The global trade landscape is transforming. Statistics from UNCTAD’s (United Nations Conference on Trade and Development) South-South Trade Monitor reveal that the past decade has seen trade that involves emerging markets surge from roughly a third to almost half of global flows. During the same period, the intra-emerging market share of world trade has almost doubled to 25 per cent.</p> One of the main consequences of this shift in geographical focus is a heightened risk-consciousness. With growth opportunities increasingly likely to be found in new (and therefore less-familiar) markets, corporates are increasingly seeking to mitigate risk throughout the end-to-end trade process. For many, this is the principal concern.</p> </p> Mauro Bonacina, EMEA Sales Officer, BNY Mellon Treasury Services</p> </td> </tr></tbody></table>This is hardly surprising, as risk mitigation shot to the top of the corporate agenda in the wake of the global crisis of 2008 and the subsequent liquidity constraints and market uncertainty. But such concerns have been exacerbated by the rise to prominence of new markets and currencies, as well as an increase in intra-emerging market trade corridors, all of which requires new approaches to age-old trade practices.</p> A changing landscape</h3> Prior to the 2008 crisis, cross-border trade had more-or-less settled into established patterns and practices. While the letter of credit (or “LC”, the cornerstone of all banks’ trade finance offerings, and most secure means of guaranteeing payment) has remained in permanent use, a combination of abundant market liquidity and mature market dominance saw its global use decline, and open account trade settlement flourish. The rise of open account, a more efficient but less secure means of trade settlement than LCs, reflected the market’s prioritisation of ease and speed over risk mitigation: with the security offered by LCs often being paperwork-heavy and coming at a cost.Though concerns over risk now rank higher than those over efficiency for the majority of companies (something of a role reversal), the solution is not quite as straightforward as reverting to LC use. This is because facilitating modern cross-border trade is more than just minimising risk, and therefore requires tools with a greater scope than the LC can offer.</p> Managing market differences</h3> In a world that takes speed and efficiency as a given, security must come hand-in-hand with ease-of-use. This makes automation vital, and though significant advances have been made in trade processing technology (particularly since the advent of the internet), automation can be complicated by global diversity.</p> With compliance environments, reporting requirements and levels of operational sophistication varying between markets, there can be no standardised “one-size-fits-all” approach to facilitating the trade process. Therefore electronic platforms alone cannot constitute a solution, even those at the more sophisticated end of the spectrum that can offer degrees of flexibility.</p> Managing cross-border trade requires a combination of operational tools, local-market understanding and global oversight. It is, therefore, a task that no one bank can undertake independently. Given this, strategic collaboration between local operators and specialist global trade services providers can be an effective solution. Their combined strengths can allow corporates across the globe to benefit from the best of both worlds: the local-market expertise and experience of house banks and the cutting edge technological solutions and international oversight and reach of global players. As a result, trade can continue to flow in the face of ongoing regulatory changes and market challenges.</p> Collaboration for success</h3> Of course, bank partnership in itself is not a new concept, and we have long believed that joining forces is the banking community’s best chance of addressing corporates’ evolving trade concerns while overcoming broader financial market hurdles.</p> Collaboration is, however, a broad concept, and we believe the market now requires a shift from the more conventional local-global bank alliances, which tend to focus on the one-way provision of technology, to those that drive the two-way transfer of knowledge as well as capabilities. This dual emphasis can prove vital, as it looks beyond technology to facilitate the global leverage of local expertise, as well as local access to the latest in international best-practice and innovation in line with individual market practices.</p> Client service, thought leadership and the promotion of market dialogue combined with innovative technology are key to helping clients and their customers succeed in their markets. To help make the most of arising opportunities and navigate the challenges ahead, clients need to be able to connect the dots between the direction of the commercial world and that of their own business strategies.</p> The views expressed herein are those of the authors only and do not reflect the views of BNY Mellon or any of its subsidiaries or affiliates. The material contained in this interview is intended for the purposes of general information only. This does not constitute treasury services advice, or any other business or legal advice, and it should not be used or relied upon as such.</p>