Finding Finance: Exploring the landscape for trade finance in 2024 – Commodity Risk & Finance 2024

FINDING FINANCE 

HOWARD WALPER, CEO AMERICAS AT COMMODITIES PEOPLE
Well, hello, everybody. Welcome back to our final session for today of the final session of our commodity risk and Finance focus month sessions.

I'm the CEO, America's for commodities people. For those of you just joining us today, we have a great session coming up. We've just heard a couple of wonderful sessions on risk. One talking about some of the big areas of risk that risk practitioners are looking at in 2024. We also talked a bit about some of the risk technology that's out there and how that's evolving and developing. We're going to switch gears and move over to trade finance, where we have a fantastic panel of experts to speak on the topic. But before we get started, a couple of housekeeping notes. Again, for those of us just joining us, thank you so much for our sponsors today for making this all possible. Your participation is really important in making sure that we can produce this type of programming. Second, since we have folks joining us from all over the world, we would love you to be part of this conversation. There's the Q a button at the bottom of your screen. You can click on that to submit questions at any time throughout the webinar. And we'll get to as many of the questions as we can in the time allotted. And finally, this webinar is just one taste of some of the types of topics that we cover at our various conferences throughout the year. Now, at our commodity trading Week conferences, we have a series of three of those in Asia, in the UK, and here in the US. So coming up, we've got our first asian commodity trading week, which will be held in Singapore next week. So I'm very excited about that. Very excited to be going out to that. I hope to see a lot of you out there. That'll be January 24 and fifth. Our UK event will be taking place in London on January 24, 25th. Our UK event will be taking place in London April 23 and 24th, and our US event will be in Stamford, Connecticut, June 5 and 6th. So with that, I'm pleased to turn the floor over to Brian Canup from trade finance global, who'll be moderating today. Brian, the floor is yours.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL

Great. Thank you very much. And good morning, good afternoon, good evening, wherever you may be in the world. Welcome to our panel. Finding Finance, exploring the landscape for trade finance in 2024. My name is Brian Canup, assistant editor at Trade Finance Global. We all know about the $2.5 trillion trade finance gap, which increased from the $1.5 trillion trademark in 2020. There is a clear struggle to access financing across the world and across the industry. Now more than ever, we need to collaborate to ease access to capital and financing. But we're not here to listen to me give a long speech. I want to pass it over to our great panel who will give a quick introduction before we move on to the discussion. Now, I do want to mention that today all the panelists are speaking with their own view and their own personal voice. They're not representing their organizations as a whole. Now with that being said, Sunil, over to you for a quick introduction.

SUNIL GEORGE, LOUIS DREYFUS COMPANY
Thank you, Brian. And good morning. Good afternoon. Good evening, everybody. My name is Sunil George and I'm based in Wilton, Connecticut, working for Louis Dreyfus Company, the agricultural commodities trading company. I've been with the company for almost 15 years taking care of trade finance, various other activities which are around trade finance activities, global trade finance. And I'm very happy to be here with the wonderful panel here.

MAGDALENA NADAR, INDEPENDENT COMMODITY TRADE FINANCE EXPERT
Yes. Hi, everyone. I'm Magdalena Nadar, based in New York City. My background has always been in international trade finance. Started out working for a logistics company in Brazil and eventually made my way back to New York working in commodities and structured trade finance for the past ten years, covering a wide variety of structured trade product suites for borrowers in the Americas and both the structuring and origination side. And thank you for having me here today.

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS
Thanks, Brian. Todd Lynady, I'm with ITFA Americas. I'm one of the board members here with ITFA. ITFA is a global association that was founded in about, I think it was 1999. And our membership is about 300 different members over 50 countries that represent financial institutions, insurance brokers, insurance carriers, but also corporations. Anyone really involved in global trade forfaiting, supply chain or receivables finance. My day job, I actually work with WTW, formerly Willis Towers Watson, as their global head of multinational client for trade credit. So I'm looking forward to this panel today. Thank you very much. Great.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL
I appreciate all of you guys keeping it brief because I know we have lots to discuss on the panel here. So to kick off the panel, I think we should kind of take a step back and look at everything from a 30,000 foot view of trade finance in 2024. So Sunil, we'll start with you. Can you give us an overview of how geopolitical risks in 2024 are impacting the trade finance commodity market?

SUNIL GEORGE, LOUIS DREYFUS COMPANY
Absolutely. Thanks very much, Brian, for that. And I'm sure that is one of the hottest topics which everybody is looking for in 2024. And the complex topic as it is in trade finance when it comes to multiple other risk, where we are talking about the interest rates going up all around the world, the central banks tightening policies and how that is being impacted with emerging markets, especially in terms of raising funding and the borrowing costs going up, not only for emerging markets and small and medium companies, but even for large corporates across the globe. All those problems will be there and were already there in the last couple of years, which we have consistently seen in the market. But this year in 2024, globally, it is in a little bit of chaotic environment when it comes to geopolitics and the risk, what we are seeing potentially, which we would potentially see will be to how to mitigate, for example, the political risk, what we are facing across the globe, or even the credit deterioration, the quality of the credit will be deteriorating when it comes to credit. So how do we sell? How do we make these things happen across the globe? It is not only the responsibility of the big corporations or the banks across the globe, but how do we find financing and in a constrained environment like this, it's a very hot topic, I would say. And also just let's keep in mind that this year, in 2024, almost 50 countries in the world are facing national elections, which consists of almost 50% of the population on this planet. And as we all know, during that kind of an election year, people will be a little bit slowed down, hesitant to invest. And in that kind of an environment, I believe that the sellers, I mean, I would say the suppliers, the customers and all the players in the ecosystem would be coming up together in terms of collaboration and understanding the risk, because the risk premiums will certainly go up. I mean, I'm not saying that geopolitics will definitely kill the trade finance opportunities, but we have to be assessing the risk and mitigating that in the right form with the help of everybody in the ecosystem, not a silo based approach. I mean, I think that is something which we'll be looking forward to in 2024, in my personal opinion.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL
Great. Thank you very much, Neil Todd. So I think we can kind of classify a lot of these issues as supply chain issues. How do you see these playing out in 2024?

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS
Well, I think Sunil hit right on the head. You see a lot of the geopolitical tensions globally. That's going to have a significant role in the supply chain for all kinds of purposes. The Suhouse canal right now is a no fly zone for a lot of companies just because of some of the issues that we're seeing there. And the sad thing is, coming out of 2020 into 2023, we had an issue with the port congestion and labor shortages after Covid. And then we finally right sized a lot of those supply chain issues and now we're seeing this. Right. But in addition to that, what's really interesting, when I was thinking about this particular topic, one of the major concerns of supply chain management for 2024, extreme weather events. And they're already playing out, right? We saw the issue in the Panama Canal. Because of the drought, most of the United States, including the folks down in Texas, are in single digits. You had the snowstorms. So when you're having a lot of these issues, right, you have geopolitical issues, you have major weather events, not just here in the United States, but globally. That's disrupting or slowing down trade. That's just going to add to some of the issues. And especially with commodities, right, where a lot of the commodity companies, regardless if it's a soft commodity or a hard commodity, they're making a penny on a trade and they're doing the volumes and the slightest delay could lead to a significant adverse effect on their profitability of that particular sale.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL
Great, thank you Tod and Magdalene. It actually segues perfectly into the question I was going to ask you. So, ESG is such a big topic for everyone across the world right now. How are banks balancing the new risk that we mentioned before with also providing incentives to get a more sustainable plan and practice ESG initiatives?

MAGDALENA NADAR, INDEPENDENT COMMODITY TRADE FINANCE EXPERT
Yeah, no, thank you Brian. And thanks Sunil and Todd for your comments. As of now, I guess this is like a two part topic here. And to kind of touch on what Sunil had mentioned about just increasing rates, interest rates have of course impacted the overall availability for capital. Right. We see that term. So for today, 5% and change, essentially a full point up since this time last year. During this period last year. As for new risks by the lending community, internal return hurdles are ever increasing. It seems like it's a month to month basis that we see these internal hurdles increasing. And of course, in combination with increased interest rates, the all in margins are going to be higher for the borrowers. Lenders of course are wanting to really focus on balance sheet optimization and therefore having higher margins, shorter term deal flow, the investment grade or equivalent of investment grade borrowers have greater negotiation power, especially over not doing collateralized secured deals, right? So fis are inevitably going to have to go down. Market companies who are in need of trade financing, but currently are deemed unbankable or non bankable. As you had mentioned, Brian, with this 2.5 trillion. And I actually thought it was less than that, I admit, but the $2.5 trillion trade finance gap of these SMEs. But specifically, Brian, to the question of ESG, there's a number of products that lenders are presenting financing products that have preferential margins as well as true sale features to maintain non bank debt accounting treatment. So these are kind of incentives, right, for providing incentives for these ESG features in transactions. So commodity producers who are successfully being able to transition their business to more sustainable operations, may be choosing the unsecured sustainability linked loans type products, where you have set out the main goals that are to be achieved by these companies, achieving them or making progress towards them. They would benefit from step down margins upon achieving these goals. I think the challenge, though, is having the due diligence and the tracking requiring a third party to be able to keep up and affirm that this is actually taking place. But there's a number of products, and one that I wanted to mention that I think is just really relevant is from a perspective of carbon offsetting and using carbon credit as a revenue stream. That can be whereby a bank can advance against that. So, for example, we have structured carbon prepayments where the advance to the producer is made against this future delivery of carbon credits as the eligible goods. In any case, I would say just lastly, the supply chain finance product between buyer led payables or accounts receivables and ESG can be complicated for the lenders to assess. And that's why having the adherence to the client's respective counterparty flow really needs to have some sort of third party, whether it be software or otherwise, to manage this. But regardless, we're really seeing that this is inevitable to be going down market. Lending structures are going to just be going down market to address the wide smas that are currently not being banked.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL
Great. It's a very comprehensive answer, so I really appreciate that. And Sunil, I think the next question would be, how do we kind of help decrease the trade finance gap, even though there are increasingly strict regulations and heightened burdens, like Magdalena just mentioned, these heightened burdens are on banks and fis. What is our strategy to decrease the trade finance gap?

SUNIL GEORGE, LOUIS DREYFUS COMPANY
Well, and thanks, Magdalena, for addressing that. I mean, it's a very important topic. The heightened tensions, what we are seeing in terms of the wide range of risk, what we have to mitigate in terms of making trade finance happen, the effect of that is that the trade finance gap will be increasing and not decreasing. So it is not the right environment, especially when it comes to the non bankable deals. So what happens is that risk needs to be mitigated. All the players in the chain, including the FIS, the banks and the large sellers will be looking for how to mitigate the counterparty risk, including the political and the credit risk. And when it comes to that kind of a situation, they will be looking for multiple options in terms of what kind of creative structures can be brought in, into the trade finance system to make this risk appealing to the participants in the market. So as a result, I mean, there could be a little bit of success because you're joining hands, and then maybe you'll come up with a little bit of creative ideas, skin in the game, and then, okay, maybe going for a club deal or whatever when it comes to big transactions. But at the end of the day, the risk will be that goods getting into high risk countries and how do we really mitigate that? And then we won't be in a position to basically do a remote control sitting in countries like us or UK, and then the goods are sitting in some remote places in the world. How do we mitigate that from a risk perspective? It becomes really difficult. So the non bankable deals as a result will be going high. And that will result in two kinds of scenarios, like how do we bridge the gap? I mean, there'll be a lot of asset managers and alternative trade finance companies that will be bringing their capital into the space, joining hands with the players in the ecosystem. So that will be one way, but the other disadvantage would be that the pricing will shoot up because the risk premiums will be going high and the liquidity costs are really high. So when we talk about deploying trade finance for making deals happen, especially in the non bankable trades, the pricing will really go high. So they will be waiting for the right opportunity for all the systems, all the pricing environments, and all the risk environments to get better. And our question is, when do we expect that kind of a better environment? You'll have to wait for a long time. So as a result, there will be trades out there which will not attract any sort of financing, even from the alternative finances, because they'll be looking for risk mitigation if they really see that the payments will be delayed or default or maturity. So what do you do? I mean, I will not be in a position to extend financing. So as a result, the gap will be going a little bit wider. That is my view. But again, that's why we have got tons of experience. Everybody in the market comes together and says, how do we join hands? How do we collaborate? I mean, I always keep on saying that this is the time for collaboration. If you look from a silo based approach, like an SME based in an emerging market, saying that, hey, I'm looking for $100 million on a standalone basis, it'll be impossible for him to raise the funding. But if he comes together with multiple players joining hands and then we may trim the ticket size. But at the same time, there will be some deals which will eventually get some financing. And at the end of the day, that's the creative nature which we have to input into the trade finance ecosystem, I believe, to make things happen. And will that really reduce the trade finance gap? I'm not very optimistic about it, but at least we can keep our fingers crossed.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL

Great. Thank you. And Magdalena, actually a bit of what you touched on in your last point and what Sunil just mentioned here, how have some of the structures of financing changed to meet the needs of an ever changing landscape? And what does this actually mean for the end borrowers?

MAGDALENA NADAR, INDEPENDENT COMMODITY TRADE FINANCE EXPERT

Yeah, I mean, I'll first say that kind of also to Neil's point, we inevitably do have to address these SMEs or if we want to say down market, kind of going away from the more traditional investment grade population of borrowers. But it's not just that banks, for example, are not just going to suddenly start brand new relationships with these entities. Right. There has to be some sort of segue. And I think the most ideal is working with, ideally if we're working with existing borrowers that have maybe emerging market captive subsidiaries in various regions, whereby they can still benefit from some sort of parent guarantee or a comfort letter providing some level of. Look, we have some accountability. Our parent company with which you have a good strong relationship long term is here to back us up. I think that's really the main point before we can just dive right into these new risky relationships. So that's one point I wanted to mention, Brian. But then in terms of lending structures, I think it's just gone through such an evolution from the more longer term secured type products with maybe like a pre export finance that was secured against offtake contracts, for example, to now seeing more shorter term, really true working capital, working capital solutions. The lending structures have to become more flexible, have to become more customized, really add true value and incorporate ESG characteristics. These are just basic requirements now, particularly on the integrating ESG criteria. We'll touch upon that later, but that's going to be just almost as much of a requirement as the credit worthiness of the loan now. And I think the other point that Sunil is touching on is kind of this liquidity or risk mitigation. Right? Like there's two different incentives for bank financing. Do we need the actual financing or is it to help mitigate counterparty risk? So yeah, I would say those are some of the dynamics we're seeing as a result.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL
Great. Thank you, Tod. I think we've all seen a decent amount of fraud and concern about greenwashing over the past, I would say 612 months. So there's also been kind of a flight to quality after these issues. How can entry collaborate to fill the gap left by this flight to quality after all of our issues?

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS
That's a very good question. And I think as you said, there are two distinct issues. Right. So you have fraud issues as it relates to the commodity. You know, it's unfortunate because what's happening there is that if it's a bank, if it's an insurance company, insurance brokers are kind of overlooking those down market companies now because of that risk. And GTR had a really nice article about some of the issues that have occurred over the last couple of years and how this flight equality is really having a diverse effect on. When I say mid market, that's still going to be a few billion dollar company, right. That no one's really going out and supporting them. I shouldn't say nobody. They're having a tougher time getting support because there's so much risk and reputational risk that could be at play given what happened, especially in Asia. We saw a lot of that there. And then what we saw with some of the big supply chain finance frauds and issues that also occurred on the ESG side. So right there, that is going to continue what I just mentioned in terms of the flight to quality. You're going to have a huge amount of organizations not being able to tap into the proper financial network regardless, trade finance, commodity finance, traditional lending, because of that issue, which is also going to increase that financing gap that we just talked about on the ESG side, you have another issue. Right? So you had those right after these frauds. I don't know if that was coincidental or what the case may have been, but you had a lot of the traditional commodity trade finance banks get out of the market and they were out of the market for a little bit and then they came back in and.

SUNIL GEORGE, LOUIS DREYFUS COMPANY
Then who knows if they're going to.

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS
Come back out again. Now with that being said, what does that lead to? Uncertainty. Right. So you have mid players, you have major players, and then even the investment grade Fortune 100 names, having to really look at a landscape that they'd never really had to experience before because they always had that stable financing in place for when they needed it. So what does that mean? That means you're going to have, as Daniel said before, the asset managers come in, the non traditional banks, non bank financial institutions come in, whose hurdle is very high. Magdalene talked about the hurdle before. Let's not even talk about the banks, but these asset managers, they're wanting 5810 percent plus. So what is that going to do to a lot of these organizations when again, we're talking about margins that are razor thin? I think that's going to continue to be an issue going forward across all commodities, but also within the trade finance community, outside of the commodity sector. And the only way that we could kind of fill the gap and reduce some of this uncertainty is, I guess you could say a very strong strict KYC and due diligence in the beginning of the process, regardless of where you are in the ecosystem, because you had some of the most sophisticated and largest traders in the commodity space totally blindsided. Right? So when you see that and you see some of the other issues that we talked about, the amount of due diligence and KYC has to go even that much deeper, which is just going to lead to maybe not as quick and rapid type of trade or transactions that has happened in the past.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL
I'm looking at a question from the audience and kind of continue on this trend of filling the gap. Today, I may direct this to you. So the question is, let me pull this up here from Rena. Do you think the combination of banks and NFIs will respond quickly and efficiently enough to ensure food security to at-risk parts of the world? And what do you see as the trouble spots?

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS
So I could address the first part, the trouble spots. I'm not really well versed enough to kind of touch on where we see other than the ones that we all know about. Right. But based on experience is what I've seen, at least on the insurance side, I've had a few clients in the agricultural sector, in the food sector who shipped into very challenging spots, like sanctioned countries. However, they got owed back waivers by the government. Right. So that was actually a positive. Now with that being said, there's also, let's say, non OFAC countries that are just hotspots for trouble. Now, one of the things you could kind of as a bank, a financier or an insurance company kind of feel a little bit more comfortable about a large majority of the time that the host government knows that food is a lifeline, right? They know that food security is incredibly important because if the citizens do not have food, there's going to be an uprising. It's going to be horrible. You're going to see things that you've never seen before. So while they might want to clamp down on, let's say, steel or nonessentials, or let's say cell phones for that matter, or things that are just not that critical, I see food being something that governments will go out of their way to ensure that companies that are willing to transact in these particular markets are paid and are paid properly and will potentially do the right thing.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL

Thank you for stepping up and taking that audience question there. And now moving on to digitalization, a topic that if you've been to a conference in the past two years, you'll hear almost every single panel. But I think it is important, especially as we have seen some progress in recent months. So, Magdalene, I'll ask you this question. How can we utilize emerging technologies and embrace digitalization to help with ESG burdens that we have mentioned so far in this?

MAGDALENA NADAR, INDEPENDENT COMMODITY TRADE FINANCE EXPERT

You know, as you mentioned, Brian, the digitalization of trying to trade finance is here. It's happening. There's a number of platforms that are being used and that have been used for some time now. Many may be already familiar with the platform of prime revenue, really to facilitate the counterparties who are part of a particular transaction, that this prime revenue actually even has a very specific focus that segments the ESG into different scopes. So you have the direct impact, like the actual company's business impact on ESG and the upstream indirect impact, which would really be how the business is able to impact the behavior of its suppliers with respect to ESG. So in this regard, we really think about how so much of supply chain finances, really what kind of relationships the counterparties have amongst each other, and being able to say, hey, if I can reduce my payment terms, if I can get a reduction in my payment terms, then what else can I do to improve this relationship? And it might be integrating ESG behaviors so that both parties can benefit from this reputational interaction and saying, yeah, the suppliers I work with or my end buyers are ESG compliant. And then the third segment, sorry, would be the downstream indirect impact, which is where businesses can actually also encourage ESG friendly behavior from its end customers. So in any case, prime revenue is one platform that already sort of segments these ESG features in this way. And then there's also, just like other softwares, for example, carbon chain that's really a good example of the combination of ESG and the digitization efforts that are being made today. It's essentially an accounting, carbon accounting software, which we've seen that a real hurdle is being able to properly assess the achievement of these ESG principles and really speaking from a view of tracking emissions from production, processing and the overall flow of commodities. So this is a software, for example, for both banks and borrowers. Banks would use it in order to assess the borrowers, and then borrowers themselves would be able to assess their own counterparties along the supply chain, and they can assess how close to net zero. For example, if we're talking about. In this case, we're talking about carbon. So carbon emissions, how close to net zero that particular party is coming towards. And in terms of trade finance, just generally speaking, sustainable supply chain finance is certainly an increasing demand amongst lenders. And ESG rating agencies are also a huge party, a huge player in this, where they can actually assign a rating, an ESG rating, right. To these counterparties and tracking their progress along the way. Yeah, I would say. And then there's even the internal software itself that lenders are using, like Salesforce, and being able to manage their customer relationships. Even that has a portion dedicated to, is this deal ESG compliant? Please elaborate here. So even on that level of just identifying which transactions that would be bankable or not from the onset, when a transaction is being presented for approval, there's already that filter happening from step one.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL
Great, thank you. And before we go off to the next question, I want to remind the audience that you can go ahead and ask any questions and we'll fluff it over to the panelists to answer. So Tod Maglen just gave us a very good overview from the benefits of merging digitalization ESG. But I have a question for you, which is, what's the best strategy for ensuring a balanced approach to digitalization and ESG? How do we ensure that we're taking the actual right steps, but not creating new gaps or new issues?

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS
Yeah, that's a very good question. I think what you're seeing now with digitization, let's say about five years ago, everyone talked about digitization and blockchain and how it was going to revolutionize trade finance, including ESG. Well, I don't think we saw it right. I think that there's a lot of it still going on, which is positive, but the uptake is a lot slower than I think people. You know, Magdalena mentioned prime revenue. Before I joined WTW, I actually worked for a trade finance platform, one of Prime's competitors. When you look at trade finance, a lot of these platforms are throwing ESG criteria in there. But even if you look at going back to the whole trade finance landscape and a lot of these platforms, everyone jumped in really hard and really quick. And then when you look at it, a lot of the trade finance platforms didn't really owe up to their billing. Right. You had trade lenses backed by the two strongest companies. You could think IBM and Merrisk go away. You recently just had contour, who is one of the leaders, folded. You had Sarai and we trade, which was backed by HSBC, go to the wayside. Right. So I think there also has to be a balanced and really thoughtful approach when it comes to digitization because, you know, I think people thought that this digitization was a silver bull for trade finance, but I think what people did not recognize, or maybe we are all naive, that when you're dealing with trade finance, which has been done a certain way for hundreds and hundreds of years, that change into digitization is going to take a little bit of time. And when you look at blockchain, I've been at some events recently in the trade finance world, and people think of blockchain now as crypto. At one point, blockchain was for everything corporate, especially trade finance. And I think until there's all these different blockchains running around, until there's a common standard, I don't think that's going to really catch on, which I think is going to hurt some of the initiatives with ESG. Right. Because if it's carbon, if it's sustainability, if it's fair trade, whatever it might be, how do you really track all of that when there's numerous ways to track, when maybe everyone on the different, the supply chain ecosystem might be doing some sort of blockchain work, but it's not necessarily on the same platform. Right. I'm not sure if I specifically answered the question properly, but I think that.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL
It'S a really hard question to answer. So that is almost no answer.

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS
It's one of those things where I think we still have a long road ahead of us. Great.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL
Yeah. And that's. I completely agree. I threw you under the bus a little bit there, Todd. It is a difficult opinion on that. It's valuable for all of us listening here. And Sunil, I'll give you the honor of kind of wrapping up the last little bit of questions before we move on to the audience. Q. A. So all the issues we talked about here today are not a local or regional issue. Sustainability, digitalization, it's clearly a global issue. So how do global companies take responsibility for their actions and initiatives?

SUNIL GEORGE, LOUIS DREYFUS COMPANY
Thanks, Brian. And I just wanted to touch base on what, before I answer on what Tod mentioned. So we have a lot of technology out there in the market. So five years back, when everybody was talking about digitalization of global trade, we have to understand that, as you know, these are systems which have existed for the last hundreds of years. And people, there's also title transfer issues. People really want to hold on to their bills of lading physically. For instance, they don't want to put that bill of lading in an online system, and they don't know how the title will be transferred around. How do they get access to the goods when it is reaching the final destination? All those things are basically concerns for the entire ecosystem, not only for the suppliers, but also for the bankers and everybody. So there is a lot of technology. Let it be. I'm not naming anything. Let it be. Let's say blockchain or tomorrow will be AI. But at the end of the day, the business will be looking for what benefit they are getting out of this. They don't care about the technology being used. If I can simplify, as a company, my overall transit time of documents, moving from the time of creating the documents till the time it is cleared at the discharge port, if my 25 days can be reduced to three days, okay, that's a benefit. What I'm looking for. I think everybody should be looking for that kind of benefit. And on that basis, the silo based approach, there are hundreds of companies out there coming up with beautiful products. But that silo based approach may not be successful. And that's one of the reasons why trade lines and contour and all those companies potentially had seen a little bit of on the downside is because you need to have collaboration.

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS
Now.

SUNIL GEORGE, LOUIS DREYFUS COMPANY
The same thing applies to sustainability, too. Not a single company, be it big or small, would be in a position to do something really good when it comes to ESG sustainability. So you need to join hands. And it should be an industry wide joining hands. All the companies, for example, in the agricultural sector, may come together. The energy sector may come together, because every industry is operating differently. There is no one stop for everybody in global trade. Everybody's got. Even the bankers will have a different system. But how do we interoperably speak, I mean, different systems. How do we bring in the topics of interoperability into this, and then usage in terms of the benefits to the final customers? Everything plays out. So all these big companies have got big targets in terms of sustainability. But at the end of the day, I think there is a lot of education which is required within the ecosystem so that everybody can come together. So my final point would be that in all the topics, what we touched today, collaboration is the key. The more we collaborate, the more successful we will be. That'll be the final statement for me.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL
Great. Thank you very much. Neil. I have one question here from audience member Umair, and I think this is a question that everyone has on their mind, and again, might throw you three under the bus a little bit because it is a very difficult question to answer. But what would all three of you kind of give a quick question? We have four minutes left before this end, so we'll have to keep it nice and concise here. But what is your key advice for SMEs who are trying to navigate the trade gap?

MAGDALENA NADAR, INDEPENDENT COMMODITY TRADE FINANCE EXPERT
Yeah, I can just take this quickly. Also, I think the key here is, again, kind of going back to the initial point about starting a relationship with lending institutions and not just having these high expectations of, okay, here I am, totally new name, I'm going to have all this, how can I say, like preferential products put out for me. I think it really needs to be realistic and perhaps start a relationship with a simpler, more kind of plain vanilla type, structured, maybe something like bill of exchange or lcs, things that can kind of get both parties warmed up to each other. And again, ideally these are relationships whereby the parent company already has an established relationship with a lending institution to really ease in that transition.

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS
Great. Todd, I was going to add be open minded, right? Because I think that I always find it very interesting, given my role, that the word factoring here is the dirtiest in the United States is the dirtiest word ever. And then when you talk about a receivable purchase program, that's like sexy for lack of a better term. When you go to Europe, those same companies call everything a factory, right? So I think be open minded in the type of financing that might be available to you if you are an SME, if you are in the market for one year or 25 years, understand the market dynamic and that pricing is probably not going to be the best today, especially after some of the stuff we talked about, be it fraud or just the rate environment and a lot of risk. There's a lot of risk out there. You might know your customer for the last 20, 25, 30 years, but understand their supply chain in addition to you, who is supplying them, who are their customers? Do a little bit more of a deep dive, because your client base is only as good as their client base. And I think sometimes we think that, oh, well, I have the best clients in the world. Well, what if they have super challenging clients in super challenging markets, that one non payment to your client basically could put them into bankruptcy, right. Which then potentially could put you to bankruptcy. So I think that today there's just a lot more that a company that is looking for financing that is not part of a large multinational company, that is an SME, regardless of size or tender in the market, they need to really do a lot more homework, I think, than they did in the past.

SUNIL GEORGE, LOUIS DREYFUS COMPANY
Just quickly, if they can get a relationship with the new companies out there in the alternative financing space and the banks together and take it global, I mean, don't restrict with only one jurisdiction and take the deals globally with the help of all the suppliers and the others in the ecosystem, could be one of the ways. I think there is a lot of room there in terms of collaboration when it comes to asset managers, alternative finances and the banks for making these deals bankable.

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS
Great.

BRIAN CANUP, EDITORIAL & RESEARCH ASSISTANT AT TRADE FINANCE GLOBAL
Well, I think that's about all the time we have. But we can easily summarize this call, say, we need relationships, we need collaboration, and the worst thing we could do in an environment like this is to act alone in silos. So I think we can take that message away from this. Howard, we need to fully wrap it up now.

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS
Wonderful.

HOWARD WALPER, CEO AMERICAS AT COMMODITIES PEOPLE
Well, thank you very much, every Brian, Sunil, Medelina and Tod, we appreciate you being part of this today. Thank you also to our sponsors, to sequant, to gen ten, to Ernst and young, and radar, radar for being part of this event as well. Once again, if you enjoyed this, we talk about things like trade, finance and some of the risk issues we talked earlier, along with other issues around trading, trade, digitalization, sustainability and other factors impacting the trade lifecycle at our commodity trading Week series of conferences which take place in Singapore, London and the US. Singapore once again is next week, so if you're in that part of the world and you're listening, first of all, you should probably go to bed. But no, other than that, it's January 24 and 25th, so we hope to see you there. London will be April 23 and 24th, and Stanford, Connecticut, June 5 and 6th. And once more, I'd like to say thank you very much to the panelists and all the other panelists for participating in our other sessions today. And everyone, have a great morning, noon or night, depending where you are in the world. So take care now.

SUNIL GEORGE, LOUIS DREYFUS COMPANY
Thanks everybody.

TODD LYNADY, ADVISORY BOARD MEMBER AT ITFA AMERICAS

Thank you. Bye.