科尔尼－中国银行3rddiscussiondocumentv2

1、108319_macros may 11, 2005 establish world-class trade finance operating model and capabilities boc international settlement a.t. kearney proprietary insight and analysis implications 1. opportunity to be dominant in the small and medium enterprise segment 2. to aggressively expand tf business, bank

2、 needs to develop focused targeting programs 3. need to match foreign banks standard in leveraging credit analysis capability to generate qualified sales 4. can take advantage of large customer database for better credit analysis 5. bank needs to develop optimal model to balance efficiency and custo

3、mer services 6. bank should consider developing electronic channel capabilities 8 108319_macros 2. trade finance organization structure with r however, there is a trend towards developing multi-skilled staff administrative management export document checking export advising tf processing center impo

4、rt document checking import issuance import settlement receive applications check credit line issue l/cs send l/cs to advising banks check completeness and accuracy of inward documents prepare and authorize payment authorize financing (if required) advise receipts l/c to customers check completeness

5、 and accuracy of export documents illustrative processing center organization structure export settlement receive payment from issuing banks initiate settlement and payment processing center focuses on transaction processing, having the trade servicing function undertaking all customer liaison leadi

6、ng international banks with high transaction volume typically configure around client groups first then followed by products global trend is moving towards developing multi- skilled staff across products and processes to balance transaction fluctuations observations 17 108319_macros considerations f

7、or boc trade finance business as the bank traditionally with the largest trade finance business in china, (assuming that this is something that boc wants to continue to excel at), will require a shift from being processing-driven to being business-driven. there will first need to be a full review ca

8、rried out as to the full importance of trade finance to the bank. the creation of a new lob for trade finance mainly involves developing a strategy and supporting business plan, and having that accepted by top management of the bank. boc needs to be able to counter threats from its competitors both

9、domestic and foreign, and while leveraging its strengths it must be flexible enough to understand and to respond to the needs of its many customers there will need to be changes to: operating model requiring specialist skills and focused effort financial arrangements - to track costs and revenue by

10、product and channel kpis and slas - to correctly set expectations performance management systems - to measure effectiveness and efficiency there has been a fundamental shift away from tf being processing-driven to being business-driven. this is an evolution that has taken place within leading banks

11、around the world, as they moved to replace diminishing earnings from traditional trade finance business. in leading banks like bank of china, trade finance would normally be a separate lob: this is because the business is a specialised product set although it requires extensive input from many other

12、 functions.trade finance is to corporate and commercial banking, as credit cards is to retail banking. the twin revenue threats a tf lob faces are from new competitors (as they increasingly target the market share of other less nimble banks) and from customers, who seek to improve on turnaround time

13、s and lower their trade finance costs through dealing directly with their trading counterparties via open account. processing costs in tf are a major business issue for banks, due to the labour-intensive nature of these transactions most banks are trying to handle this business faster and cheaper gl

14、obal trendsimplications for bank of china 18 108319_macros to determine the optimum organization model and specific roles and responsibilities for boc, a number of issues will be addressed by the team ndistributed, integrated or stand-alone business? nseparation or integration of marketing, processi

15、ng and risk management? nreporting to line directors or independent director? nlevel of integration with cash management, payment, etc.? nfor each functional unit, what are: detailed roles and responsibilities slas reporting lines kpis organization structure issues to be addressed these are the issu

16、es we will address in the project 19 108319_macros 3. operational performance metrics and illustrative templates for benchmarking objective of this exercise is to: identify relevant operations kpis conduct benchmarking exercise to set performance target for boc future operations detailed global benc

17、hmarking data would not be very much meaningful without understanding of boc current tf operations and availability of detailed operational data derive implications on tf process design and vendor selections 20 108319_macros key performance indicators - examples monitoring of relevant key performanc

18、e indicators for business and operations will enable bank of china to drive achievement of tf objectives business growth - new customer business cross sell - new business from existing customers trade finance business objectives retain current customers enhance process efficiency improve productivit

19、y enhance quality increase cost effectiveness transaction volume by product and type of transactions average productivity per worker overtime percentage of turnaround time meeting standard time sla performance costs by products variance of actual costs to standard costs selected key performance indi

20、cators enhance customer service effective operational risk management number of defects in processing outputs amount of actual losses incurred (non lending) 21 108319_macros benchmarking results will be used for target setting for boc tf operations and implications will be developed for process desi

21、gn and solution selection turnaround time transaction volume processing cost boc best practice implications on process and technology solution requirements to redesign trade finance processes to reduce turnaround time and align with new system modules typically processing requires ability to offer v

22、ariable service levels large volumes indicate need for processes centralisation and specialization to enhance efficiency and balance transaction fluctuation - enhanced it and communication capacity may also be required scale efficiencies will lower per unit processing costs and will enhance competit

23、iveness - mis is needed to track performance where will boc be in the short term and long term? selected operations kpis by products illustrative benchmarking of trade finance operations and implications other possible dimensions 22 108319_macros baseline of processing operations documentary credits

24、 $5 45% documentary collections $3 26% other bill products $3 29% estimated product expenses (% of processing time) total expenses product volume documentary credits import credit issuance 17,000 inward bills under import credits 19,000 advising of export credits13,000 negotiation of export credits

25、14,000 documentary collections collections of inward bills 16,000 collections of outward bills 18,000 other bill products trust receipts and bills receivable purchased 26,000 shipping guarantees 7,000 reimbursement claims 1,700 bank guarantees 12,000 total143,700 detailed transaction volumes for all

26、 other cases, business / support management or orm section (2) the objective should be to balance the dual objectives of data collection with the time commitment required to complete this form the operational risk reporting template sample 43 108319_macros 2. trade finance product pricing decision m

27、echanism out of project scope tf product manufacturer business unit customer needs products and detailed costing alco pricing tactics cost info decision making on pricing product specialists: product features development market intelligence collection and analysis customer analysis activity based co

28、sting analysis customer owners: business development pricing tactics development market intelligence collection and analysis customer analysis internal p&l management tf product pricing decision mechanism (illustrative) there first needs to be a marketing (product ownership) function for trade finan

29、ce product features are developed and regularly reviewed to ensure compatibility with client needs marketplace intelligence is gathered and analysed, both from customers (in terms of market research and surveys) and by surveying what competitors are doing internally, activity-based costing (abc) hel

30、ps the bank understand, in great detail, what it costs to deliver various components of each of the trade finance products - itemised in terms of origination (by channel), servicing and processing the various surveys that are conducted provide a guide as to customer pricing (ie fee and interest marg

31、in) expectations, and competitor activity: from these, pricing tactics are formulated and agreed by alco while customers are usually owned by business units (bus) products may be owned elsewhere eg treasury, tf lobs etc. while product groups will set the price for their products, customer profitability is ultimately the responsibility of the customer-owning bus. they can agree to discounts on the products for tactical reasons, but they need to provide the