Strengthen the supply chain by reimagining trade finance workflows

By | 4 minute read | October 20, 2021

The words “supply chain” conjure images of manufacturers, shippers and distributors of consumer goods. However, trade finance is a critical yet sometimes overlooked component. The supply chain requires capital providers to keep goods flowing. However, disruption has challenged this sector to rethink its operations. In trade finance, competition no longer comes only from banks, but also from fintech businesses. As disruption proliferates and the competitive landscape shifts, now is the time to rethink workflows and how to shore up the processes that keep your organization resilient and agile. 

Why now? Some disruptions this sector faces are foreseeable and predictable: an aging workforce, knowledgeable workers approaching retirement, rising operations costs, and greater regulations accompanied by greater fines. Others are far less predictable: pandemics, natural disasters, the consequences of climate change. We live in an age of amplified risk that demands greater resilience. 

One immediate lesson from the COVID-19 pandemic has been greater awareness of the criticality of supply chains and how severely and quickly they can be impacted. COVID-19 exposed many of the fractures within the trade finance supply chain that were already there, but were easier to previously remain unexposed. The pandemic forced other supply chain foundations (like shipping, manufacturing, work processes and order and supply tracking) to respond and innovate at a much faster pace. If trade finance resists responsiveness and innovation, the supply chain will remain vulnerable despite progress in other areas.  

Increasing efficiency and transparency 

There are a few key areas ripe for transformation within trade finance. These areas lead to the inefficiency and non-transparency that plague the trade finance supply chain.   

Operations: This is an area of high cost for trade finance. Those costs are driven by highly manual, redundant work. That costs not only time, but also lowers employee morale and delivers an inconsistent customer experience.  

Workflows: Too often workflows exist in silos within an organization. Multiple makers, checkers and handoffs decrease visibility into transactional cycle process and results in slow speed to close. 

Systems: Fragmented data across multiple internal systems causes delays in escalations and approvals. 

Customer Experience: Due to multiple handoffs, lack of transparency and long settlement cycle times, customer experience is inconsistent.  

Regulatory Requirements: Paper-based, manual process drive errors lead to both higher false positives and financial crimes risk. Fines for failure to meet these requirements can be staggering. 

New technologies have been brought to the table and can reinvent how trade finance works right now. These changes could bring significant and tangible benefits to an organization with the right investment. These technologies present a trade finance opportunity to reimagine workflows that have long lacked inertia and imagination. 

Transformation through intelligent workflows   

Within trade finance, there is always a why behind the what. Cost metrics, speed-to-close metrics, customer experience metrics, fraud capture metrics—banks require substantial outcome improvements in these metrics if they commit to transformation and organizational change. 

In simplest terms, workflows are how work gets done inside any organization. The addition of intelligence to a workflow means adding actionable insights to work processes. That can happen by automating repetitive work and relying on rules-based business decisioning. Yet even that definition doesn’t provide a full picture because it focuses on process only. There is also a people-centered component to intelligent workflows. Solutions need to be human-centric and that applies to employee experience as well as customer experience. Learn more about intelligent workflows.

Why human experience matters

Intelligent workflows are driven by automation, AI, analytics and worker skills. The combination of these things fundamentally changes how work gets done by reducing friction between tasks and processes. The goal of using intelligent workflows is to unlock value in real time. By removing friction, you also unlock the value of your people. You free them to do more valuable work. They shift from being task-doers to decision makers. 

What’s gained through workflow transformation  

HSBC Global Trade Finance processes 100 million pages a year to support $500B in documentary trade transactions. By transforming their trade finance operations document processes, they created operating efficiency and accuracy key to retaining their global client base. This transformation led to a 90% data accuracy rate (a process improvement), which also created a 30% increase in productivity (a human-centered improvement). As a result, HSBC can make transactions quicker and safer for its buyers and suppliers. This change also reduced compliance risks through an enhanced ability to manage huge volumes of data. 

Trade document processing traditionally relies on a high degree of manual effort to ensure transaction compliance. One of IBM’s clients, a British multi-national banking and financial services company, processes more than 36 million pages of trade documents annually, with over 200 million data elements for name-capture and processing. IBM helped this client develop a Trade AI Engine using content intelligence capabilities to automate the retrieval of key information from text within scanned documents. The solution significantly reduced the time and effort needed for these tasks while also raising the bar on the client’s controls environment. The company realized a 50% time savings in trade document processing and a 40% reduction in the liabilities associated with human errors. 

Where to start

HSBC and other client stories show the tangible, measurable results banks can gain by transforming their workflows. If, like them, you hope to modernize your supply chain strategy and trade finance workflows, where should you start? The answer to that question is specific and individual to each trade finance organization. Some choose holistic approaches to transform their enterprise from end to end. Others have very specific problems and require targeted solutions aimed at a particular area that needs improvement. Finding value often means focusing on pain points where technology, like AI or automation, can make a significant improvement with low risk. For HSBC, the focus was document processing. For the British multinational, the focus was using AI to find key information. As these organizations demonstrate, a good place to start a transformative process is to identify the specific stumbling blocks where integrating intelligence can make measurable, visible improvements to your workflows.