Opinion: Takeaways on the impact of digitalisation on trade finance
Howard Spira, US EXIM’s Chief Information Officer, reflects on the lessons from BU's inaugural Digitalisation Specialist Meeting, and celebrates the developments the community is making.
On June 30 and July 1, I participated in the Berne Union’s first event dedicated to the impact of digitalisation on trade finance. It was an impressive gathering that the Berne Union Secretariat organised together with Atradius, our host, that included member executives, product, and process owners as well as technologists who have dedicated their careers to trade finance. The conference featured a broad range of topics demonstrating how technology is impacting not only how Berne Unionl participants conduct business, but also how digitalisation affects the fundamental nature of commerce and trade finance. Members further discussed how digitalisation touches products and markets as well the expectations of customers and employees who work in an increasingly digitised world. Here are some of the key takeaways from the conference that I am sharing with my team.
What is digitalisation? At its simplest, digitalisation is the impact of computers and modern telecommunications on how society develops, people interact with one another and how commerce is performed. Businesses and government as well as people all use increasingly sophisticated information technology (digitalisation) to interact and solve problems. More of what people create has significant content and value driven by digital components.
Digitalisation is a business leadership imperative. Digitalisation needs to be a focus of executive leadership. It is not solely the domain of the Chief Information Officer (CIO) or Director of Information Technology, or a staff function. To compete, businesses must reimagine markets, products, services, policies and enabling processes. This requires C-suite engagement and direction.
Dematerialisation is the principle of stripping the information content from physical goods and turning it into pure digital form where it can be stored, transported, copied, and manipulated electronically. Photographs, phonograph records, books and films turned into digital files are all examples of dematerialisation. Almost all forms of intellectual property (IP) can be dematerialised, and a larger and larger portion of trade is in IP and related services. As underlying trade shifts to intellectual property and services, how will ECAs and trade finance companies evolve their products and underwriting and risk management processes to support this shift?
Platforms and digital ecosystems are technology enabled marketplaces that have the potential to disrupt how trade finance companies and customers find one another and disintermediate customers and providers. So far, they have not been overly successful, but as commerce continues to digitise, they may move to the centre of how trade is performed. Is our company following this trend and does it have a strategy to play in this kind of market?
Are you aggressively pursuing process digitisation? Process digitisation is focused on taking existing business processes and ‘digitising’ them. Digitising them removes the need for paper and can speed up processes, improve consistency and quality and lower costs. In addition, digital processes bring resiliency because they can be performed from anywhere there is a computer as many businesses found during the COVID pandemic.
There are many exciting and rapidly evolving ways to digitise processes including electronic documents, blockchain, workflow electronic commerce solutions, robotic process automation (RPA) and machine learning (ML) that were demonstrated during the BU digitalisation event. Competitive ECAs and trade finance companies are creatively and rapidly digitising all key processes.
Data from digitisation must be harvested and analysed to make data-driven business decisions. In addition to digitising process, developing, and organising data and using analytics to drive decision making is an important set of capabilities to develop as part of a digitisation strategy. Many speakers at the event shared how they used thoughtful management of data to make data-driven decisions that improved revenue and lowered costs.
Digitisation impacts work culture and change management. How do we grow and cultivate a positive work culture in a more digitised workplace with options for remote and hybrid work in addition to traditional on-premises work styles? How do we leverage the talent of digital natives in our business and how do we create positive change to adopt new ways of blending technology into how we work? Successful digitalisation is very much a human resource challenge.
Customers set the bar for digital experience from their personal experience. The expectation for what represents a great customer (or staff) digital experience does not necessarily come from competing ECAs, but rather from an individual’s experience of what they can do personally on the internet or with their personal technology – whether that be Amazon.com or other retail platforms they interact with. That is the bar for speed and agility that trade finance companies need to shoot for.
Orchestrating a digitalisation strategy is challenging. Digitalisation efforts are a significant commitment of staff and financial resources. Leadership needs to be involved to properly participate, prioritise, fund, and monitor these activities. Leadership and project teams need to be particularly attuned to how to manage the risk of digitalisation initiatives and their subsequent implementation initiatives. How can you break a big problem into smaller less risky parts? Can you prototype something before being fully committed? How do you monitor and manage this activity?
Focus on outcomes and integrated teams for successful project execution. Successful digitisation efforts discussed at the event tied closely to clear, measurable business outcomes. They also performed best when well-integrated with the trade finance-specific understanding of the business model. The most effective teams balance business and technology expertise. The most interesting presentations were presented by trade finance experts and discussed how they exploited technology to get a business result – they were business centred, not technology focused.
Not all parts of the world are digital ready. As we think about digitisation strategy, remember that some of the concepts that are so exciting may not have great traction in less developed countries (LDCs). For those ECAs that support trade and manage risk in LDCs, how does your digitisation strategy stack up against the on-ground capabilities?
Digitalisation brings new risks to be managed. As trade finance companies and ECAs do more digitally, they need to focus on mastering new risks. Cybersecurity is an increasing focus to ensure digital assets of a company are protected. Counterparty risk is also impacted by cybersecurity readiness of the counterparty. Business controls need to be strengthened to counter increasingly sophisticated cyberattacks that can attempt to misdirect payments, steal business confidential information, or commit other forms of fraud.
What an impressive community! One after another, members shared their knowledge and expertise. Atradius presented its automated credit scoring and the use of machine learning, Export Development Canada reported out on their adoption of robotic process automation, KSURE introduced their customer portal. They were just a few among the many exciting and interesting illustrations of work happening in the Berne Union community. While each ECA or trade finance company may be different, all members are working to crack the code on effective digitalisation strategies to improve and develop their business.
