Trade Finance Development
AB Volvo
Agenda
 Background
 Solution
 Benefits Summary
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Background
 Sales in more than 190 countries
 Production in 18 countries
 Decentralised organisation divided in:
– 6 different Business Areas (BA) (Truck, Bus, Construction Equipment, Penta, Parts, VFS)
– 9 different brands (Volvo, Renault, Mack, Eicher, UD, SDLG, Penta, Nova & Prevost Bus)
 Growth ambitions in Asia and Africa
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Background
 Limited transparency in Trade Finance transactions on Group / BA level
 Various levels of competence in the respective markets/regions
 Reactive process rather than being proactive to sales and customers
 Utilization of Banks not coordinated
 Difficulties in presenting correct documents
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% Discrepant document sets 1st presentation
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Which documents are troublesome?
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How would we like to set it up?
 Why do we use LC at all?
 ”As Is” / ”To Be” process
 Organisation
 Communication
 IT structure
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Drivers for using Export LC?
 Risk:
– Still a driver for using LC
 Legal Demands:
– Some countries demand LC to control import
 Cash Enhancement!
– ”Selling receivables”
 Financing Instrument:
– Interest arbitrage and availability of funds between markets
 Funding Instrument:
– LC used on non traditional LC-flows
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Why a decentralised Organisation?
 L/C as ”Financing Instrument” demand Trade Finance to be close to business
 Increased service to customers and sales – 24/7
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Objectives on a Standardized Process
 Proactive support to sales of financing solutions on emerging markets
 Improve service towards sales and customers
 Coordinate the utilization of banks used for Trade Finance products
 Reduce lead time for presenting correct documents to confirming bank
 Improve back-up possibilities
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Objectives on a Trade Finance System
 Support a decentralized organisation
 Reduce manual input into document issuance via templates
 Electronic communication with Banks - Flexibility
 Create detailed and aggregated reports on all levels
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Why SWIFT?
 SWIFT is a member owned cooperative
– More than 9.000 banking & financial institutions connected
 Used for bank to bank communication for 40 years
 Only 1.000 corporates connected since 1998
– New hosting model in 2005 has made it easier for corporates to connect
 Alliance Lite 2 (SaaS-Solution)
 SWIFT can be used for:
– Payments
– Account statements
– FX-transactions
– Trade Finance transactions – MT798 (MT 798 = Bank to corporate message type for Trade Finance)
 Only 30 banks ready to communicate MT 798
– SWIFT says that the volume/demand has been too low….so far!
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SWIFT Messages for MT798
Documents - File Act
Confirmation Advice - File Act
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Requests & Question Marks – So Far!
 A FIN-message type for Confirmation Advice
 Bank contracts?
 Documentary Collection
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Corporate Finance, Working Capital Management
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Trade Finance – Benefits Summary
 Finance administration - Customer/sales support
 Document handling – Cash flow
 Transparency for BA / AB Volvo - Reporting
 Negotiation power with Banks - Price and/or Risk Willingness
 Trade Finance Community – Increased competence
 Handling cost/LC
 LC as funding instrument
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”Followers”
 Metsä
Billerud
 FLS
Kinnarps
 Volvo Car Corporation
 Sandvik
 Eriksson
 SAAB
 Yara International
 Ekman
 Konecranes
 ABB
 Siemens
AB Volvo
Corporate Finance, Working Capital Management
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