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1、108319_MacrosMay 11, 2005Establish World-Class Trade Finance Operating Model and CapabilitiesBOC International Settlement & Trade Finance Centralized Processing System Discussion Document Copyright 2005 by A.T. KearneyThis document was prepared by A.T. Kearney for use by a joint Client and A.T. Kear
2、ney team and may not be used for other purposes, or disclosed to other parties without the written permission of A.T. Kearney1108319_MacrosFrom last meeting on April 25, BOC asked us to present and discuss the following topics Business Workstream: 1.Benchmarking methodology and templates2.Trade Fina
3、nce organization structure with roles and responsibilities3.Operational performance metrics and illustrative templates for benchmarking4.Demonstration of Core business processes designTechnology Workstream:1.Sample RFP document for TF vendor selection Other Relevant Considerations: 1.Operational ris
4、k control aspects of TF operations2.Trade finance product pricing decision mechanism 2108319_MacrosBusiness Workstream 3108319_Macros1. Benchmarking Methodology and Template 1.During the project, we will conduct benchmarking on relevant aspects to identify existing gaps on BOC TF business and operat
5、ions 2.We will employ proved benchmarking methodology and leverage our accumulated experience and knowledge of the market3.During this exercise, we will update our existing ICs and research data to ensure we provide latest information to BOC4.Usually benchmarking exercise has the following key steps
6、:Identify relevant key dimensions for benchmarking exercise Identify relevant banks as benchmarking targets for identified key dimensions Collect / update data using a combination of desktop research, interviews, site visits, etc. Compare benchmarking results with BOC “as-is” data Identify gaps and
7、define future “to-be” model or set future targets 4108319_MacrosWe will focus our benchmarking efforts mainly on three categories TF Organization Model Operational Network Configuration Operational Performance Metrics Separated sales / servicing model Integrated model Wholesale banking model Others
8、Network design principles / rationaleNumber of processing centers Number of service outletsNumber of staff Transaction volume allocation Others Turnaround time perTransaction volume per day Processing cost Processing time Analysis per process, product, staffOthers Preliminary5108319_MacrosSample ben
9、chmarking templates the banks we benchmark against will be determined later Benchmarking Category HSBCStandard Charted ABN Amro Other BanksTF Organization Model Sales / servicing Integrated Wholesale bankingOperational Network Configuration Network design principles / rationaleNumber of processing c
10、enters Number of service outletsNumber of staff Transaction volume allocation Operational Performance Metrics Turnaround time perTransaction volume per day Processing cost Processing time To be completed during project6108319_MacrosAreaABN AmroHSBCStandard CharteredStrategyWholesale bankFocus on lar
11、ge, local corporate and state-owned companiesLeverage on global network and competitive pricing in foreign exchange (easier to raise lower cost of fund overseas)Focusing on MME and SME customers who need liquidity and get better marginMNC is around 20-25% of HSBC portfolio80% of business are trade b
12、usinessWholesale and consumer bankingFocus on multinational companies and very selective large local corporationReduce number of customers while trying to deepen relationship with current customers70% of business coming from tradeSale and distributionRelationship banker being primary contact with cl
13、ientSpecialist in trade will go along with the relationship banker for potential trade clientDedicated team to acquire customers getting 50 new account per month with some new state enterprises as wellRelationship manager going to meet customers with trade finance specialistAllocated 50,000 within f
14、ront line authority OperationsCentralize operations in Chennai, India (24 hour operations, since 2001) already upgraded speed and cut-off time processing to ensure efficient communication Cut-off time 1 pm for customers and 4 pm for transactions sent to IndiaOperation team divided into Import (issua
15、nce, checker, settlement) and Export (advising, checking, payment)Middle office provide technical issues and doing a marketing and customer service functions, servicing both corporate and commercial40 staff processing 200 million/monthCut-off time at noonMulti-skills staff 27 people with each proces
16、sing 12-14 transaction per day Operation org structure Large corporate, multinational, and local product team (each can do export, import, payment, clearing)Cut-off time 4pm for platinum customer attitude trying to do it for customers as much as they canSystemMaxtrack online systemOwn system Used to
17、 use Eximbills but has change to another system, IMAX from Canada as the Eximbills although user friendly but not good at MIS, limited access, no workflow embeddedOthersnMore export transaction than importn60-70% of customers are using Internet channelnRecently shut down trade operations due to bein
18、g non economicalnProviding customer training on TF processingnTeaching operation staff about one hour every morning nGiving trade finance test to both RMs and operation staffnMore export transaction than importBenchmarking analysis example 7108319_MacrosBenchmarking analysis example profiles of glob
19、al banks AreaCustomer FocusSmall & Medium Enterprises CorporateSales and MarketingCentralized in single locationPartially centralized in a few locationsDecentralized in branchesFocused industry targetingMarketing responsibility only Credit and Risk ManagementProactivity and flexibility in customer r
20、equirements“Product programs” to standardize credit approvalLeverage of large local databaseDocument Collection and ProcessingCollect and process at branchesCollect at branches and process at centralized location(s) Collect and process in bills processing center locations onlyCourier collection serv
21、iceE-Commerce CapabilitiesWeb-based marketing capabilityTransaction capability through electronic bankingExtended financial services through internet (e.g. regional trading platform)Deut-cshe44444444ABN4444444444CITI44444444444SCB44444444444HSBC44444444444Source: Various press releases, annual repor
22、ts, interviews; A.T. Kearney proprietary insight and analysisImplications 1.Opportunity to be dominant in the small and medium enterprise segment2.To aggressively expand TF business, Bank needs to develop focused targeting programs3.Need to match foreign banks standard in leveraging credit analysis
23、capability to generate qualified sales4.Can take advantage of large customer database for better credit analysis5.Bank needs to develop optimal model to balance efficiency and customer services6.Bank should consider developing electronic channel capabilities8108319_Macros2. Trade Finance Organizatio
24、n Structure with R&RsIssues to address this section:Issues to address regarding TF organization structure design: What are global trends?What is the TF model likely to be suitable for BoC?Issues to address regarding TF processing center design:What is the organization structure of TF processing cent
25、er?What is relationship between TF processing center, HQ and branches?What are R&Rs of organization units within processing center?Therefore, we provide the following materials for discussion: Examples of TF organization models of global banks Client example of TF organizationClient example of TF pr
26、ocessing centers with descriptions on roles and responsibilities 9108319_MacrosThere are 3 basic organization models, depending on size, global nature of bank and emphasis on trade financeLending-Focused Banks with Distributed ApproachTF-Focused Banks With Semi-Integrated Trade Finance ApproachInter
27、national Banks Driving Trade Finance As A Standalone BusinessRMs responsible for selling and servicing trade financeBills processing integrated with other branch processingHO TF function primarily one of product development and part of Corporate BankingExample: Bank MandiriRMs as primary sales force
28、Trade Finance specialists in HO to support RMsBills processing integrated with centralized back office branch processingCustomer support mix of RMs, processing people and TF specialists Example: Maybank, UOB, OCBC, Hong Long BankRMs as “coordinators”Trade Finance accountable for all trade finance bu
29、sinessTrade Finance sales specialists:Responsible for acquiring new TF clientsSupport RMs with current customersBills processing center under Trade Finance DepartmentClient servicing by TF service specialists, located in the field, reporting to Trade Finance DepartmentExample: ANZ Bank, ABN AMROOrga
30、nizational Structure Models10108319_MacrosTF Organization ModelsA number of factors need to be considered to select the appropriate organization model for Bank of China Enable a more aggressive approach to drive TF sales and new customer acquisitionEnable more effective cross selling of all banking
31、productsEmphasis on TFS as a Core ProductEmphasis on Integration of Banking ProductsKey ConsiderationsDifferent organization models can be adopted depending onLevel of aggression required to push TFOperational efficiency requirements Level of emphasis on cross-selling The structure of the organizati
32、on will also depend on several factors such asScale of operationsComplexity of productsClient interfacing requirementsOrganization should also align with overall bank objectives (e.g. certain banks are positioning itself as Transaction Banking)Standalone BusinessDistributed ApproachTF DivisionProduc
33、t & MarketingTF SalesTF ServicingTF ProcessingPresidentBusiness LineRMsTF ProductTF OperationOperation LineTF ServicingTF ProcessingHybrid Models11108319_MacrosBank Mandiri has a distributed model, with Corporate/Commercial banking responsible for TF sales and product development, while Distribution
34、 Network managing distributed TF processing centers ObservationsnRMs under Corporate and Commercial Banking are responsible for selling all banking products including trade finance productsnTrade Service function is primarily responsible for trade product development with no sales responsibilitiesnB
35、ill Processing Centers (BPCs) are distributed across the country, reporting to Distribution Network (together with bank branches)nBPCs are responsible for both servicing to clients and processingTF Organization Structure Distributed ModelCorporate RMsDeputy President Director and COOTreasury & Inter
36、nationalCommercial BankingDistribution NetworkCorporate BankingFI & OverseasTreasuryCorporate ProductJakarta NetworkRegional NetworkCity OperationsCommercial RMsPresident and CEOTrade ServiceProcessing Center Regional ManagerCity OperationsProcessing CentersTrade Service12108319_MacrosMaybank is the
37、 dominant trade finance player in the Malaysian market TFS functions are managed as a standalone business, except for the processing center, which reports to the servicing lineTF Organization Structure Semi-Integrated ModelObservationsnTrade finance business is operated as a hub and spoke model:TF s
38、ales and service are integrated with product development, reporting to Trade Finance Business unitOperations is centralized in one center, reporting to central operations on the service linenThe roles of sales, services and processing are clearly district with relevant authorizationnRMs are responsi
39、ble for credit line approvals while TFC operates within the line responsibilitiesnCustomers will only deal with TFC for TF transactions (not at the branches) - the model requires a year to migrate all customers overPresidentDeputy President(Business)Deputy President(Service)Enterprise Financial Serv
40、ices (EVP)CommercialInstitutionalCorporateTrade Finance BusinessBCBCBCBCCentral OperationsTPC(Trade Processing Center)TFCSalesProduct DevelopmentOperations & ServicesSalesSalesTFRETFSETFRETFCTFCTFC(Trade Finance & Relationship Executive)(Trade Finance & Relationship Executive)Source: Bank Mandiri In
41、terview Team13108319_MacrosSmall BusinessTF Organization Structure “Standalone” Business ModelHead Of Trade And Transaction Service Head Of International Trade FinanceHead Of Trade Service DeliveryTrade Sales SpecialistsTrade Service OutletsInternational Trade Finance (ITF) has first-in-line account
42、ability if sales falls below targetIn some cases where TF with client is substantial, TF sales person can play RM roleOnce sales is completed and line established, customers interacts on day-to-day basis with Services teamTrade Service Delivery is considered as a part of the business unit, having tr
43、ade relationship officers proactively interact with customers Servicing officers can approve discrepancies up to credit levelObservationsInstitutional Banking DirectorProcessing CenterHead Of Institutional BankingRelationship ManagersCorporateBanking DirectorRelationship ManagersBusiness BankingCorp
44、orate BankingIn ANZ Bank, sales and servicing are considered business partners reporting directly to the same line of businessConsumerBanking DirectorPresident“Huge growth” using this model14108319_MacrosDespite organization model employed, roles and responsibilities related to Trade Finance and Ser
45、vices typically consist of 7 key functions Trade Finance Line of Business Product Development & Marketing Structured Trade FinanceTradeServiceDeliverySalesProcessing Performance Monitoring & SupportDevelop TFS productsDetermine pricing policyFormulate Marketing StrategyProvide complex trade finance
46、and servicing deal structuresDrive business development for TFProvide technical support for complex TFProvide servicing support to TF customersLiaise between customers and processingHandle documentsOperate Bill Processing CentersTransact based on imagesPrepare performance report and analysisProvide
47、overall administrative supportTrade FinancingMatch fund for trade financingParticipate in global trade financingTFS Organization Structure Roles And ResponsibilitiesWe have detailed roles and responsibilities for each function15108319_MacrosInternational banks also employ a split Processing Center a
48、nd Service Outlets model, which significantly enhance customer servicingDistinction Between Servicing And Processing1SpokeRelationship OfficerHubProcessingOfficersSpokeRelationship OfficersReceive applicationsCheck credit lineAssign priorityScan and transfer electronic files to hub121Relationship fo
49、cused for major customers Customers know who to callSupported by a self-service, web-based trade services for customers to submit online applications and check transaction statusHub-Trade ProcessingTrade ServicingX No InteractionCheck documentGenerate Swift messagesInteract with correspondent banksC
50、redit/Debit customer accountsReceive processing resultsSend original documents & send to appropriate recipientsHandle communications with customers2SpokeSpokeSpokeSpokeCustomer ACustomer BCustomer CCustomer D16108319_MacrosFunctions within processing centers are usually organized around products and
51、 processes; however, there is a trend towards developing multi-skilled staff Administrative ManagementExport Document CheckingExport AdvisingTF Processing CenterImport Document CheckingImport IssuanceImport SettlementReceive applicationsCheck credit lineIssue L/CsSend L/Cs to advising banksCheck com
52、pleteness and accuracy of inward documentsPrepare and authorize paymentAuthorize financing (if required)Advise receipts L/C to customers Check completeness and accuracy of export documentsIllustrativeProcessing Center Organization StructureExport SettlementReceive payment from issuing banksInitiate
53、settlement and paymentProcessing Center focuses on transaction processing, having the Trade Servicing function undertaking all customer liaisonLeading international banks with high transaction volume typically configure around client groups first then followed by productsGlobal trend is moving towar
54、ds developing multi-skilled staff across products and processes to balance transaction fluctuationsObservations17108319_MacrosConsiderations for BOC Trade Finance Business As the bank traditionally with the largest Trade Finance business in China, (assuming that this is something that BoC wants to c
55、ontinue to excel at), will require a shift from being processing-driven to being business-driven. There will first need to be a full review carried out as to the full importance of Trade Finance to the Bank. The creation of a new LOB for Trade Finance mainly involves developing a Strategy and suppor
56、ting Business Plan, and having that accepted by Top Management of the Bank. BoC needs to be able to counter threats from its competitors both domestic and foreign, and while leveraging its strengths it must be flexible enough to understand and to respond to the needs of its many customersThere will
57、need to be changes to:Operating model requiring specialist skills and focused effort Financial arrangements - to track costs and revenue by product and channelKPIs and SLAs - to correctly set expectationsPerformance Management systems - to measure effectiveness and efficiency There has been a fundam
58、ental shift away from TF being processing-driven to being business-driven. This is an evolution that has taken place within leading banks around the world, as they moved to replace diminishing earnings from traditional Trade Finance business. In leading banks like Bank of China, Trade Finance would
59、normally be a separate LOB: this is because the business is a specialised product set although it requires extensive input from many other functions.Trade Finance is to Corporate and Commercial banking, as Credit Cards is to Retail banking.The twin revenue threats a TF LOB faces are from new competi
60、tors (as they increasingly target the market share of other less nimble banks) and from customers, who seek to improve on turnaround times and lower their Trade Finance costs through dealing directly with their trading counterparties via open account.Processing costs in TF are a major business issue
61、 for banks, due to the labour-intensive nature of these transactions most banks are trying to handle this business faster and cheaperGlobal TrendsImplications for Bank of China18108319_MacrosTo determine the optimum organization model and specific roles and responsibilities for BOC, a number of issu
62、es will be addressed by the teamnDistributed, integrated or stand-alone business?nSeparation or integration of marketing, processing and risk management?nReporting to line directors or independent director?nLevel of integration with cash management, payment, etc.?nFor each functional unit, what are:
63、Detailed roles and responsibilitiesSLAsReporting linesKPIsOrganization Structure Issues To Be AddressedThese are the issues we will address in the project 19108319_Macros3. Operational performance metrics and illustrative templates for benchmarkingObjective of this exercise is to:Identify relevant o
64、perations KPIs Conduct benchmarking exercise to set performance target for BOC future operations Detailed global benchmarking data would not be very much meaningful without understanding of BOC current TF operations and availability of detailed operational data Derive implications on TF process desi
65、gn and vendor selections 20108319_MacrosKey Performance Indicators - ExamplesMonitoring of relevant key performance indicators for business and operations will enable Bank of China to drive achievement of TF objectivesBusiness growth - new customer businessCross Sell - new business from existing cus
66、tomersTrade Finance Business ObjectivesRetain current customersEnhance Process EfficiencyImprove ProductivityEnhance QualityIncrease Cost EffectivenessTransaction volume by product and type of transactions Average productivity per workerOvertimePercentage of turnaround time meeting standard timeSLA
67、performanceCosts by productsVariance of actual costs to standard costsSelected Key Performance IndicatorsEnhance Customer ServiceEffective Operational Risk ManagementNumber of defects in processing outputsAmount of actual losses incurred (non lending)21108319_MacrosBenchmarking results will be used
68、for target setting for BOC TF operations and implications will be developed for process design and solution selection Turnaround TimeTransaction VolumeProcessing CostBOCBest Practice Implications on Process and Technology Solution Requirements to redesign trade finance processes to reduce turnaround
69、 time and align with new system modules typically processing requires ability to offer variable service levelsLarge volumes indicate need for processes centralisation and specialization to enhance efficiency and balance transaction fluctuation - enhanced IT and communication capacity may also be req
70、uiredScale efficiencies will lower per unit processing costs and will enhance competitiveness - MIS is needed to track performanceWhere will BOC be in the short term and long term?Selected Operations KPIs by Products Illustrative Benchmarking Of Trade Finance Operations And ImplicationsOther Possibl
71、e Dimensions22108319_MacrosBaseline Of Processing OperationsDocumentary Credits $545%Documentary Collections $326%Other Bill Products $3 29%Estimated Product Expenses(% of Processing Time)Total ExpensesProductVolumeDocumentary CreditsImport Credit Issuance 17,000Inward Bills UnderImport Credits 19,0
72、00Advising of Export Credits13,000Negotiation of Export Credits 14,000Documentary CollectionsCollections of Inward Bills 16,000Collections of Outward Bills 18,000Other Bill ProductsTrust Receipts andBills Receivable Purchased 26,000Shipping Guarantees 7,000Reimbursement Claims 1,700Bank Guarantees 1
73、2,000TOTAL143,700Detailed Transaction Volumes & CostsAvg Time (Mins)351602013811090506066160IllustrativeEst. Per Item Cost$27$125$15$107$86$70$39$46$53$124$10 First, it is necessary to baseline Bank of China key operations, the comprehensiveness of which will depend upon availability of data23108319
74、_MacrosBenchmarking Of Turnaround TimeThen BOC performance will be compared against best practice data to determine improvement opportunities IllustrativeTurnaround Time By Product (Minutes)CommentsIt is more important to compare relative differences of benchmarking data than specific actual amount
75、as there are different factors impacting trade finance operations such as:Processing procedures and requirements Processing organization (centralized or distributed processing)Production levels24108319_MacrosProcess Map Import Letter Of Credit IssuanceReview applications for completeness/ compliance
76、Signature verificationCall customer for rectification of discrepanciesSeek approval for highlights20 minsFR, BNR, SIS/CIS Key ActivitiesCollection Of Charges/ CommissionIssue LC (Authorization & Printing)Enter And Log Data (Processing)Booking Of LinesRegistration/ Creation of EntryReceive & Authenti
77、cate Applications On AmendmentsTurnaround TimeSystems UsedCreate bill in system5 minsDetermine if credit limit within or exceededPending approval (6 hours- 8 hours)Seek credit approvalIf line exceeded, earmark customers accountPerform debit to customers account (for cash deposit collateral)10 minsIn
78、put transaction into system20 minsAuthorize transactionTransmit/issue LC via mail/Swift/telex to advising bankPrint LCSort, dispatch (for mail LC) and file LCFollow-up35 minsEnter dataPerform debit to customers account5 mins35 minsClient example of operational metrics analysis turnaround time analys
79、is Modified Client Example 25108319_MacrosDetail analysis of key processes will uncover improvement opportunitiesExport L/C Negotiation (No Trade Line)Import L/C IssuanceKey Client IssuesBranchBUBPCReceive & Forward DocumentsRegistry/1st CheckingHaveTradeLine/Discrepancies?NoProvide Approval/Set Up
80、Trade Line2nd Checking/ VerifyAuthorize Credit NotesSplit/Posting/EndorsePrepare Credit Notes1 Day2 HrsTo3 Days1 DayBranchBU/RiskBPCReceive Application & DocumentsCheck Requirement2nd CheckingLoanCustomer?Approve NCLFacilityYesYesRegister/ Entry Into Eximbills 1st & 2nd Approval (Swift Go)Register/
81、Entry Into Eximbills 1 DayTo3 Months1 Day1. The new trade line requirements designed to reduce turnaround time for sight export L/C negotiation has not been consistently implementedATIS(Admin)Secure Cash Collateral2. Approval process for NCL facility is lengthyClient Example 26108319_MacrosImpact of
82、 operational metrics analysis on technology solution selection 20-30% improvement in processing efficiency achievable with leading workflow management practices not available under current platform Web-based trade finance origination and tracking front-end difficult to deploy without major enhanceme
83、nt to core systemSignificant gaps in key system functionality:Integrated credit checkingIntegrated with document management CRM capabilitiesStraight-Through-Processing Major effort required to implement security measures required to ensure web-access integrity and client data segregation for custome
84、rs of different subsidiariesTime and cost associated with enhancing existing trade finance platform to meet requirements unacceptable, assuming technical feasibilityEvaluation of Trade Finance IT PlatformIT Platform Assessment Key FindingsDecision on IT PlatformExisting trade finance platform should
85、 be replaced, not enhancedEvaluation of available trade finance software products resulted in the selection of IMEX v5.2 system Leverage middleware solutions, such as MQ Series, to support development of custom components and integration of 3rd part componentsClient Example 27108319_Macros4. Demonst
86、ration of Core business processes designObjective of this section:To illustrate the level of details of our project deliverables To demonstrate our experience of TF operations To assure BOC that we have comprehensive base materials as reference when we start the project 28108319_MacrosOverview of TF
87、 product processesReceive documents/ applications/ SWIFT, telex, or mail notificationTime/ Date stampCheck documents for thoroughness and accuracyLocate appropriate codesClarify with issuing party, if necessarySettlementCustomer LiaisonIssuance/ FinanceCredit, Data Checks/ ProcessingDocuments Receip
88、t/ CheckingWork with credit department if applicable for credit approvalBook lineObtain cash deposit, collateral, earmark account, if applicableCreate transactions in systemStamp reference numberEnter dataDetermine finance rate, if applicableAuthorize financingEarmark account/ lines, if applicableIn
89、form customer of financingObtain proper authorizationIssue necessary documentsSend to receiving party by appropriate method (SWIFT, mail, telex)File documentsCheck daily/ monthly reportsSend month-end statements to customer and credit departmentSend tracer as due date approachesContact customer for
90、payment on due dateCollect necessary feesThe fundamental TFS product processes are quite similarReceive necessary authorization to settle billCompute payment and chargesInitiate settlement and payment in appropriate formRenew guarantees if applicableSort advice for dispatchSend documents for archiva
91、l after six monthsSimplifying all these processes, either through implementation of improved processes enhanced by IT/ software initiatives, or on a standalone basis, is key to improved competitive positioningIllustrative 29108319_MacrosA typical TF process example Service Center (Shenzhen) Processi
92、ng Center Treasury Credit Service Center (Xiamen) Application documentsPhysical or electronic (e.g., internet)Document checking VerificationSeek for credit approval Inform credit assessment result Application for setting up FX contract Electronic documents for processing Transaction processingIssuan
93、ce Settlement Customer liaison Inform treasury for debiting FX account Inform status of FX contract30108319_MacrosProcess Descriptions The process describe how to process import L/C applications. The basis of the process is:Centralized transaction processing Separated processing and servicing It als
94、o describes the linkages and hand-overs between processing centers and service outlets. Input Output Customer application documents Customer credit limit and usage information Customer identification verification information Letter of Credit issued Bank charges / commissions received Customer accoun
95、t debited Customer limit and other information updated Owner General Manager, TF operations Key Success Factors Accuracy of documents checking and verification, timeliness of credit approval Import L/C Process (Without Finance) Sample Process Overview 1. Documents Checking2. Credit and Data Processi
96、ng 3. Issuance4. Customer Liaison5. SettlementIllustrative 31108319_MacrosService Outlet Representative Service Outlet ManagerProcessing CenterCredit TreasuryImport L/C Process (Without Finance) Sample Process MappingStart2. Credit and Data Processing 1. Documents Checking1.2 Verify signature1.3 Con
97、tact treasury for FX contract if necessary1.5 Contact customer for discrepancies1.6 Seek approval for highlights1.7 Approve highlights1.8 Scan and transfer electronic documents2.1 Receive electronic documents 2.2 Create transaction in the system2.3 Check credit limit 2.4 Seek credit approval if nece
98、ssary 2.5 Approve credit application 2.6 Book line2.7 Obtain cash deposit, collateral & earmark the account 2.8 Enter complete data AIllustrative 1.4 Complete FX contract 1.5 Inform servicing people 1.1 Check completeness and compliance32108319_Macros5. Settlement Service Outlet Representative Servi
99、ce Outlet ManagerProcessing CenterTreasury Import L/C Process (Without Finance) Sample Process Mapping (contd)A4. Customer Liaison 3. Issuance3.1 Authorize transaction3.2 Transmit / issue L/C3.3 Print L/C3.4 Sort, dispatch, and file L/C4.1 Check daily /monthly report 4.2 Send month-end statements to
100、 customer and credit 4.3 Send tracer as due date approaches4.4 Contact customer for payment on due date5.1 Receive authorization to settle bill 5.2 Compute payment and charges 5.3 Inform Customer Service Rep5.4 Inform treasury where applicable 5.7 Archive documents after 6 months5.6 Debit customer a
101、ccountEndIllustrative 5.5 Initiate settlement and payment process5.5 Receive notice and confirm 33108319_MacrosImport L/C Process (Without Finance) Sample Improvement and KPIsNew method or improvement Centralized processing improves efficiency and work quality Separated sale, processing, and servici
102、ng enhances customer service and improves job focus Electronic imaging transfer improves efficiency by avoiding shipping paper around KPIsTotal turnaround time Error rate of document checking Error rate of data inputCompliance with internal process Accuracy of transaction processing Customer complai
103、nts Illustrative 34108319_MacrosRoles and responsibilities matrix for key steps sample Suggested Roles Of Related TF Servicing UnitsServicing RoleRMTF Sales SpecialistsTF Service OutletsBranch StaffProcessing Hub(s)Proactive sales (acquisition of new customers)Reactive Sales (increasing TF usage of
104、existing customers)Provide customer referralTF facility approval for new customerTF facility approval or extension for existing customerTF facility line checking (availability of trade line, NCL)Servicing issue resolution, application checking, negotiation/discounting, discrepancy advice, transactio
105、n statusTF transaction processingDiscrepancies approval (covered within trade facilities)Discrepancies approval (not covered within trade facilities)RSCResponsibleSupportRIIConsultedInformedCRSRRIIIRICICIIRRCCCCRRRRISII35108319_MacrosTechnology Workstream 36108319_MacrosTechnology Workstream: Sample
106、 RFP for TF Vendor Selection Please refer to sample document 37108319_MacrosOther Relevant Considerations 38108319_Macros1. Operational Risk Control Mechanism on Trade Finance Operations How to Use This in Project:We have a comprehensive methodology, tools and templates for operational risk control
107、and management, and we have deep understanding of key operational risk points along TF processes During the project, we will leverage our experience and apply operational risk control methodology to specify key risk points with validation from BOC Risk mitigation and solutions for identified key ris
108、k points will then be embedded in process design and implications to technology will be specified in RFP 39108319_MacrosOperational risk management for Trade Finance can be significant if proper control is not in place Trade Finances Operational RisksInternal/External FraudExecution, Delivery & Proc
109、ess ManagementBusiness Disruption & System FailureKey Trade Finance Operational RisksLosses due to acts of a type intended to defraud, misappropriate property or circumvent regulations Losses from failed transaction processing or process managementExample: Data entry error, Loss of L/C documentsLoss
110、es arising from disruption of business or system failuresExample: System or telecommunication failuresExamples of Key Operational RisksBank Negara Indonesias fictitious L/CsBNI Indonesia issued an L/C worth Rp1.7 trillion to some companies to finance exports to a number of African countriesThose L/C
111、s were later found fictitious as BNI has no correspondent banks in the export destination countries and the L/C cannot be retractedCitibanks fraudulent L/CsA businessman and a Citibank employee were arrested over an alleged fraud involving a letter of credit (L/C) worth US$2.3 millionThe alleged sus
112、pects proposed the counterfeit L/C for the international trading of 40,000 metric tons of coal to swindle money from the bank40108319_MacrosGiven our extensive experience in ORM, we will incorporate effective ORM practices relevant to TF into both business and system development Operational Risk Man
113、agement For Trade Finance1. Assessment And Measurement2. Control And Monitoring3. ReportingKey ORM ComponentsIdentify key operational risks and assess risk levels based on simple/systematic methodologyConduct Risk Self Assessment (RSA) on relevant TF unitsHighlight operational risk issues for TFUnde
114、rstand risk control and mitigation optionsSelect risk control and mitigation options to balance control effectiveness and cost efficiencyConduct OR monitoring using identified Key Risk IndicatorsCollect operational risk losses related to TFPrepare operational risk reports related to TFKey ORM Activi
115、tiesWe will incorporate ORM considerations during the process design stage41108319_MacrosActual or estimated amount involved:Date of loss uncovered:Preliminary cause suspected:Means by which irregularity was identifiedCurrent form and substance of information and evidence in relation to the matterAc
116、tion taken to-date and steps taken to protect the Bank from further lossIndications whether most recent audit or OR self-assessment uncovered circumstances which might have contributed to OR loss occurringoFraud/wrongdoingoIncomplete/neglectoErroroOther:_ (specify)OR Loss HistoryOR Loss OverviewBusi
117、ness Unit(s) Impacted:Department(s) Impacted:Activity(ies) Impacted:1) 2) 1) 2) 3) 1) 2) Operational Risk (OR) Loss Identification FormName(s) and grade (s) of individuals involved1) 2) 3) 4) Status Of EmployeeCurrento o o o o o o o o o o o TerminatedSuspendedSigned:Department HeadDateBu HeadDateNot
118、e: (1) Threshold level must still be determinedOperational risk loss identification template sample Sample 42108319_MacrosLoss Amount:Loss Type:(see appendices)Loss Amount And Areas ImpactedLoss / Risk Identification WorksheetoLegal liabilityoRegulatory compliance/tax penaltyoLoss of damage to asset
119、soRestitutionoLoss of recourseoWritedownPeopleoIncompetenceoNegligenceoFraudoKeymanDescription Of Root CauseProcessoModel/methodologyoExecution erroroProduct complexityoBooking erroroSettlement erroroLimits exceededoSecurity risksoVolume riskTechnologyoSystem failureoProgramming erroroInfo riskoTele
120、coms failureRoot cause identified: (pick only one)Did KRIs for the department presage the loss event?Explain:Are there other indicators that presaged this loss event?If yes, show dataDid most recent self-assessment conducted by department presage this loss event?Explain:Did most recent audit highlig
121、ht exceptions in the activity impacted?ExplainKRIs AssessmentPreventative ActionsoYesoYesoYesoYesoNooNooNooNoM-2M0M-11) 2) 3) Rationale For Selection Of Root Cause:Possible Contributing Causes And Explanation:Likelihood of recurrence without preventative measuresPreventative measures required:Expect
122、ed timing of preventative measures:Approval(s) required:Responsibility(ies):Highly Likelyo Likelyo Unlikelyo oBetter/timelier data/informationoTrainingoNew/revised policies and proceduresoImproved activities or controlsoCoaching/feedbackoMore active monitoringoOther:1) 2) 3) 1) 2) 3) (attach workpla
123、n)Description Of Asset And Loss:Business Unit:Business ProcessActivity(ies)Impacted staff:1) 2) 3) 1) 2) 3) Direct Loss AmountDirect ExpensesIndirect Expenses(from list)(from list)Loss DetailsImpacted AreaAo o o Bo o o Co o o Do o o Eo o o Performance GradeInsurance claims / recoveries made:Date of
124、first loss:Date loss discovered:Means by which loss uncovered:(specify)Note: (1) In cases of fraud or large losses, Internal Audit; for all other cases, business / support management or ORM Section(2) The objective should be to balance the dual objectives of data collection with the time commitment
125、required to complete this formThe operational risk reporting template Sample 43108319_Macros2. Trade Finance Product Pricing Decision Mechanism Out of Project Scope TF Product Manufacturer Business Unit Customer NeedsProducts and detailed costingALCO Pricing Tactics Cost InfoDecision Making on Prici
126、ng Product Specialists:Product features development Market intelligence collection and analysis Customer analysis Activity based costing analysis Customer Owners:Business development Pricing tactics development Market intelligence collection and analysis Customer analysis Internal P&L management TF
127、Product Pricing Decision Mechanism (Illustrative)There first needs to be a marketing (product ownership) function for Trade Finance Product features are developed and regularly reviewed to ensure compatibility with client needsMarketplace intelligence is gathered and analysed, both from customers (i
128、n terms of market research and surveys) and by surveying what competitors are doing Internally, activity-based costing (ABC) helps the bank understand, in great detail, what it costs to deliver various components of each of the trade finance products - itemised in terms of origination (by channel),
129、servicing and processing The various surveys that are conducted provide a guide as to customer pricing (ie fee and interest margin) expectations, and competitor activity: from these, pricing tactics are formulated and agreed by ALCOWhile customers are usually owned by Business units (BUs) products m
130、ay be owned elsewhere eg Treasury, TF LOBs etc. While product groups will set the price for their products, customer profitability is ultimately the responsibility of the customer-owning BUs. They can agree to discounts on the products for tactical reasons, but they need to provide the subsidy from
131、their BU P&LComments 108319_MacrosnMajpjMVcyzj21HLfrvy96dv02lPPfYgxUS7IYmZkyEmZ0kGeYZS3bpLCkYH1lt4EK7CxmUX3ijoYSOer7ZuaVWYgz4EpZrUirVpMzzvNtf1XZw5oswSXOtFaejnOcmfE1lZgnN1RSXg8wLCG8CVQ3XPJMvodPFWcpiYJgZazNSEPNIaklYSu7qSd1UpaxmZDlpN9zW7kljfsLCLi26Yv109ffbnDH8LbUN1G6ACURQ39eG12KHL9tXsZ1jzgoCK8g1kuNOh5e
132、FvcmVT5ZYVQt9zk3rp3qLnf02FovEXxVRxjCcFRNppiJljNiOuk6fONnyX7fyGg7sXZ49BmCN5oy9VesHpKzdjTKwjrkCEQCFDehVmGax3lrOEbw63VscA3YSijtUKoCyiLzAlVRp7l4QgPNHxvJFFDyjUVN3oHlMah0XBd4uTbkfPIhHtw0evPmYOrdhEDoPwvYhzlGplU1AU9mpyiCXH8gpPCBRYjq77VcnbXumNE1yGfyTsbSj89J63kRTKDkKUg3mdS5sJ4X5cQ8dK7oW9IkScssECQdz2O9UTlpRjAF
133、PChjhLdzopQzwxQf8ozdzOhogwAooXpUF83BX4C3jRgjDJiiXEUDMaNz4vQ4n164vspddHvOIVuBBdMA4xp1YhiHk0vOJ8TL1BxogzVlMpmod6ianYGmksQq6NWCEd56hZF4wfaNyZcrGfNxnPiG6ZAxSkfmhJAKtNmCqbRmppeXp8inz4eq3HkWCMSORyMMX522xpHG6basNr6KQfbZsFbHjzyNlJrruLolKFcC84dqfijBO5Dy2NaBcNEBPgQrT12PgpcKx2or2YChN5DPjs80zzdtdAdTKuW4uVv9bbZu3K2SZ2aEhTlIC1UqrIWibkzwHh6p8gLv26zr01mJybfOzFc4T7kQH1IpPwOzMDnAKPLsLrznXGjFNIA9bSWWms6ibKZwQIKrMzalwbFrQJvOP1rPH8rx2KkyYqrtQk5VRwM1HSX
