Global challenges, local solutions: How banks can help manage complex international trade relationships

How have international trade and the associated financial instruments changed in recent years?

Sabine Zucker: There has been a significant change in recent years, mainly due to increasing geopolitical risks, which have manifested themselves in the form of shifts in supply chains and increased regulatory requirements, i.e. sanctions. These, in turn, have been mitigated by banks' traditional trade finance products, notably bank guarantees and letters of credit. These not only reduce geopolitical risks for the beneficiary, but also provide financial compensation in the event of supply chain disruptions caused by other factors. The industry is also making a significant contribution to ensuring resilient supply chains through nearshoring.

Daniel Rath: The various crises of recent years have shown that the key parameters for our customers are flexibility, resilience, and speed. Corona and the partly forced digitalization have brought these values even more to the fore. At RBI, we have responded by automating our processes and making them more efficient, which has enabled us to speed up our processing steps and thus our customer focus immensely.

Zucker: The trend is clearly towards ESG financing, where sustainability criteria play an important role. This is also being driven by the Supply Chain Act, which ensures the origin of goods and environmental standards. In addition, the focus on resilient supply chains will continue to increase, and nearshoring is becoming more popular because of its de-risking component. Another trend is the reduction of banking connections and the optimization of payment flows. Last but not least, there is a noticeable trend towards more credit insurance.

Rath: The topics of sustainability and long-term protection of the business model have always been important parameters for our clients in their business practices, regardless of additional regulatory requirements. As Sabine has already mentioned, we at RBI are there to identify these trends, to evaluate them together with our customers and to structure the right financial and risk-mitigating solutions on this basis. We offer a wide range of instruments for this purpose, also in cooperation with external organizations such as export credit agencies (ECAs, e.g. OeKB).

How can companies and financial institutions best manage risk in international trade? What tools are available?

Rath: As RBI, we support our customers globally in their trading activities. We just had a case where our client did not receive the agreed service from its supplier in the emerging markets. As the underlying contract was secured by RBI, our client was able to use one of our performance bonds and received payment from us for the non-delivery within five banking days. The fact that we received a counter-guarantee for this transaction from a bank in the exporter's country of origin means that the risk remains with RBI and our partner bank. This is a classic example of hedging commercial and political risks.

International trade is subject to very different rules and laws in different jurisdictions. What should companies and financial institutions be aware of and how can a bank like RBI help?

Zucker: The different regulations and laws in various jurisdictions are actually one of the biggest challenges in international trade. Companies need to make sure they have the right partners and specialists at their side to drastically minimize business and sanction risks. Thanks to its extensive international network of subsidiary banks, branches and representative offices, RBI has a high level of expertise in local regulations and can therefore provide companies with optimal support. With the advisory services of the International Desks, we offer solutions that are specifically tailored to local requirements.