ISFS610: Payment Processes And Technology
Bills and Collections
Business Scenario 1
Go through the business scenario and play the role of a trade finance officer to translate the business requirements to Flexcube UBS.
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Jubilant Industries is a huge manufacturer and exporter of electronic items since 1970. Raw materials are purchased from the local market and most of their sales are overseas.
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Currently the company is planning to export their finished goods to MAX Enterprises in China.
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Jubilant Industries and MAX Enterprises have been working together for several years. Both the parties have accepted the deal and the goods worth $10,000 are ready to be shipped.
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The beneficiary, being a privileged customer, has negotiated an export usance period of 90 days from the bank as they require more orders than what they currently possess. Jubilant Industries needs raw material for further production and are in short of funds.
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So they have acquired Clean Export Bill with a 90 Days Usance period. They approached ORION Bank to provide an Export bill. The bank charges 12% and 15% for SWIFT and handling.
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You are a Trade Finance professional at ORION bank. You have been given the task of capturing the above requirement in Flexcube UBS core banking system. Translate the scenario in Flexcube by taking a look at the process flow. (http://paymentsprocesses.wix.com/labs#!bc-flexcube-process-flow/c1la9).
Business Scenario 2
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ZAPIFIC is a fully incorporated company in Falkland Islands. It is registered in the UK in order to facilitate South American trade by aiding South American iron ore miners to improve international trade cash flows. KMOTO Enterprises in Canada has decided to sign a contract with ZAPIFIC to import iron ore but under the condition that they will pay the bill on maturity date.
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In order to not disrupt the value chain, ZAPIFIC has agreed upon a forfaiting agreement with a forfaiter. KMOTO Enterprises in Canada has decided to sign a contract with ZAPIFIC to import iron ore. When the exporter initiated the shipment, KMOTO Enterprises approached AYX Bank to obtain a guarantee. KMOTO Enterprises then sends the necessary documents exporter who in turn gives those documents to forfeiter.
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Forfeiter then pays cash to the exporter and presents the documents to AYX Bank at maturity. Once the maturity date arrives, KMOTO Enterprises pays their cash to AYX Bank which in-turn pays to forfeiter.
Based on this scenario and the process flow shown above, explain the risks involved in the process.