The Blog

Musings on corporate finance, fund raising, capital markets and other matters

Altimapa Global Trade
Altimapa Global Trade

Increasingly complicated supply chains can be disrupted at any moment and businesses need to know how to manage this risk. Businesses need to have the export and import know-how needed to divert trade as and when logjams and crises hit, ensuring they can trade with new markets compliantly and profitably. Failure to do so will risk delays, reputational damage, fines and potentially the loss of business.

Currently, all carriers shipping goods into China are facing significant delays due to Corona Virus and exporters are being advised to hold off shipping further goods there. We’ve also recently been warned about delays to shipments to Australia and New Zealand due to the devastating bushfires.

New ‘Green Deals’, technological advancements in AI and blockchain and trade wars are also among the innumerable issues which affect international trade regulation and policy. Risk managers need to stay on top of all these factors, monitoring businesses’ ever-changing compliance requirements and adapting their supply chains when needed.

Brexit: The UK formally exited the EU at 11 PM GMT on 31 January

The process of working out how the relationship between the UK and the bloc begins in earnest. The parties have until the end of 2020 to conclude a deal that replaces the current relationship on trade and other issues – an unusually short period of time for such negotiations.

Brexit is just the start. Businesses must improve their compliance processes or risk supply chain disruption. Brexit will change the rules of trade for UK businesses trading into Europe, but it forms part of a much larger picture. Trade regulation around the world is constantly changing.

Brexit will change the rules of trade for UK businesses trading into Europe, but it forms part of a much larger picture. Trade regulation around the world is constantly changing. Businesses need to manage risk, know all their global compliance requirements, and constantly adapt to changes in the regulatory and geopolitical landscape

What are the biggest challenges in trade, receivables, and supply chain finance predicted for 2020?

Pervasive protectionism (1,290 new trade barriers in 2019, the number of new regional trade agreements divided by three and average U.S. tariffs more than doubled since 2017) has pushed countries to sharpen their trade arsenals. We identify that challenges could come from countries that could become irritable (i.e. could be tempted) and capable to wage trade wars (the U.S., India, Russia, China, France); those that are irritable but not equipped (Japan, Mexico, South Africa) and those that are neither equipped nor irritable (Australia, South Korea).

In addition, expected new rules of the game, as part of the shift towards more sustainable trade (regulation of trade transportation and carbon emissions of traded products). Simplifying and considering the EU Border Carbon Adjustment tax (BCA) to be an outright tariff on EU imports, an estimate that a 1% tariff could result in a loss of USD7bn of exports to the EU, affecting Russian, U.S. and Chinese exports. Overall, I think that trade finance and supply chain finance will grow more rapidly than traditional factoring and that there will be more open account trading. We should also see slightly more stability in Europe post-Brexit but bearing in mind so much to do in terms of trade relationships. To conclude, as international trade policy and international regulations change at an accelerating speed, businesses need to manage the risks this entails, ensuring that they get the training they need and have the processes in place to adapt, comply and profit.