Sponsored Statement

Sponsored Statement

The rise of trade services

outsourcing

Corporates in India are increasingly working in partnership with banks to improve

the management of their trade functions. Prashant Pillai, Executive Director, J.P.
Morgan Treasury Services, examines the factors driving this trend and looks at the
opportunities ahead.

lobal trade is both complex and

crucial. It requires deep knowledge
of varied documentation,
different geographies, stringent
regulations, multiple currencies and everchanging business dynamics. At the same
time it opens the corporate to a number of
challenges, ranging from safe delivery and
payment to currency variation and supply
chain strength.
Add to this the growing need, post-credit
crisis, for corporates to raise business
efficiency and improve working capital
management. Multiply this by the growth in
trade being experienced right across Asia,
and the result is that efficient, reliable and
smart trade processing is more essential to
success than ever before.
The challenges for corporates, however,
is that the scale of modern global trade
requires them to maintain a large talent pool
within the organisation to handle it talent
that needs to be retained in a competitive
market and retrained to reflect continuous
changes in best practice and technology.
Given these factors, it is not surprising
that outsourcing a strategic partnership
with an external team has become
more popular. It not only helps corporates
to manage their trade functions more
efficiently, but it also frees up a companys
internal resources to concentrate on what
they do best growing their business.

An Indian perspective
In India, trade has long been regarded
as document intensive and subject to
a multitude of regulatory requirements.
However, thanks to liberalisation,

40 | Asia Trade Finance Supplement 2011

increasing corporate demand and a strong

push from banks, the first wave of change
is evident.
As a result, trade transactions can now be
initiated electronically with, for example,
online issuances of letters of credit (LCs).
Trade transactions still require documents
and certain regulatory aspects to be taken
care of, but the overall trade process
is re-organised in a manner that takes
care of the regulatory and documentary
requirements, but at the same time is a
more automated and straight-through
process for the corporate. Post-transaction
deliverables can also be handled through
electronic interfaces, allowing better
control and more transparent access
to the trade process. The ability to use
electronically scanned and imaged
documents further speeds up the
process particularly where a corporates
factories, headquarters and customer
base may be several thousand miles apart.
While many companies have installed
proprietary automated systems, banks
have invested heavily in building their
own comprehensive systems, which can
be used either alongside, or in place of,
corporate processes.

The second wave

Not only has electronic trade processing
created new efficiencies, it has also
created new possibilities. For corporates,
the opportunity to build greater control,
integration and transparency into their
trade functions is irresistible. The challenge
of doing so has led them to see the value
of banks like J.P. Morgan, whose financial

strength and global scale enables them

to invest in the people, products and
platforms required for state-of-the-art
trade processing and management. As
a result, there is a clear move forward
from the first wave of electronic trade to
the second wave of development trade
process partnership between corporates
and banks.
What follows is a snapshot of the various
trade process outsourcing solutions
offered by banks in India, which can
be categorised into generic solutions,
industry-specific solutions and clientspecific solutions.
1. Generic solutions
a. Export document preparation
(letters of credit and collection bills)
Primarily targeted at exporters, particularly
those who use LCs extensively:
export LC advising and confirmation
between corporate and bank
document preparation and collation
post-document preparation services
management reporting
b. Import document management
Primarily targeted at importers, this caters
to those with extensive import portfolios
characterised by large numbers of
invoices, bulk payments and lower value
payments:
collation of import documents (including
invoices, transport documents and bills of
entry)
scrutiny and discrepancy resolution
warehouse documents and electronic

www.gtreview.com

interface (including physical and electronic

management of documents)
management reporting (covering
periodic MIS and reporting on adherence
to the service level agreement between
the corporate and bank).
c. Regulatory and other certificates
Facilitate preparation and submission of
regulatory and other certificates material
to the handling of trade transactions.
2. Industry-specific solutions
a. Softex outsourcing
This is specific to the software export
industry and covers the following as part
of the offering:
document preparation: including invoices
and Softex forms (to be submitted to the
software regulatory bodies)
Softex filing: making arrangements to
get the Softex forms certified by software
regulatory bodies
scrutiny and discrepancy resolution
warehouse documents and electronic
interface: physical and electronic
management of documents
management reporting
b. Domestic capital equipment and
project-related industries
The needs of corporates in these
sectors mean that there is more
emphasis on milestone and payment
tracking mechanisms than on document
preparation services. Document
management involves maintaining and
tracking records of milestone payments
and calculating the residual payments for
appropriate management decisions.
3. Client-specific solutions
These require very detailed analysis of
a companys requirements and existing
processes. Examples range from
a bank managing a corporates
entire payables portfolio, with
due linkages between the
value and quantity of goods
imported; to an engineering
company requiring import
document management
services (direct import
payments) to be linked
with the foreign
exchange portion of
the process (including
booking, utilisation
and cancellation of
forex risk mitigation
products like

www.gtreview.com

forward contracts).

How to get it right

Despite the many benefits of trade
outsourcing, choosing the right approach
and the right solution is crucial to success.
Identifying client need is essential so
that the solution matches requirements
with the correct process mapping, clear
responsibilities and periodic reviews.
The ability and expertise of the bank in
handling similar solutions is another key
factor. Technology is also vital to ensure
that the processes minimise error, are
more efficient and help in managing scale.
A customised and integrated approach is
essential to enable the corporate to derive
maximum benefit; and continuous value
enhancements should be built into the
process.

Choosing the best partner

The need for multiple skill-sets, crossborder expertise, the latest technology and
fully integrated services means that many
corporates tend to be attracted to bigger
global banks like J.P. Morgan. However,
local knowledge and understanding are
also vital to the process. This is why at

a pathway towards more wide-ranging

end-to-end trade partnerships.
These could extend beyond
documentation and banking-related
processes to cover everything from
customs clearance and duty payments
to freight payments and other logisticsrelated activity. This would enable a
corporate to have a single window to all its
trade processes.
Another area that offers further scope
for integration is cash management.
From a corporate perspective there
is a strong linkage between trade and
the related collection/payment process
which, in domestic banking parlance, gets
categorised as cash management. Banks
can handle the entire leg of trade from the
initiation of a purchase order to invoicing,
shipment, warehousing and acceptance, to
payment in a comprehensive end-to-end
manner.
Banks can also interface with a corporates
business partners, taking both advisory
and process management roles. This
could ensure that, right from the start,
all contracts, invoicing, shipments,
documents and payments are prepared
correctly to avoid any discrepancy or

For corporates the opportunity to build greater

control, integration and transparency into their
trade functions is irresistible.
J.P. Morgan, we back our global financial
strength with strong local commitment.
Already represented in 16 countries across
Asia, our investment in technology and
key hires almost 30 in Apac to date has
added even greater depth to our highly
experienced team. By applying our
expertise to understand our clients
business challenges and drawing
from a full range of products
offered across the region, we can
deliver an unrivalled platform that
bundles technology, integrated
treasury management tools,
global infrastructure and
industry-leading capital markets
capabilities.

issues later, and are also tracked properly

throughout the entire chain for better
control and efficiency.
These are some of the possibilities. But the
flexibility and innovation of banks, driven
by the dynamics of business, mean that
new and challenging areas of partnership
between corporates and banks could well
emerge.
To discuss any of the issues raised in this
article, or to discover more about the
potential of trade services outcourcing
for your organisation, please contact
prashant.v.pillai@jpmchase.com or get
in touch with your local J.P. Morgan
representative.

The next step

As trade process
outsourcing gathers
momentum, it has cleared

Asia Trade Finance Supplement 2011 | 41

Sponsored Statement

Sponsored Statement

The rise of trade services

outsourcing

Corporates in India are increasingly working in partnership with banks to improve

the management of their trade functions. Prashant Pillai, Executive Director, J.P.
Morgan Treasury Services, examines the factors driving this trend and looks at the
opportunities ahead.

lobal trade is both complex and

crucial. It requires deep knowledge
of varied documentation,
different geographies, stringent
regulations, multiple currencies and everchanging business dynamics. At the same
time it opens the corporate to a number of
challenges, ranging from safe delivery and
payment to currency variation and supply
chain strength.
Add to this the growing need, post-credit
crisis, for corporates to raise business
efficiency and improve working capital
management. Multiply this by the growth in
trade being experienced right across Asia,
and the result is that efficient, reliable and
smart trade processing is more essential to
success than ever before.
The challenges for corporates, however,
is that the scale of modern global trade
requires them to maintain a large talent pool
within the organisation to handle it talent
that needs to be retained in a competitive
market and retrained to reflect continuous
changes in best practice and technology.
Given these factors, it is not surprising
that outsourcing a strategic partnership
with an external team has become
more popular. It not only helps corporates
to manage their trade functions more
efficiently, but it also frees up a companys
internal resources to concentrate on what
they do best growing their business.

An Indian perspective
In India, trade has long been regarded
as document intensive and subject to
a multitude of regulatory requirements.
However, thanks to liberalisation,

40 | Asia Trade Finance Supplement 2011

increasing corporate demand and a strong

push from banks, the first wave of change
is evident.
As a result, trade transactions can now be
initiated electronically with, for example,
online issuances of letters of credit (LCs).
Trade transactions still require documents
and certain regulatory aspects to be taken
care of, but the overall trade process
is re-organised in a manner that takes
care of the regulatory and documentary
requirements, but at the same time is a
more automated and straight-through
process for the corporate. Post-transaction
deliverables can also be handled through
electronic interfaces, allowing better
control and more transparent access
to the trade process. The ability to use
electronically scanned and imaged
documents further speeds up the
process particularly where a corporates
factories, headquarters and customer
base may be several thousand miles apart.
While many companies have installed
proprietary automated systems, banks
have invested heavily in building their
own comprehensive systems, which can
be used either alongside, or in place of,
corporate processes.

The second wave

Not only has electronic trade processing
created new efficiencies, it has also
created new possibilities. For corporates,
the opportunity to build greater control,
integration and transparency into their
trade functions is irresistible. The challenge
of doing so has led them to see the value
of banks like J.P. Morgan, whose financial

strength and global scale enables them

to invest in the people, products and
platforms required for state-of-the-art
trade processing and management. As
a result, there is a clear move forward
from the first wave of electronic trade to
the second wave of development trade
process partnership between corporates
and banks.
What follows is a snapshot of the various
trade process outsourcing solutions
offered by banks in India, which can
be categorised into generic solutions,
industry-specific solutions and clientspecific solutions.
1. Generic solutions
a. Export document preparation
(letters of credit and collection bills)
Primarily targeted at exporters, particularly
those who use LCs extensively:
export LC advising and confirmation
between corporate and bank
document preparation and collation
post-document preparation services
management reporting
b. Import document management
Primarily targeted at importers, this caters
to those with extensive import portfolios
characterised by large numbers of
invoices, bulk payments and lower value
payments:
collation of import documents (including
invoices, transport documents and bills of
entry)
scrutiny and discrepancy resolution
warehouse documents and electronic

www.gtreview.com

interface (including physical and electronic

management of documents)
management reporting (covering
periodic MIS and reporting on adherence
to the service level agreement between
the corporate and bank).
c. Regulatory and other certificates
Facilitate preparation and submission of
regulatory and other certificates material
to the handling of trade transactions.
2. Industry-specific solutions
a. Softex outsourcing
This is specific to the software export
industry and covers the following as part
of the offering:
document preparation: including invoices
and Softex forms (to be submitted to the
software regulatory bodies)
Softex filing: making arrangements to
get the Softex forms certified by software
regulatory bodies
scrutiny and discrepancy resolution
warehouse documents and electronic
interface: physical and electronic
management of documents
management reporting
b. Domestic capital equipment and
project-related industries
The needs of corporates in these
sectors mean that there is more
emphasis on milestone and payment
tracking mechanisms than on document
preparation services. Document
management involves maintaining and
tracking records of milestone payments
and calculating the residual payments for
appropriate management decisions.
3. Client-specific solutions
These require very detailed analysis of
a companys requirements and existing
processes. Examples range from
a bank managing a corporates
entire payables portfolio, with
due linkages between the
value and quantity of goods
imported; to an engineering
company requiring import
document management
services (direct import
payments) to be linked
with the foreign
exchange portion of
the process (including
booking, utilisation
and cancellation of
forex risk mitigation
products like

www.gtreview.com

forward contracts).

How to get it right

Despite the many benefits of trade
outsourcing, choosing the right approach
and the right solution is crucial to success.
Identifying client need is essential so
that the solution matches requirements
with the correct process mapping, clear
responsibilities and periodic reviews.
The ability and expertise of the bank in
handling similar solutions is another key
factor. Technology is also vital to ensure
that the processes minimise error, are
more efficient and help in managing scale.
A customised and integrated approach is
essential to enable the corporate to derive
maximum benefit; and continuous value
enhancements should be built into the
process.

Choosing the best partner

The need for multiple skill-sets, crossborder expertise, the latest technology and
fully integrated services means that many
corporates tend to be attracted to bigger
global banks like J.P. Morgan. However,
local knowledge and understanding are
also vital to the process. This is why at

a pathway towards more wide-ranging

end-to-end trade partnerships.
These could extend beyond
documentation and banking-related
processes to cover everything from
customs clearance and duty payments
to freight payments and other logisticsrelated activity. This would enable a
corporate to have a single window to all its
trade processes.
Another area that offers further scope
for integration is cash management.
From a corporate perspective there
is a strong linkage between trade and
the related collection/payment process
which, in domestic banking parlance, gets
categorised as cash management. Banks
can handle the entire leg of trade from the
initiation of a purchase order to invoicing,
shipment, warehousing and acceptance, to
payment in a comprehensive end-to-end
manner.
Banks can also interface with a corporates
business partners, taking both advisory
and process management roles. This
could ensure that, right from the start,
all contracts, invoicing, shipments,
documents and payments are prepared
correctly to avoid any discrepancy or

For corporates the opportunity to build greater

control, integration and transparency into their
trade functions is irresistible.
J.P. Morgan, we back our global financial
strength with strong local commitment.
Already represented in 16 countries across
Asia, our investment in technology and
key hires almost 30 in Apac to date has
added even greater depth to our highly
experienced team. By applying our
expertise to understand our clients
business challenges and drawing
from a full range of products
offered across the region, we can
deliver an unrivalled platform that
bundles technology, integrated
treasury management tools,
global infrastructure and
industry-leading capital markets
capabilities.

issues later, and are also tracked properly

throughout the entire chain for better
control and efficiency.
These are some of the possibilities. But the
flexibility and innovation of banks, driven
by the dynamics of business, mean that
new and challenging areas of partnership
between corporates and banks could well
emerge.
To discuss any of the issues raised in this
article, or to discover more about the
potential of trade services outcourcing
for your organisation, please contact
prashant.v.pillai@jpmchase.com or get
in touch with your local J.P. Morgan
representative.

The next step

As trade process
outsourcing gathers
momentum, it has cleared

Asia Trade Finance Supplement 2011 | 41