Supporting Trade in a time of crisis

The impact of the COVID-19 pandemic on trade has been profound. Disruption to both supply and demand dynamics and supply-chain logistics have resulted in the entire trade value chain coming under pressure. The World Trade Organisation estimates that global trade will decrease by between 13% and 32% overall in 2020 1 – a predicted decline potentially far greater than the 12.2% decrease in global trade recorded in 2009, at the height of the global financial crisis. According to Accenture, 75% of companies have experienced “negative or strongly negative impacts in their businesses” 2 , with the knock- on impact on trade volumes likely to continue into 2021. Operationally, however, trade flows have shown remarkable resilience. While there have been enormous volatility in demand, there has – equally – been continuity with respect to the operational flow of cross-border goods. One reason for this is that trade flows have benefitted from the decline in manual legacy and paper-based trade processes. Certainly, and somewhat ironically, the timing of the pandemic – coming as it does after a period of innovation and growth in electronic trade processes – has been fortuitous. Once heralded as the “future of trade”, the digital supply chain appears to have developed both the depth and breadth to have made a significant difference to the robustness of trade during this crisis. Banks that have invested heavily in trade technologies are now able to deliver digital trade finance solutions that enable their operations and documentary processing to continue remotely and their clients to initiate these transactions remotely, with little (or even no) disruption. Such banks can connect clients and counterparties digitally, enabling end-to-end transactions to be carried out seamlessly, with funds delivered electronically to buyers and suppliers across the globe. There are three key components to the digital processes now benefitting crisis-hit supply chains. First , the onboarding of counterparties onto the system, with effective and comprehensive due diligence taking place electronically, and with digital identities subsequently established for clients. This has eliminated the need to manually collect and submit documentation. The disruption has also resulted in new suppliers being sourced – for sometimes life-saving equipment – with due diligence having to follow behind. In these circumstances, having digital onboarding capabilities is paramount, and – from the perspective of Citi’s customers – highly successful. Second , bank-client connectivity. Digitalisation has allowed for far greater and more immediate connectivity, with banks connected digitally to client accounting platforms, either via APIs, host-to-host applications, web uploads, or platform-based functionality. Clients can provide requests for transactions or financing in real time and have them dealt with quickly and efficiently. Parvaiz Hamid Dalal Global Head Strategy & Solutions, Working Capital Finance, TTS, Citi parvaiz.dalal@citi.com