
Discussion
Session 24
Commodity trade finance- What commodity finance is: description, when used, parties
- Typical commodities: hard, soft, energy: role of commodity exchanges
- Key risk characteristics of commodity financing
- Using structured commodity finance to look beyond the balance sheet
- Financing the commodity trader
- Pre-export and prepayment: description and operation:
- Risk appreciation and mitigation - Warehouse financing: description and operation: control of goods:
- Warehouse receipt (working example)
- Warrant, deed of attornment: description and use
- Financing ratio: determining criteria
- Security over goods - legal implications of ‘lex situs’
- Inspection: use of collateral managers
- Risk appreciation and mitigation: fraud - Receivables: structural enhancement: top-up, acceleration, debt reserve and service accounts
- Borrowing base: description, operation, use:
- Value of the security pool: periodic reporting: valuation
- Risk appreciation
Session 25
Case study and solution: Financing the commodity trade cycle
Construction of a trade financing solution across the commodity cycle to include pre-shipment payment, financing goods held in a warehouse and receivables finance on goods call-off.
Breakout syndicate session
Recent developments and trends- Demand for efficiency, speed, and low cost solutions
- Digitised innovation in the trade environment:
- Digital independent payment undertakings
- Blockchain finance: application in the trade finance market
Summary and close -
Our Tailored Learning Offering
Do you have five or more people interested in attending this course? Do you want to tailor it to meet your company’s exact requirements? If you’d like to do either of these, we can bring this course to your company’s office. You could even save up to 50% on the cost of sending delegates to a public course and dramatically increase your ROI.
If you want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.
We produce learning solutions that are completely unique to your business. We’ll guide you through the whole process, from the initial consultancy to evaluating the success of the full learning experience. Our learning specialists ensure you get the maximum return on your training investment.
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We have a combined experience of over 60 years providing learning solutions to the world’s major organisations and are privileged to have contributed to their success. We view our clients as partners and focus on understanding the needs of each organisation we work with to tailor learning solutions to specific requirements.
We are proud of our record of customer satisfaction. Here is why you should choose us to help you achieve your goals and accelerate your career:
- Quality – our clients consistently rate our performance ‘excellent’ or ‘outstanding’. Our average overall score awarded to us by our clients is nine out of ten.
- Track record – 10/10 of the world’s largest banks have chosen us as there training provider and we have delivered training across the largest banks and have trained over 25,000 professionals.
- Knowledge – our 100+ strong team of industry specialist trainers are world leading financial leaders and commentators, ensuring our knowledge base is second to none.
- Reliability – if we promise it, we deliver it. We have delivered over 25,000 events both in person and online, using simultaneous translation to delegates from over 99 countries.
- Recognition – we are accredited by the British Accreditation Council and the CPD Certification Service. In an independent review by Feefo we scored 4.2/5 on service and 4.7/5 on Coursecheck
Instructor
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Stephen Jones
Biography
Stephen Jones is a leading trade finance practitioner, trainer, and consultant with over 46 years of experience. He has held senior positions in Lloyds Bank, NatWest, and RBS, working in trade operations and customer trade finance solutions.Stephen was Regional Head of International Trade for several years at NatWest and RBS. During this time Stephen overviewed and structured his team’s trade finance applications prior to submission to the credit department achieving a 97% credit approval success rate over a 4-year period. He was also responsible for originating new business in the major corporate market using trade & working capital finance solutions.Stephen left banking in November 2009 to set up his own trade finance advisory business. In 2014 Stephen was appointed Consultant Head of Risk for a new alternative market trade finance provider. During his term of office Stephen formulated the trade finance credit risk policy and operational instructions for the financier and headed up its credit risk committee.Stephen has a very successful track record of delivering public and tailored in-house training to banks and corporates (relationship managers, credit risk managers, sales & customer service teams, trade operations personnel, and bank inspectors) on trade finance, supply chain finance (payables and receivables finance), credit risk assessment, AML & sanctions compliance.His extensive training materials span an enviable library of 35 different training modules and more than 70 case studies and exercises covering the application of the ICC rules and practice through the operational cycle, risk identification and mitigation techniques, credit risk assessment, formulation of trade and commodity finance deal structures, identifying and selling trade & working capital finance solutions, and new business origination.Over 100 physical and virtual classroom training courses have been delivered in the Middle East, Africa, North America, Europe, and Australia to delegates from more than 75 different countries. Delegate feedback on the quality of Stephen’s training is consistently rated as excellent.He continues to work as a trade finance practitioner, consultant trade advisor, handles letters of credit for his corporate clients (to include structuring LC terms, and preparing documents for presentation to banks); this helps to ensure his material is both relevant to today’s market and highly practical.Stephen is the author of ‘Trade and Receivables Finance: A Practical Guide to Risk Evaluation and Structuring’ which is endorsed by The London Institute of Banking & Finance and ‘The Trade and Receivables Finance Companion: A Collection of Case Studies and Solutions’ published by Palgrave Macmillan in 2020.
