E-Learning
E-Learning
Export Finance Factory Door

Export finance (Factory door) caters for financing of a borrower which sources commodity from various domestic suppliers for pooling in a warehouse, processes it into finished goods (as needed), and then delivers the commodity to their international off takers

Export Finance (Factory door) caters for financing a Borrower who has an existing delivery contract with an international Offtaker at a fixed price, through a forward sale agreement.

The product is a structured product with a credit base, with a credit view taken on the Offtaker alone. The commodity being traded is bought by the Bank as security. The bank finances the entire transaction starting from the storage facility to the door of the Offtaker including delivery of physical goods. The Borrower is appointed as the Bank’s logistics officer in terms of the transport and delivery of the stock

The solution is based upon delivery of a processed commodity to a defined Offtaker at a defined price according to a forward sale agreement.

The product is a structured product with a credit view taken on the Offtaker alone with the commodity taken as security.


BANK RISK MATRIX

No Risk Mitigation
1. The commodity is of an inferior grade Collateral Controller hired to ensure the commodity grade (lab testing conducted, etc.), approve storage facilities. Scope of services up front ensures control by the Collateral Controller. Original Warehouse Receipt/Load Survey report is the security.
2. The commodity is lost/stolen/damaged in storage Collateral Control Agreement, all risks and misappropriation insurance for commodity storage, finance limited to short term period (max 12 months).
3. Collateral Management process failure Annual audit on the Collateral Controller
4. The commodity is lost/stolen/damaged in transit Insurance approved Transporters/shipping line used, Collateral Controller utilised, Open Marine (Carriage) insurance policy, recourse to the Transporter for loss, mismanagement, etc. through the carriage/shipping agreement.
5. The Client does not have title to sell Legal and Collateral Controller checks up front, Bank holds original Warehouse Receipt, warranty from Client as to his good title, Collateral Controller ensures the process and that containers and warehouses are clearly demarcated.
6. Commodity encumbered Bank ensures that storage/shipping costs are paid, Bank owns the commodity, Collateral Controller used for storage control, waiver signed to prevent commodity being used to settle other existing debts.
7. Price risk (market forces of supply and demand) Bank owns the commodity through all phases of the supply chain under finance (documentation to prove this in Bank’s name), discount calculation includes a buffer, finance provided on a percentage of the import/export parity price, trigger level set conservatively, market price monitored daily, local price received from the Collateral Controller weekly, commodity limits per country to avoid being the market.
8. Price risk (Client can not buy back) Bank owns the commodity at a discounted price which caters for import/export costs, LC guarantee provided by the Offtaker for payment on good delivery, LC verified by Trade.
9. Price risk (change in interest rates, etc.) Interest rates linked to base rate in the discount model calculation,
10. Client unable to sell commodity Limits on the commodity per country, Put Options used as a hedge, checks on Put Option quantities.
11. Defined limits are exceeded Limit reports produced and checked before each deal and payout. Authorisation of a deal and each payment is a dual control.
12. KYC not/incorrectly performed Originator uses a KYC checklist, Securities performs a QA (Quality Assurance) check.
13. Documentation not legally binding Contracts drafted by Legal with Contract drafting experience, external legal council used as required, Contracts signed in the presence of witnesses, and originals obtained, Contracts checked by securities for unauthorised alterations and complete signatures.
14. Costs will not be covered by the fixed future price Discount calculation performed to cover all costs, checks on Put Options to ensure that prices conform to the model and relevant tonnage is covered.
15. Operational risk (lack of controls, incorrect process followed, incorrect payments/receipts processed) Segregation of duties, process approvals.
16. Unavailability of staff Diary reminder on the IT system to the entire Middle Office Management team.
17. Insurance cover insufficient Reputable Insurer used, reminders to pay insurance.
18. Delivery risk (delays in commodity shipping along the supply chain) Insurance covers delays due to trans-shipping, trans-shipping avoided due to the quantities financed.
19. Monies not received on time Diary reminder on the IT system regarding receipt dates, penalty interest rate invoiced for late payment.

20.

Errors in accounting processes and reporting between the Bank systems Reconciliation of each transaction between the IT system and the applicable system on daily basis, monthly statements from Treasury (in-country) and / or monthly statements from finance, Income signed off by division head.

ACE GLOBAL RISK MATRIX

Risk Likely Cause Preventative action Marine Insurance
1. Grade/Quality inferior 1. Misrepresentation
2. Incorrect assessment
3. Excessive mixing with lower grades
4. Inadequate handling procedures
5. Weighbridge not calibrated accurately
6. Difference in lab analysis standards
1. Inspection by ACE GLOBAL
2. Analysis by independent laboratory approved by ACE GLOBAL
3. Calibration of equipment by by Local Authorized Company on behalf of ACE GLOBAL
4. International standards used for analysis
5. Certificate of weight and Analysis issued by ACE GLOBAL
6. Specify quality standards on certificate
1. Misrepresentation is excluded by the policy
2. excessive mixing is assimilated to contamination
2. Moisture 1. Inspected incorrectly
2. Measured incorrectly
3. Exposure to elements prior to loading
4. Climatic conditions
5. Inferior Storage construction
1. Storage Agreement defines responsibility
2. Insurance Cover
3. Certificate of Analysis issued by Collateral Controller
4. No goods with moisture > pre agreed rate accepted
5. ACE GLOBAL Engineers issue Inspection Report on the Storage Location
1. cargo marine policy extended to staay/storage
2. All Risks cover ( french and/or English and/or Belgium General conditions extended to specific risks depending on the nature of goods
3. Condensation clause whtsover the cause
3. Insect infestation 1. Misrepresentation
2. Incorrect inspection
3. Infiltration
4. Inferior Storage construction
5. cross contamination
6. Proximity of infested lots
1. Storage Agreement defines responsibility
2. Insurance Cover
3. Inspection by ACE GLOBAL on weekly basis
4. ACE GLOBAL Technical Support Services Manager issue Inspection Report on the Storage Location
5. Fumigation on recommendation from ACE GLOBAL
6. Refuse dangerous proximity
1. Wilful misconduct or gross negligence of the assured emplyees for the misrepresentation except for the board
2. Infiltration : covered
3. Pre-inspection done by the underwrters surveyor
4. Cross contamination is coverd whatever the cause
5. covered sunject to due diligence but the bank is paid
4. Defective title/counterfeit title documents/ Borrowers reputation 1. Fraud by Supplier/Storer
2. Commodity stolen
3. Dispute over ownership of commodity
1. Bank holds original documents of title
2. Storage agreements with storers
3. Supplier warrants full title
4. Supplier is also storer in majority of cases
5. Country Manager through KYCC will determine the Crediblity of the borrower
1. Fraud covered by misappropriation clause and /or PI policy
2. covered wherever the goods are : TC , Storage , Vessel etc,,,
5. weight shortage 1. Inadequate equipment
2. fraud/storer deviating goods
3. weightscale not calibrated
4. Silo scales not calibrated
5. Bad handling favoring spillage
1. Updated calibration certificate
2. ACE GLOBAL will check for possible by-passes
3. ACE GLOBAL will request regular test weighing
4. Weighing under surveillance of ACE GLOBAL
5. ACE GLOBAL to issue protest letter
2. Covered
5. Covered
6. heating & self combustion 1. Defective lightning on board vessel holds
2. too high moisture
3. fresh goods
4. poor ventilation
5. lack of follow up
1. check on vessel electic devices
2. moisture testing on arrival
3. regular temperature testing
4. proper and adequate ventilation
5. Country Manager regular monitoring
6. Storage Location sites to be inspected and approved by ACE GLOBAL
7. Insurance cover
heating , sweating , condensation and spontanneous combustion covered whatsoever the cause
All the number 6 events are covered
7. damage to the goods 1. malicious
2. Force majeur
3. leakage/water infiltration
4. bad storage conditions
1. permanent presence of ACE GLOBAL
2. proper inspection of warehouse
3. Insurance cover
1. All the events ( point 7 ) are covered except the bad storage unless agreed by underwriters for the warehouse inspection
Risk Likely Cause Preventative action Marine Insurance
1. Loss of commodity 1. Lack of controls
2. Incompetent personnel
3. Collusion between Collateral Manager & Storer
4. Force Majeure
5. Weight recording incorrect
6. Stored too long - commodity spoiled
1. ACE GLOBAL independent controls verification
2. The Lender Insurance cover
3. ACE GLOBAL quantity & quality certificates retained as proof of value and exsistance
4. Storage period limited to 12 months
 
2. Damage to Commodity 1. Storage facilities sub standard
2. Manpower requirements inadequate
3. Theft or Misappropriation
4. Force Majeure
5. Spontaneous Combustion
1. ACE GLOBAL Engineers Report
2. Storage agreement defines responsibility
3. Insurance cover
4. ACE GLOBAL regular inspections
1. 3 , 4 are covered and number 6 could be covered subject to underwrters agreement and when the normal cycle of life is not concerned
3. Stored commodity infected/contaminated with disease - Bank sells to end user with subsequent claim for damages 1. Insect infestation
2. Fungi contamination
3. mould
4. Proximity of infested lots
1. Bank has taken out insurance (Public Liability )
2. Country Manager regular inspections
3. Refuse proximity / Proper separations
1. 3,4,5 covered
4.warehouse not covered by insurance 1. warehouse insurance not properly checked
2. premium not paid
3. insured value to low
4. Deductible to high
1. proper check of proper cargo all risks and misappropriation insurance Policy
2. Confirmation from underwriter that premium has bee paid
 
Risk Likely Cause Preventative action Marine Insurance
1. Non performance to maintain and store the commodity 1. Financial failure
2. Storage facilities sub-standard
3. Manpower not qualified to manage storage
4. Changes in statutory limitations
5. Force majeure
1. ACE GLOBAL leases or subleases Storage/warehouse
2. ACE GLOBAL Engineers issue Inspection Report on the Storage Location
3. ACE GLOBAL employs competent personnel
4. Bank are owners of commodity
5. Full commodity insurance cover with the Bank as first loss payee
6. Protection measures when feasible
1. 1 2 3 and 4 covered ( see above )
Risk Likely Cause Preventative action Marine Insurance
1. Non-performance of payment 1. Client unable to pay / insolvency
2. Economic downturn
3. Cash flow difficulties/financial distress
4. Cheque not cleared
1. Credit approval on off-taker, annual credit review
2. Commodity held at discount to market value for Intrinsic Value
3. The Bank owns commodities
4. Non Bank accepted clients must first either present bank guaranteed cheques or payment to be cleared
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Drop in price of commodity 1. Oversupply
2. Economic Downturn
1. Back to Back Sale and Purchase agreement.
2. Hedge purchase price or use appropriate discounting model
3. Use appropriate discounting model, institute triger price levels
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Incorrect calculation of cost by client
2. Incorrect calculation of purchase price by Bank
1. Inability of client to calculate and include all costs accurately
2 .Discount model flawed
1. Bank to review all orders and calculations
2. Generic Discounting Model - Any variations to be approved by Bank line management
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Unacceptable return on Capital
2. Changing interest rates
1. Interest rate change
2. Change in statutory requirements
3. Funding a short term advance with long-term funds
1. Rate linked to Prime
2. Funding to be determined by management on a case by case basis
3. Attempt to lock in rate with a short term instrument
4. Generic Discounting Model - 3% hedge
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Fraud / Misappropriation
2. Inadequate controls
3. Statutory
4. Documentation
5. Administration
6. Information Technology
1. Inadequate internal controls
2. Breakdown in basic controls
3. Changes to Act and Regulations
4. Documentation not legally binding
5. Administrative burden too big for administrative department
6. Admin system incompatible
1. Segregation of duties
2. Audit functions (Internal & External)
3. Approve documents through Bank Specialized Finance Legal department
4. Review admin procedures
5. Increase capacity to handle workload
6. Structured Trade & Commodity Finance system designed to mitigate associated risks
1. Only misappropriation/fraud are covered
Risk Likely Cause Preventative action Marine Insurance
1. Funding provided without adequate insurance on Bank owned commodity
2. Insurance Co unable to meet its obligations
3. Low class company
1. Insurance inadequate
2. Insurance not in place
3. Insurer over extended
4. wrong value insured
5. too high deductible
6. Insurance Company Not reliable
1. Recognised insurance company to be used
2. Bank to monitor insurance premiums
3. Other Insurance Companies to be approved by Bank
4. dedicated person to follow market
5. dedicated person to review insurance
1. Broker or client liability
2. client liability
3. Can be covered as an omission
4. Broker and/or client liability
Risk Likely Cause Preventative action Marine Insurance
1. Not a Tax Based Transaction      
Risk Likely Cause Preventative action Marine Insurance
1. Goods are rejected or condemned by Authorities due to absence of import/ export permits
2. Fake import/ export permits
3. 4Import/ export permit not valid on day of import/ export
4. Delay in delivery
1. Bank is not registered as a valid importer/ exporter
2. Bank does not possess a valid import/ export permit for the goods to be imported/ exported
3. Bank is not aware of special import/ export permit for a specific product
4. Bank is not allowed to be an importer/ exporter
1. Special Import/ Export Permits will be obtained if necessary.
2. Bank will consult with the client, the supplier, the FF, the insurer and the nominated collateral controller before entering into a transaction
1. NOT COVERED AT ALL
Risk Likely Cause Preventative action Marine Insurance
1. Bank suffers a loss as a result of financial default of the shipping line, or any other sub-contractor 1. The goods are claimed by creditors or liquidation due to financial default of the shipping line or sub-contractor 1. Bank shall be covered for any loss as a result of the impoundment of the goods or destruction of the goods as a result of insolvency or financial default of the shipping line. However, it has been agreed in the insurance policy that it shall not cover any loss due to insolvency or financial default of the shipping line, if the insured was aware of the situation prior to the transaction. 1. THE UNSOLVENCY OF THE CARRIER DURING THE TRANSIT IS COVERED
Risk Likely Cause Preventative action Marine Insurance
1. Bank suffers a loss as a result of damage of goods in transit 1. Negligence or intentional action(s) by the Carrier or one of his contractors Force Majeur
    1. 1. It is the obligation of the Carrier, in terms of the Carriage Agreement, to ensure that all reasonable steps are taken to prevent damage to the goods whilst the goods are under their control. Carrier must give notification of any damage to the goods to Bank upon discovery of such damage. Bank will then advise the insurers.
    1. 2. Loss or damage to the goods which may be presumed to have occurred during transit which is only discovered when the goods are unpacked, is recoverable under the policy provided that :
      i) the immediate packaging of the goods are examined externally when it becomes available for inspection (for example, after unstuffing of containers) and is then outwardly sound;
      ii) the packages have not been moved from the place from which cover seized, in other words, the goods have not been moved from the warehouse to the premises of the Forward Sale Purchaser;
1. FULLY COVERED
Risk Likely Cause Preventative action Marine Insurance
1. The goods are damaged after the insurance policy seized or prior to commencement of the policy 1. The timing of the loss is just before or after the cover of insurance policy 1. The policy has been negotiated that the cover commences at the same moment at the transfer of ownership/security to Bank and the cover seizes when Bank transfers ownership to the Forward Sale Purchaser or client. The financing period and the insurance period shall always match. 1. Not Covered
Export Finance Commodity Exchange

Export Finance caters for the financing of a Client which sources a commodity from various domestic suppliers, transports and pools this in a storage location, processes it into finished goods and from there, distributes to their off takers.

The solution is based upon delivery of a 'pre-sold' commodity to a defined off-taker. The Commodity Exchange version of Export finance uses the Commodity Exchange i.e. SAFEX or LIFE or any other exchange as the Offtaker, by buying a Selling Position (Short) to fix the price.

The Client/Borrower may decide to buy and sell on the approved COMEX i.e. SAFEX or LIFE or any other exchange under this product. If that is the case, the Buying Positions (Long) and Selling Positions (Short) need to be matched so that the price is fully hedged.


BANK RISK MATRIX

No Risk Mitigation
1. The commodity is of an inferior grade Collateral Controller hired to ensure the commodity grade (lab testing conducted, etc.), approve storage facilities. Scope of services up front ensures control by the Collateral Controller. Original Warehouse Receipt/Load Survey report is the security.
2. The commodity is lost/stolen/damaged in storage Collateral Control Agreement, all risks and misappropriation insurance for commodity storage, finance limited to short term period (max 12 months).
3. Collateral Management process failure Annual audit on the Collateral Controller
4. The commodity is lost/stolen/damaged in transit Insurance approved Transporters/shipping line used, Collateral Controller utilised, Open Marine (Carriage) insurance policy, recourse to the Transporter for loss, mismanagement, etc. through the carriage/shipping agreement.
5. The Client does not have title to sell Legal and Collateral Controller checks up front, Bank holds original Warehouse Receipt, warranty from Client as to his good title, Collateral Controller ensures the process and that containers and warehouses are clearly demarcated.
6. Commodity encumbered Bank ensures that storage/shipping costs are paid, Bank owns the commodity, Collateral Controller used for storage control, waiver signed to prevent commodity being used to settle other existing debts.
7. Price risk (market forces of supply and demand) Bank owns the commodity through all phases of the supply chain under finance (documentation to prove this in Bank's name), discount calculation includes a buffer, finance provided on a percentage of the import/export parity price, trigger level set conservatively, market price monitored daily, local price received from the Collateral Controller weekly, commodity limits per country to avoid being the market.
8. Price risk (change in interest rates, etc.) Interest rates linked to base rate in the discount model calculation,
9. Client unable to sell commodity Limits on the commodity per country, Put Options used as a hedge, checks on Put Option quantities.
10. Defined limits are exceeded Limit reports produced and checked before each deal and payout. Authorisation of a deal and each payment is a dual control.
11. KYC not/incorrectly performed Originator uses a KYC checklist, Securities performs a QA (Quality Assurance) check.
12. Documentation not legally binding Contracts drafted by Legal with Contract drafting experience, external legal council used as required, Contracts signed in the presence of witnesses, and originals obtained, Contracts checked by securities for unauthorised alterations and complete signatures.
13. Costs will not be covered by the fixed future price Discount calculation performed to cover all costs, checks on Put Options to ensure that prices conform to the model and relevant tonnage is covered.
14. Operational risk (lack of controls, incorrect process followed, incorrect payments/receipts processed) Segregation of duties, process approvals.
15. Unavailability of staff Diary reminder on the IT system to the entire Middle Office Management team.
16. Insurance cover insufficient Reputable Insurer used, reminders to pay insurance.
17. Delivery risk i.e . Late delivery to Commodity Exchange (delays in commodity shipping along the supply chain) Insurance covers delays due to trans-shipping, trans-shipping avoided due to the quantities financed.
18. Monies not received on time Diary reminder on the IT system regarding receipt dates, penalty interest rate invoiced for late payment.
19. Errors in accounting processes and reporting between the Bank systems Reconciliation of each transaction between the IT system and the applicable system on daily basis, monthly statements from Treasury (in-country) and / or monthly statements from finance, Income signed off by division head.

ACE GLOBAL RISK MATRIX

Risk Likely Cause Preventative action Marine Insurance
1. Grade/Quality inferior 1. Misrepresentation
2. Incorrect assessment
3. Excessive mixing with lower grades
4. Inadequate handling procedures
5. Weighbridge not calibrated accurately
6. Difference in lab analysis standards
1. Inspection by ACE GLOBAL
2. Analysis by independent laboratory approved by ACE GLOBAL
3. Calibration of equipment by by Local Authorized Company on behalf of ACE GLOBAL
4. International standards used for analysis
5. Certificate of weight and Analysis issued by ACE GLOBAL
6. Specify quality standards on certificate
1. Misrepresentation is excluded by the policy
2. excessive mixing is assimilated to contamination
2. Moisture 1. Inspected incorrectly
2. Measured incorrectly
3. Exposure to elements prior to loading
4. Climatic conditions
5. Inferior Storage construction
1. Storage Agreement defines responsibility
2. Insurance Cover
3. Certificate of Analysis issued by Collateral Controller
4. No goods with moisture > pre agreed rate accepted
5. ACE GLOBAL Engineers issue Inspection Report on the Storage Location
1. cargo marine policy extended to staay/storage
2. All Risks cover ( french and/or English and/or Belgium General conditions extended to specific risks depending on the nature of goods
3. Condensation clause whtsover the cause
3. Insect infestation 1. Misrepresentation
2. Incorrect inspection
3. Infiltration
4. Inferior Storage construction
5. cross contamination
6. Proximity of infested lots
1. Storage Agreement defines responsibility
2. Insurance Cover
3. Inspection by ACE GLOBAL on weekly basis
4. ACE GLOBAL Technical Support Services Manager issue Inspection Report on the Storage Location
5. Fumigation on recommendation from ACE GLOBAL
6. Refuse dangerous proximity
1. Wilful misconduct or gross negligence of the assured emplyees for the misrepresentation except for the board
2. Infiltration : covered
3. Pre-inspection done by the underwrters surveyor
4. Cross contamination is coverd whatever the cause
5. covered sunject to due diligence but the bank is paid
4. Defective title/counterfeit title documents/ Borrowers reputation 1. Fraud by Supplier/Storer
2. Commodity stolen
3. Dispute over ownership of commodity
1. Bank holds original documents of title
2. Storage agreements with storers
3. Supplier warrants full title
4. Supplier is also storer in majority of cases
5. Country Manager through KYCC will determine the Crediblity of the borrower
1. Fraud covered by misappropriation clause and /or PI policy
2. covered wherever the goods are : TC , Storage , Vessel etc,,,
5. weight shortage 1. Inadequate equipment
2. fraud/storer deviating goods
3. weightscale not calibrated
4. Silo scales not calibrated
5. Bad handling favoring spillage
1. Updated calibration certificate
2. ACE GLOBAL will check for possible by-passes
3. ACE GLOBAL will request regular test weighing
4. Weighing under surveillance of ACE GLOBAL
5. ACE GLOBAL to issue protest letter
2. Covered
5. Covered
6. heating & self combustion 1. Defective lightning on board vessel holds
2. too high moisture
3. fresh goods
4. poor ventilation
5. lack of follow up
1. check on vessel electic devices
2. moisture testing on arrival
3. regular temperature testing
4. proper and adequate ventilation
5. Country Manager regular monitoring
6. Storage Location sites to be inspected and approved by ACE GLOBAL
7. Insurance cover
heating , sweating , condensation and spontanneous combustion covered whatsoever the cause
All the number 6 events are covered
7. damage to the goods 1. malicious
2. Force majeur
3. leakage/water infiltration
4. bad storage conditions
1. permanent presence of ACE GLOBAL
2. proper inspection of warehouse
3. Insurance cover
1. All the events ( point 7 ) are covered except the bad storage unless agreed by underwriters for the warehouse inspection
Risk Likely Cause Preventative action Marine Insurance
1. Loss of commodity 1. Lack of controls
2. Incompetent personnel
3. Collusion between Collateral Manager & Storer
4. Force Majeure
5. Weight recording incorrect
6. Stored too long - commodity spoiled
1. ACE GLOBAL independent controls verification
2. The Lender Insurance cover
3. ACE GLOBAL quantity & quality certificates retained as proof of value and exsistance
4. Storage period limited to 12 months
 
2. Damage to Commodity 1. Storage facilities sub standard
2. Manpower requirements inadequate
3. Theft or Misappropriation
4. Force Majeure
5. Spontaneous Combustion
1. ACE GLOBAL Engineers Report
2. Storage agreement defines responsibility
3. Insurance cover
4. ACE GLOBAL regular inspections
1. 3 , 4 are covered and number 6 could be covered subject to underwrters agreement and when the normal cycle of life is not concerned
3. Stored commodity infected/contaminated with disease - Bank sells to end user with subsequent claim for damages 1. Insect infestation
2. Fungi contamination
3. mould
4. Proximity of infested lots
1. Bank has taken out insurance (Public Liability )
2. Country Manager regular inspections
3. Refuse proximity / Proper separations
1. 3,4,5 covered
4.warehouse not covered by insurance 1. warehouse insurance not properly checked
2. premium not paid
3. insured value to low
4. Deductible to high
1. proper check of proper cargo all risks and misappropriation insurance Policy
2. Confirmation from underwriter that premium has bee paid
 
Risk Likely Cause Preventative action Marine Insurance
1. Non performance to maintain and store the commodity 1. Financial failure
2. Storage facilities sub-standard
3. Manpower not qualified to manage storage
4. Changes in statutory limitations
5. Force majeure
1. ACE GLOBAL leases or subleases Storage/warehouse
2. ACE GLOBAL Engineers issue Inspection Report on the Storage Location
3. ACE GLOBAL employs competent personnel
4. Bank are owners of commodity
5. Full commodity insurance cover with the Bank as first loss payee
6. Protection measures when feasible
1. 1 2 3 and 4 covered ( see above )
Risk Likely Cause Preventative action Marine Insurance
1. Non-performance of payment 1. Client unable to pay / insolvency
2. Economic downturn
3. Cash flow difficulties/financial distress
4. Cheque not cleared
1. Credit approval on off-taker, annual credit review
2. Commodity held at discount to market value for Intrinsic Value
3. The Bank owns commodities
4. Non Bank accepted clients must first either present bank guaranteed cheques or payment to be cleared
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Drop in price of commodity 1. Oversupply
2. Economic Downturn
1. Back to Back Sale and Purchase agreement.
2. Hedge purchase price or use appropriate discounting model
3. Use appropriate discounting model, institute triger price levels
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Incorrect calculation of cost by client
2. Incorrect calculation of purchase price by Bank
1. Inability of client to calculate and include all costs accurately
2 .Discount model flawed
1. Bank to review all orders and calculations
2. Generic Discounting Model - Any variations to be approved by Bank line management
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Unacceptable return on Capital
2. Changing interest rates
1. Interest rate change
2. Change in statutory requirements
3. Funding a short term advance with long-term funds
1. Rate linked to Prime
2. Funding to be determined by management on a case by case basis
3. Attempt to lock in rate with a short term instrument
4. Generic Discounting Model - 3% hedge
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Fraud / Misappropriation
2. Inadequate controls
3. Statutory
4. Documentation
5. Administration
6. Information Technology
1. Inadequate internal controls
2. Breakdown in basic controls
3. Changes to Act and Regulations
4. Documentation not legally binding
5. Administrative burden too big for administrative department
6. Admin system incompatible
1. Segregation of duties
2. Audit functions (Internal & External)
3. Approve documents through Bank Specialized Finance Legal department
4. Review admin procedures
5. Increase capacity to handle workload
6. Structured Trade & Commodity Finance system designed to mitigate associated risks
1. Only misappropriation/fraud are covered
Risk Likely Cause Preventative action Marine Insurance
1. Funding provided without adequate insurance on Bank owned commodity
2. Insurance Co unable to meet its obligations
3. Low class company
1. Insurance inadequate
2. Insurance not in place
3. Insurer over extended
4. wrong value insured
5. too high deductible
6. Insurance Company Not reliable
1. Recognised insurance company to be used
2. Bank to monitor insurance premiums
3. Other Insurance Companies to be approved by Bank
4. dedicated person to follow market
5. dedicated person to review insurance
1. Broker or client liability
2. client liability
3. Can be covered as an omission
4. Broker and/or client liability
Risk Likely Cause Preventative action Marine Insurance
1. Not a Tax Based Transaction      
Risk Likely Cause Preventative action Marine Insurance
1. Goods are rejected or condemned by Authorities due to absence of import/ export permits
2. Fake import/ export permits
3. 4Import/ export permit not valid on day of import/ export
4. Delay in delivery
1. Bank is not registered as a valid importer/ exporter
2. Bank does not possess a valid import/ export permit for the goods to be imported/ exported
3. Bank is not aware of special import/ export permit for a specific product
4. Bank is not allowed to be an importer/ exporter
1. Special Import/ Export Permits will be obtained if necessary.
2. Bank will consult with the client, the supplier, the FF, the insurer and the nominated collateral controller before entering into a transaction
1. NOT COVERED AT ALL
Risk Likely Cause Preventative action Marine Insurance
1. Bank suffers a loss as a result of financial default of the shipping line, or any other sub-contractor 1. The goods are claimed by creditors or liquidation due to financial default of the shipping line or sub-contractor 1. Bank shall be covered for any loss as a result of the impoundment of the goods or destruction of the goods as a result of insolvency or financial default of the shipping line. However, it has been agreed in the insurance policy that it shall not cover any loss due to insolvency or financial default of the shipping line, if the insured was aware of the situation prior to the transaction. 1. THE UNSOLVENCY OF THE CARRIER DURING THE TRANSIT IS COVERED
Risk Likely Cause Preventative action Marine Insurance
1. Bank suffers a loss as a result of damage of goods in transit 1. Negligence or intentional action(s) by the Carrier or one of his contractors Force Majeur
    1. 1. It is the obligation of the Carrier, in terms of the Carriage Agreement, to ensure that all reasonable steps are taken to prevent damage to the goods whilst the goods are under their control. Carrier must give notification of any damage to the goods to Bank upon discovery of such damage. Bank will then advise the insurers.
    1. 2. Loss or damage to the goods which may be presumed to have occurred during transit which is only discovered when the goods are unpacked, is recoverable under the policy provided that :
      i) the immediate packaging of the goods are examined externally when it becomes available for inspection (for example, after unstuffing of containers) and is then outwardly sound;
      ii) the packages have not been moved from the place from which cover seized, in other words, the goods have not been moved from the warehouse to the premises of the Forward Sale Purchaser;
1. FULLY COVERED
Risk Likely Cause Preventative action Marine Insurance
1. The goods are damaged after the insurance policy seized or prior to commencement of the policy 1. The timing of the loss is just before or after the cover of insurance policy 1. The policy has been negotiated that the cover commences at the same moment at the transfer of ownership/security to Bank and the cover seizes when Bank transfers ownership to the Forward Sale Purchaser or client. The financing period and the insurance period shall always match. 1. Not Covered
Import Finance

Import Finance is an extension of the Stock Financing Product, which caters for the shipping and transport legs involved in an export or import trade. As such, Import Finance caters for the financing of a Client which sources a commodity from various suppliers internationally, transports and pools this in a storage location and from there, distributes to their off takers. Another aspect of the import finance typically involves processing, where the Client purchases the goods on behalf of the Bank and processes the same into finished goods which are then sold.

The solution is based upon the delivery of a commodity to a defined offtaker at a defined price according to a Forward Sale Agreement. Since the commodity is sourced offshore, freight forwarding agreements, duties etc. are taken into account in the discounted commodity price. Freight & carriage insurance applies.

This structured product takes a view on the commodity as security, and is not a credit-based product. The credit view is taken on the offtaker.

Since Import Finance is usually based for Developing countries, on hard currency- based purchases against local currency- denominated sales, the FX risk management is highly sensitive and decisive in the performance risk assessment process. The (market) price risk management is another tremendous challenge, not always taken into consideration, when entering into a transaction. Both the price and FX risks management must impact the size, the scale and the scope of the required Security Margin, hence the level of Deposit. A very profitable business may result in bankruptcy because of a poor handling of those parameters.



BANK RISK MATRIX

No Risk Mitigation
1. The commodity is of an inferior grade Collateral Controller hired to ensure the commodity grade (lab testing conducted, etc.), approve storage facilities. Scope of services up front ensures control by the Collateral Controller. Original Warehouse Receipt/Load Survey report is the security.
2. The commodity is lost/stolen/damaged in storage Collateral Control Agreement, all risks and misappropriation insurance for commodity storage, finance limited to short term period (max 12 months).
3. Collateral Management process failure Annual audit on the Collateral Controller
4. The commodity is lost/stolen/damaged in transit Insurance approved Transporters/shipping line used, Collateral Controller utilised, Open Marine (Carriage) insurance policy, recourse to the Transporter for loss, mismanagement, etc. through the carriage/shipping agreement.
5. The Client does not have title to sell Legal and Collateral Controller checks up front, Bank holds original Warehouse Receipt, warranty from Client as to his good title, Collateral Controller ensures the process and that containers and warehouses are clearly demarcated.
6. Commodity encumbered Bank ensures that storage/shipping costs are paid, Bank owns the commodity, Collateral Controller used for storage control, waiver signed to prevent commodity being used to settle other existing debts.
7. Price risk (market forces of supply and demand) Bank owns the commodity through all phases of the supply chain under finance (documentation to prove this in Bank’s name), discount calculation includes a buffer, finance provided on a percentage of the import/export parity price, trigger level set conservatively, market price monitored daily, local price received from the Collateral Controller weekly, commodity limits per country to avoid being the market.
8. Price risk (Client can not buy back) Bank owns the commodity at a discounted price which caters for import/export costs, LC guarantee provided by the Offtaker for payment on good delivery, LC verified by Trade.
9. Price risk (change in interest rates, etc.) Interest rates linked to base rate in the discount model calculation,
10. Client unable to sell commodity Limits on the commodity per country, Put Options used as a hedge, checks on Put Option quantities.
11. Defined limits are exceeded Limit reports produced and checked before each deal and payout. Authorisation of a deal and each payment is a dual control.
12. KYC not/incorrectly performed Originator uses a KYC checklist, Securities performs a QA (Quality Assurance) check.
13. Documentation not legally binding Contracts drafted by Legal with Contract drafting experience, external legal council used as required, Contracts signed in the presence of witnesses, and originals obtained, Contracts checked by securities for unauthorised alterations and complete signatures.
14. Costs will not be covered by the fixed future price Discount calculation performed to cover all costs, checks on Put Options to ensure that prices conform to the model and relevant tonnage is covered.
15. Operational risk (lack of controls, incorrect process followed, incorrect payments/receipts processed) Segregation of duties, process approvals.
16. Unavailability of staff Diary reminder on the IT system to the entire Middle Office Management team.
17. Insurance cover insufficient Reputable Insurer used, reminders to pay insurance.
18. Delivery risk (delays in commodity shipping along the supply chain) Insurance covers delays due to trans-shipping, trans-shipping avoided due to the quantities financed.
19. Monies not received on time Diary reminder on the IT system regarding receipt dates, penalty interest rate invoiced for late payment.

20.

Errors in accounting processes and reporting between the Bank systems Reconciliation of each transaction between the IT system and the applicable system on daily basis, monthly statements from Treasury (in-country) and / or monthly statements from finance, Income signed off by division head.

ACE GLOBAL RISK MATRIX

Risk Likely Cause Preventative action Marine Insurance
1. Grade/Quality inferior 1. Misrepresentation
2. Incorrect assessment
3. Excessive mixing with lower grades
4. Inadequate handling procedures
5. Weighbridge not calibrated accurately
6. Difference in lab analysis standards
1. Inspection by ACE GLOBAL
2. Analysis by independent laboratory approved by ACE GLOBAL
3. Calibration of equipment by by Local Authorized Company on behalf of ACE GLOBAL
4. International standards used for analysis
5. Certificate of weight and Analysis issued by ACE GLOBAL
6. Specify quality standards on certificate
1. Misrepresentation is excluded by the policy
2. excessive mixing is assimilated to contamination
2. Moisture 1. Inspected incorrectly
2. Measured incorrectly
3. Exposure to elements prior to loading
4. Climatic conditions
5. Inferior Storage construction
1. Storage Agreement defines responsibility
2. Insurance Cover
3. Certificate of Analysis issued by Collateral Controller
4. No goods with moisture > pre agreed rate accepted
5. ACE GLOBAL Engineers issue Inspection Report on the Storage 6. Location
1. cargo marine policy extended to staay/storage
2. All Risks cover ( french and/or English and/or Belgium General conditions extended to specific risks depending on the nature of goods
3. Condensation clause whtsover the cause
3. Insect infestation 1. Misrepresentation
2. Incorrect inspection
3. Infiltration
4. Inferior Storage construction
5. cross contamination
6. Proximity of infested lots
1. Storage Agreement defines responsibility
2. Insurance Cover
3. Inspection by ACE GLOBAL on weekly basis
4. ACE GLOBAL Technical Support Services Manager issue Inspection Report on the Storage Location
5. Fumigation on recommendation from ACE GLOBAL
6. Refuse dangerous proximity
1. Wilful misconduct or gross negligence of the assured emplyees for the misrepresentation except for the board
2. Infiltration : covered
3. Pre-inspection done by the underwrters surveyor
4. Cross contamination is coverd whatever the cause
5. covered sunject to due diligence but the bank is paid
4. Defective title/counterfeit title documents/ Borrowers reputation 1. Fraud by Supplier/Storer
2. Commodity stolen
3. Dispute over ownership of commodity
1. Bank holds original documents of title
2. Storage agreements with storers
3. Supplier warrants full title
4. Supplier is also storer in majority of cases
5. Country Manager through KYCC will determine the Crediblity of the borrower
1. Fraud covered by misappropriation clause and /or PI policy
2. covered wherever the goods are : TC , Storage , Vessel etc,,,
5. weight shortage 1. Inadequate equipment
2. fraud/storer deviating goods
3. weightscale not calibrated
4. Silo scales not calibrated
5. Bad handling favoring spillage
1. Updated calibration certificate
2. ACE GLOBAL will check for possible by-passes
3. ACE GLOBAL will request regular test weighing
4. Weighing under surveillance of ACE GLOBAL
5. ACE GLOBAL to issue protest letter
2. Covered
5. Covered
6. heating & self combustion 1. Defective lightning on board vessel holds
2. too high moisture
3. fresh goods
4. poor ventilation
5. lack of follow up
1. check on vessel electic devices
2. moisture testing on arrival
3. regular temperature testing
4. proper and adequate ventilation
5. Country Manager regular monitoring
6. Storage Location sites to be inspected and approved by ACE GLOBAL
7. Insurance cover
heating , sweating , condensation and spontanneous combustion covered whatsoever the cause
All the number 6 events are covered
7. damage to the goods 1. malicious
2. Force majeur
3. leakage/water infiltration
4. bad storage conditions
1. permanent presence of ACE GLOBAL
2. proper inspection of warehouse
3. Insurance cover
1. All the events ( point 7 ) are covered except the bad storage unless agreed by underwriters for the warehouse inspection
Risk Likely Cause Preventative action Marine Insurance
1. Loss of commodity 1. Lack of controls
2. Incompetent personnel
3. Collusion between Collateral Manager & Storer
4. Force Majeure
5. Weight recording incorrect
6. Stored too long - commodity spoiled
1. ACE GLOBAL independent controls verification
2. The Lender Insurance cover
3. ACE GLOBAL quantity & quality certificates retained as proof of value and exsistance
4. Storage period limited to 12 months
 
2. Damage to Commodity 1. Storage facilities sub standard
2. Manpower requirements inadequate
3. Theft or Misappropriation
4. Force Majeure
5. Spontaneous Combustion
1. ACE GLOBAL Engineers Report
2. Storage agreement defines responsibility
3. Insurance cover
4. ACE GLOBAL regular inspections
1. 3 , 4 are covered and number 6 could be covered subject to underwrters agreement and when the normal cycle of life is not concerned
3. Stored commodity infected/contaminated with disease - Bank sells to end user with subsequent claim for damages 1. Insect infestation
2. Fungi contamination
mould
3. Proximity of infested lots
1. Bank has taken out insurance (Public Liability )
2. Country Manager regular inspections
3. Refuse proximity / Proper separations
1. 3,4,5 covered
4.warehouse not covered by insurance 1. warehouse insurance not properly checked
2. premium not paid
3. insured value to low
4. Deductible to high
1. proper check of proper cargo all risks and misappropriation insurance Policy
2. Confirmation from underwriter that premium has bee paid
 
Risk Likely Cause Preventative action Marine Insurance
1. Non performance to maintain and store the commodity 1. Financial failure
2. Storage facilities sub-standard
3. Manpower not qualified to manage storage
4. Changes in statutory limitations
5. Force majeure
1. ACE GLOBAL leases or subleases Storage/warehouse
2. ACE GLOBAL Engineers issue Inspection Report on the Storage Location
3. ACE GLOBAL employs competent personnel
4. Bank are owners of commodity
5. Full commodity insurance cover with the Bank as first loss payee
6. Protection measures when feasible
1. 1 2 3 and 4 covered ( see above )
Risk Likely Cause Preventative action Marine Insurance
1. Non-performance of payment 1. Client unable to pay / insolvency
2. Economic downturn
3. Cash flow difficulties/financial distress
4. Cheque not cleared
1. Credit approval on off-taker, annual credit review
2. Commodity held at discount to market value for Intrinsic Value
3. The Bank owns commodities
4. Non Bank accepted clients must first either present bank guaranteed cheques or payment to be cleared
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Drop in price of commodity 1. Oversupply
2. Economic Downturn
1. Back to Back Sale and Purchase agreement.
2. Hedge purchase price or use appropriate discounting model
3. Use appropriate discounting model, institute triger price levels
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Incorrect calculation of cost by client
2. Incorrect calculation of purchase price by Bank
1. Inability of client to calculate and include all costs accurately
2 .Discount model flawed
1. Bank to review all orders and calculations
2. Generic Discounting Model - Any variations to be approved by Bank line management
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Unacceptable return on Capital
2. Changing interest rates
1. Interest rate change
2. Change in statutory requirements
3. Funding a short term advance with long-term funds
1. Rate linked to Prime
2. Funding to be determined by management on a case by case basis
3. Attempt to lock in rate with a short term instrument
4. Generic Discounting Model - 3% hedge
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Fraud / Misappropriation
2. Inadequate controls
3. Statutory
4. Documentation
5. Administration
6. Information Technology
1. Inadequate internal controls
2. Breakdown in basic controls
3. Changes to Act and Regulations
4. Documentation not legally binding
5. Administrative burden too big for administrative department
6. Admin system incompatible
1. Segregation of duties
2. Audit functions (Internal & External)
3. Approve documents through Bank Specialized Finance Legal department
4. Review admin procedures
5. Increase capacity to handle workload
6. Structured Trade & Commodity Finance system designed to mitigate associated risks
1. Only misappropriation/fraud are covered
Risk Likely Cause Preventative action Marine Insurance
1. Funding provided without adequate insurance on Bank owned commodity
2. Insurance Co unable to meet its obligations
3. Low class company
1. Insurance inadequate
2. Insurance not in place
3. Insurer over extended
4. wrong value insured
5. too high deductible
6. Insurance Company Not reliable
1. Recognised insurance company to be used
2. Bank to monitor insurance premiums
3. Other Insurance Companies to be approved by Bank
4. dedicated person to follow market
5. dedicated person to review insurance
1. Broker or client liability
2. client liability
3. Can be covered as an omission
4. Broker and/or client liability
Risk Likely Cause Preventative action Marine Insurance
1. Not a Tax Based Transaction      
Risk Likely Cause Preventative action Marine Insurance
1. Goods are rejected or condemned by Authorities due to absence of import/ export permits
2. Fake import/ export permits
3. 4Import/ export permit not valid on day of import/ export
4. Delay in delivery
1. Bank is not registered as a valid importer/ exporter
2. Bank does not possess a valid import/ export permit for the goods to be imported/ exported
3. Bank is not aware of special import/ export permit for a specific product
4. Bank is not allowed to be an importer/ exporter
1. Special Import/ Export Permits will be obtained if necessary.
2. Bank will consult with the client, the supplier, the FF, the insurer and the nominated collateral controller before entering into a transaction
1. NOT COVERED AT ALL
Risk Likely Cause Preventative action Marine Insurance
1. Bank suffers a loss as a result of financial default of the shipping line, or any other sub-contractor 1. The goods are claimed by creditors or liquidation due to financial default of the shipping line or sub-contractor 1. Bank shall be covered for any loss as a result of the impoundment of the goods or destruction of the goods as a result of insolvency or financial default of the shipping line. However, it has been agreed in the insurance policy that it shall not cover any loss due to insolvency or financial default of the shipping line, if the insured was aware of the situation prior to the transaction. 1. THE UNSOLVENCY OF THE CARRIER DURING THE TRANSIT IS COVERED
Risk Likely Cause Preventative action Marine Insurance
1. Bank suffers a loss as a result of damage of goods in transit 1. Negligence or intentional action(s) by the Carrier or one of his contractors Force Majeur 1. It is the obligation of the Carrier, in terms of the Carriage Agreement, to ensure that all reasonable steps are taken to prevent damage to the goods whilst the goods are under their control. Carrier must give notification of any damage to the goods to Bank upon discovery of such damage. Bank will then advise the insurers.
2. Loss or damage to the goods which may be presumed to have occurred during transit which is only discovered when the goods are unpacked, is recoverable under the policy provided that : i) the immediate packaging of the goods are examined externally when it becomes available for inspection (for example, after unstuffing of containers) and is then outwardly sound; ii) the packages have not been moved from the place from which cover seized, in other words, the goods have not been moved from the warehouse to the premises of the Forward Sale Purchaser;
1. FULLY COVERED
Risk Likely Cause Preventative action Marine Insurance
1. The goods are damaged after the insurance policy seized or prior to commencement of the policy 1. The timing of the loss is just before or after the cover of insurance policy 1. The policy has been negotiated that the cover commences at the same moment at the transfer of ownership/security to Bank and the cover seizes when Bank transfers ownership to the Forward Sale Purchaser or client. The financing period and the insurance period shall always match. 1. Not Covered
Import Finance Factory Door

Import Finance is an extension of the Stock Financing product, which caters for the shipping and transport legs involved in an import trade. The Borrower sources the commodity from various domestic suppliers for pooling in a warehouse.

As such, Import Finance (factory door) caters for financing a Borrower who has an existing delivery contract with an Offtaker at a fixed price, through a forward sale agreement.

The product is a structured product with a credit base, with a credit view taken on the Offtaker alone. The commodity being traded is bought by the Bank as security. The bank finances the entire transaction starting from the storage facility to the door of the Offtaker including delivery of physical goods. The Borrower is appointed as the Bank’s logistics officer in terms of the transport and delivery of the stock

Since, the commodity is sourced offshore, freight forwarding agreements, duties etc. are taken into account in the discounted commodity price. Freight & carriage insurance applies.


BANK RISK MATRIX

No Risk Mitigation
1. The commodity is of an inferior grade Collateral Controller hired to ensure the commodity grade (lab testing conducted, etc.), approve storage facilities. Scope of services up front ensures control by the Collateral Controller. Original Warehouse Receipt/Load Survey report is the security.
2. The commodity is lost/stolen/damaged in storage Collateral Control Agreement, all risks and misappropriation insurance for commodity storage, finance limited to short term period (max 12 months).
3. Collateral Management process failure Annual audit on the Collateral Controller
4. The commodity is lost/stolen/damaged in transit Insurance approved Transporters/shipping line used, Collateral Controller utilised, Open Marine (Carriage) insurance policy, recourse to the Transporter for loss, mismanagement, etc. through the carriage/shipping agreement.
5. The Client does not have title to sell Legal and Collateral Controller checks up front, Bank holds original Warehouse Receipt, warranty from Client as to his good title, Collateral Controller ensures the process and that containers and warehouses are clearly demarcated.
6. Commodity encumbered Bank ensures that storage/shipping costs are paid, Bank owns the commodity, Collateral Controller used for storage control, waiver signed to prevent commodity being used to settle other existing debts.
7. Price risk (market forces of supply and demand) Bank owns the commodity through all phases of the supply chain under finance (documentation to prove this in Bank’s name), discount calculation includes a buffer, finance provided on a percentage of the import/export parity price, trigger level set conservatively, market price monitored daily, local price received from the Collateral Controller weekly, commodity limits per country to avoid being the market.
8. Price risk (Client can not buy back) Bank owns the commodity at a discounted price which caters for import/export costs, LC guarantee provided by the Offtaker for payment on good delivery, LC verified by Trade.
9. Price risk (change in interest rates, etc.) Interest rates linked to base rate in the discount model calculation,
10. Client unable to sell commodity Limits on the commodity per country, Put Options used as a hedge, checks on Put Option quantities.
11. Defined limits are exceeded Limit reports produced and checked before each deal and payout. Authorisation of a deal and each payment is a dual control.
12. KYC not/incorrectly performed Originator uses a KYC checklist, Securities performs a QA (Quality Assurance) check.
13. Documentation not legally binding Contracts drafted by Legal with Contract drafting experience, external legal council used as required, Contracts signed in the presence of witnesses, and originals obtained, Contracts checked by securities for unauthorised alterations and complete signatures.
14. Costs will not be covered by the fixed future price Discount calculation performed to cover all costs, checks on Put Options to ensure that prices conform to the model and relevant tonnage is covered.
15. Operational risk (lack of controls, incorrect process followed, incorrect payments/receipts processed) Segregation of duties, process approvals.
16. Unavailability of staff Diary reminder on the IT system to the entire Middle Office Management team.
17. Insurance cover insufficient Reputable Insurer used, reminders to pay insurance.
18. Delivery risk (delays in commodity shipping along the supply chain) Insurance covers delays due to trans-shipping, trans-shipping avoided due to the quantities financed.
19. Monies not received on time Diary reminder on the IT system regarding receipt dates, penalty interest rate invoiced for late payment.

20.

Errors in accounting processes and reporting between the Bank systems Reconciliation of each transaction between the IT system and the applicable system on daily basis, monthly statements from Treasury (in-country) and / or monthly statements from finance, Income signed off by division head.

ACE GLOBAL RISK MATRIX

Risk Likely Cause Preventative action Marine Insurance
1. Grade/Quality inferior 1. Misrepresentation
2. Incorrect assessment
3. Excessive mixing with lower grades
4. Inadequate handling procedures
5. Weighbridge not calibrated accurately
6. Difference in lab analysis standards
1. Inspection by ACE GLOBAL
2. Analysis by independent laboratory approved by ACE GLOBAL
3. Calibration of equipment by by Local Authorized Company on behalf of ACE GLOBAL
4. International standards used for analysis
5. Certificate of weight and Analysis issued by ACE GLOBAL
6. Specify quality standards on certificate
1. Misrepresentation is excluded by the policy
2. excessive mixing is assimilated to contamination
2. Moisture 1. Inspected incorrectly
2. Measured incorrectly
3. Exposure to elements prior to loading
4. Climatic conditions
5. Inferior Storage construction
1. Storage Agreement defines responsibility
2. Insurance Cover
3. Certificate of Analysis issued by Collateral Controller
4. No goods with moisture > pre agreed rate accepted
5. ACE GLOBAL Engineers issue Inspection Report on the Storage Location
1. cargo marine policy extended to staay/storage
2. All Risks cover ( french and/or English and/or Belgium General conditions extended to specific risks depending on the nature of goods
3. Condensation clause whtsover the cause
3. Insect infestation 1. Misrepresentation
2. Incorrect inspection
3. Infiltration
4. Inferior Storage construction
5. cross contamination
6. Proximity of infested lots
1. Storage Agreement defines responsibility
2. Insurance Cover
3. Inspection by ACE GLOBAL on weekly basis
4. ACE GLOBAL Technical Support Services Manager issue Inspection Report on the Storage Location
5. Fumigation on recommendation from ACE GLOBAL
6. Refuse dangerous proximity
1. Wilful misconduct or gross negligence of the assured emplyees for the misrepresentation except for the board
2. Infiltration : covered
3. Pre-inspection done by the underwrters surveyor
4. Cross contamination is coverd whatever the cause
5. covered sunject to due diligence but the bank is paid
4. Defective title/counterfeit title documents/ Borrowers reputation 1. Fraud by Supplier/Storer
2. Commodity stolen
3. Dispute over ownership of commodity
1. Bank holds original documents of title
2. Storage agreements with storers
3. Supplier warrants full title
4. Supplier is also storer in majority of cases
5. Country Manager through KYCC will determine the Crediblity of the borrower
1. Fraud covered by misappropriation clause and /or PI policy
2. covered wherever the goods are : TC , Storage , Vessel etc,,,
5. weight shortage 1. Inadequate equipment
2. fraud/storer deviating goods
3. weightscale not calibrated
4. Silo scales not calibrated
5. Bad handling favoring spillage
1. Updated calibration certificate
2. ACE GLOBAL will check for possible by-passes
3. ACE GLOBAL will request regular test weighing
4. Weighing under surveillance of ACE GLOBAL
5. ACE GLOBAL to issue protest letter
2. Covered
5. Covered
6. heating & self combustion 1. Defective lightning on board vessel holds
2. too high moisture
3. fresh goods
4. poor ventilation
5. lack of follow up
1. check on vessel electic devices
2. moisture testing on arrival
3. regular temperature testing
4. proper and adequate ventilation
5. Country Manager regular monitoring
6. Storage Location sites to be inspected and approved by ACE GLOBAL
7. Insurance cover
heating , sweating , condensation and spontanneous combustion covered whatsoever the cause
All the number 6 events are covered
7. damage to the goods 1. malicious
2. Force majeur
3. leakage/water infiltration
4. bad storage conditions
1. permanent presence of ACE GLOBAL
2. proper inspection of warehouse
3. Insurance cover
1. All the events ( point 7 ) are covered except the bad storage unless agreed by underwriters for the warehouse inspection
Risk Likely Cause Preventative action Marine Insurance
1. Loss of commodity 1. Lack of controls
2. Incompetent personnel
3. Collusion between Collateral Manager & Storer
4. Force Majeure
5. Weight recording incorrect
6. Stored too long - commodity spoiled
1. ACE GLOBAL independent controls verification
2. The Lender Insurance cover
3. ACE GLOBAL quantity & quality certificates retained as proof of value and exsistance
4. Storage period limited to 12 months
 
2. Damage to Commodity 1. Storage facilities sub standard
2. Manpower requirements inadequate
3. Theft or Misappropriation
4. Force Majeure
5. Spontaneous Combustion
1. ACE GLOBAL Engineers Report
2. Storage agreement defines responsibility
3. Insurance cover
4. ACE GLOBAL regular inspections
1. 3 , 4 are covered and number 6 could be covered subject to underwrters agreement and when the normal cycle of life is not concerned
3. Stored commodity infected/contaminated with disease - Bank sells to end user with subsequent claim for damages 1. Insect infestation
2. Fungi contamination
3. mould
4. Proximity of infested lots
1. Bank has taken out insurance (Public Liability )
2. Country Manager regular inspections
3. Refuse proximity / Proper separations
1. 3,4,5 covered
4.warehouse not covered by insurance 1. warehouse insurance not properly checked
2. premium not paid
3. insured value to low
4. Deductible to high
1. proper check of proper cargo all risks and misappropriation insurance Policy
2. Confirmation from underwriter that premium has bee paid
 
Risk Likely Cause Preventative action Marine Insurance
1. Non performance to maintain and store the commodity 1. Financial failure
2. Storage facilities sub-standard
3. Manpower not qualified to manage storage
4. Changes in statutory limitations
5. Force majeure
1. ACE GLOBAL leases or subleases Storage/warehouse
2. ACE GLOBAL Engineers issue Inspection Report on the Storage Location
3. ACE GLOBAL employs competent personnel
4. Bank are owners of commodity
5. Full commodity insurance cover with the Bank as first loss payee
6. Protection measures when feasible
1. 1 2 3 and 4 covered ( see above )
Risk Likely Cause Preventative action Marine Insurance
1. Non-performance of payment 1. Client unable to pay / insolvency
2. Economic downturn
3. Cash flow difficulties/financial distress
4. Cheque not cleared
1. Credit approval on off-taker, annual credit review
2. Commodity held at discount to market value for Intrinsic Value
3. The Bank owns commodities
4. Non Bank accepted clients must first either present bank guaranteed cheques or payment to be cleared
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Drop in price of commodity 1. Oversupply
2. Economic Downturn
1. Back to Back Sale and Purchase agreement.
2. Hedge purchase price or use appropriate discounting model
3. Use appropriate discounting model, institute triger price levels
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Incorrect calculation of cost by client
2. Incorrect calculation of purchase price by Bank
1. Inability of client to calculate and include all costs accurately
2 .Discount model flawed
1. Bank to review all orders and calculations
2. Generic Discounting Model - Any variations to be approved by Bank line management
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Unacceptable return on Capital
2. Changing interest rates
1. Interest rate change
2. Change in statutory requirements
3. Funding a short term advance with long-term funds
1. Rate linked to Prime
2. Funding to be determined by management on a case by case basis
3. Attempt to lock in rate with a short term instrument
4. Generic Discounting Model - 3% hedge
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Fraud / Misappropriation
2. Inadequate controls
3. Statutory
4. Documentation
5. Administration
6. Information Technology
1. Inadequate internal controls
2. Breakdown in basic controls
3. Changes to Act and Regulations
4. Documentation not legally binding
5. Administrative burden too big for administrative department
6. Admin system incompatible
1. Segregation of duties
2. Audit functions (Internal & External)
3. Approve documents through Bank Specialized Finance Legal department
4. Review admin procedures
5. Increase capacity to handle workload
6. Structured Trade & Commodity Finance system designed to mitigate associated risks
1. Only misappropriation/fraud are covered
Risk Likely Cause Preventative action Marine Insurance
1. Funding provided without adequate insurance on Bank owned commodity
2. Insurance Co unable to meet its obligations
3. Low class company
1. Insurance inadequate
2. Insurance not in place
3. Insurer over extended
4. wrong value insured
5. too high deductible
6. Insurance Company Not reliable
1. Recognised insurance company to be used
2. Bank to monitor insurance premiums
3. Other Insurance Companies to be approved by Bank
4. dedicated person to follow market
5. dedicated person to review insurance
1. Broker or client liability
2. client liability
3. Can be covered as an omission
4. Broker and/or client liability
Risk Likely Cause Preventative action Marine Insurance
1. Not a Tax Based Transaction      
Risk Likely Cause Preventative action Marine Insurance
1. Goods are rejected or condemned by Authorities due to absence of import/ export permits
2. Fake import/ export permits
3. 4Import/ export permit not valid on day of import/ export
4. Delay in delivery
1. Bank is not registered as a valid importer/ exporter
2. Bank does not possess a valid import/ export permit for the goods to be imported/ exported
3. Bank is not aware of special import/ export permit for a specific product
4. Bank is not allowed to be an importer/ exporter
1. Special Import/ Export Permits will be obtained if necessary.
2. Bank will consult with the client, the supplier, the FF, the insurer and the nominated collateral controller before entering into a transaction
1. NOT COVERED AT ALL
Risk Likely Cause Preventative action Marine Insurance
1. Bank suffers a loss as a result of financial default of the shipping line, or any other sub-contractor 1. The goods are claimed by creditors or liquidation due to financial default of the shipping line or sub-contractor 1. Bank shall be covered for any loss as a result of the impoundment of the goods or destruction of the goods as a result of insolvency or financial default of the shipping line. However, it has been agreed in the insurance policy that it shall not cover any loss due to insolvency or financial default of the shipping line, if the insured was aware of the situation prior to the transaction. 1. THE UNSOLVENCY OF THE CARRIER DURING THE TRANSIT IS COVERED
Risk Likely Cause Preventative action Marine Insurance
1. Bank suffers a loss as a result of damage of goods in transit 1. Negligence or intentional action(s) by the Carrier or one of his contractors Force Majeur
    1. 1. It is the obligation of the Carrier, in terms of the Carriage Agreement, to ensure that all reasonable steps are taken to prevent damage to the goods whilst the goods are under their control. Carrier must give notification of any damage to the goods to Bank upon discovery of such damage. Bank will then advise the insurers.
    1. 2. Loss or damage to the goods which may be presumed to have occurred during transit which is only discovered when the goods are unpacked, is recoverable under the policy provided that :
      i) the immediate packaging of the goods are examined externally when it becomes available for inspection (for example, after unstuffing of containers) and is then outwardly sound;
      ii) the packages have not been moved from the place from which cover seized, in other words, the goods have not been moved from the warehouse to the premises of the Forward Sale Purchaser;
1. FULLY COVERED
Risk Likely Cause Preventative action Marine Insurance
1. The goods are damaged after the insurance policy seized or prior to commencement of the policy 1. The timing of the loss is just before or after the cover of insurance policy 1. The policy has been negotiated that the cover commences at the same moment at the transfer of ownership/security to Bank and the cover seizes when Bank transfers ownership to the Forward Sale Purchaser or client. The financing period and the insurance period shall always match. 1. Not Covered
Import Finance Commodity Exchange

Import Finance caters for the financing of a Client which sources a commodity from various suppliers internationally, transports and pools this in a storage location, processes it into finished goods and from there, distributes to their off takers.

The solution is based upon delivery of a ‘pre-sold’ commodity to a defined off-taker. The Commodity Exchange version of Import finance uses the Commodity Exchange i.e. SAFEX or LIFE or any other exchange as the Offtaker, by buying a Selling Position (Short) to fix the price.

The Client/Borrower may decide to buy and sell on the approved COMEX i.e. SAFEX or LIFE or any other exchange under this product. If that is the case, the Buying Positions (Long) and Selling Positions (Short) need to be matched so that the price is fully hedged.


BANK RISK MATRIX

No Risk Mitigation
1. The commodity is of an inferior grade Collateral Controller hired to ensure the commodity grade (lab testing conducted, etc.), approve storage facilities. Scope of services up front ensures control by the Collateral Controller. Original Warehouse Receipt/Load Survey report is the security.
2. The commodity is lost/stolen/damaged in storage Collateral Control Agreement, all risks and misappropriation insurance for commodity storage, finance limited to short term period (max 12 months).
3. Collateral Management process failure Annual audit on the Collateral Controller
4. The commodity is lost/stolen/damaged in transit Insurance approved Transporters/shipping line used, Collateral Controller utilised, Open Marine (Carriage) insurance policy, recourse to the Transporter for loss, mismanagement, etc. through the carriage/shipping agreement.
5. The Client does not have title to sell Legal and Collateral Controller checks up front, Bank holds original Warehouse Receipt, warranty from Client as to his good title, Collateral Controller ensures the process and that containers and warehouses are clearly demarcated.
6. Commodity encumbered Bank ensures that storage/shipping costs are paid, Bank owns the commodity, Collateral Controller used for storage control, waiver signed to prevent commodity being used to settle other existing debts.
7. Price risk (market forces of supply and demand) Bank owns the commodity through all phases of the supply chain under finance (documentation to prove this in Bank’s name), discount calculation includes a buffer, finance provided on a percentage of the import/export parity price, trigger level set conservatively, market price monitored daily, local price received from the Collateral Controller weekly, commodity limits per country to avoid being the market.
8. Price risk (change in interest rates, etc.) Interest rates linked to base rate in the discount model calculation,
9. Client unable to sell commodity Limits on the commodity per country, Put Options used as a hedge, checks on Put Option quantities.
10. Defined limits are exceeded Limit reports produced and checked before each deal and payout. Authorisation of a deal and each payment is a dual control.
11. KYC not/incorrectly performed Originator uses a KYC checklist, Securities performs a QA (Quality Assurance) check.
12. Documentation not legally binding Contracts drafted by Legal with Contract drafting experience, external legal council used as required, Contracts signed in the presence of witnesses, and originals obtained, Contracts checked by securities for unauthorised alterations and complete signatures.
13. Costs will not be covered by the fixed future price Discount calculation performed to cover all costs, checks on Put Options to ensure that prices conform to the model and relevant tonnage is covered.
14. Operational risk (lack of controls, incorrect process followed, incorrect payments/receipts processed) Segregation of duties, process approvals.
15. Unavailability of staff Diary reminder on the IT system to the entire Middle Office Management team.
16. Insurance cover insufficient Reputable Insurer used, reminders to pay insurance.
17. Delivery risk (delays in commodity shipping along the supply chain) Insurance covers delays due to trans-shipping, trans-shipping avoided due to the quantities financed.
18. Monies not received on time Diary reminder on the IT system regarding receipt dates, penalty interest rate invoiced for late payment.

19.

Errors in accounting processes and reporting between the Bank systems Reconciliation of each transaction between the IT system and the applicable system on daily basis, monthly statements from Treasury (in-country) and / or monthly statements from finance, Income signed off by division head.

ACE GLOBAL RISK MATRIX

Risk Likely Cause Preventative action Marine Insurance
1. Grade/Quality inferior 1. Misrepresentation
2. Incorrect assessment
3. Excessive mixing with lower grades
4. Inadequate handling procedures
5. Weighbridge not calibrated accurately
6. Difference in lab analysis standards
1. Inspection by ACE GLOBAL
2. Analysis by independent laboratory approved by ACE GLOBAL
3. Calibration of equipment by by Local Authorized Company on behalf of ACE GLOBAL
4. International standards used for analysis
5. Certificate of weight and Analysis issued by ACE GLOBAL
6. Specify quality standards on certificate
1. Misrepresentation is excluded by the policy
2. excessive mixing is assimilated to contamination
2. Moisture 1. Inspected incorrectly
2. Measured incorrectly
3. Exposure to elements prior to loading
4. Climatic conditions
5. Inferior Storage construction
1. Storage Agreement defines responsibility
2. Insurance Cover
3. Certificate of Analysis issued by Collateral Controller
4. No goods with moisture > pre agreed rate accepted
5. ACE GLOBAL Engineers issue Inspection Report on the Storage Location
1. cargo marine policy extended to staay/storage
2. All Risks cover ( french and/or English and/or Belgium General conditions extended to specific risks depending on the nature of goods
3. Condensation clause whtsover the cause
3. Insect infestation 1. Misrepresentation
2. Incorrect inspection
3. Infiltration
4. Inferior Storage construction
5. cross contamination
6. Proximity of infested lots
1. Storage Agreement defines responsibility
2. Insurance Cover
3. Inspection by ACE GLOBAL on weekly basis
4. ACE GLOBAL Technical Support Services Manager issue Inspection Report on the Storage Location
5. Fumigation on recommendation from ACE GLOBAL
6. Refuse dangerous proximity
1. Wilful misconduct or gross negligence of the assured emplyees for the misrepresentation except for the board
2. Infiltration : covered
3. Pre-inspection done by the underwrters surveyor
4. Cross contamination is coverd whatever the cause
5. covered sunject to due diligence but the bank is paid
4. Defective title/counterfeit title documents/ Borrowers reputation 1. Fraud by Supplier/Storer
2. Commodity stolen
3. Dispute over ownership of commodity
1. Bank holds original documents of title
2. Storage agreements with storers
3. Supplier warrants full title
4. Supplier is also storer in majority of cases
5. Country Manager through KYCC will determine the Crediblity of the borrower
1. Fraud covered by misappropriation clause and /or PI policy
2. covered wherever the goods are : TC , Storage , Vessel etc,,,
5. weight shortage 1. Inadequate equipment
2. fraud/storer deviating goods
3. weightscale not calibrated
4. Silo scales not calibrated
5. Bad handling favoring spillage
1. Updated calibration certificate
2. ACE GLOBAL will check for possible by-passes
3. ACE GLOBAL will request regular test weighing
4. Weighing under surveillance of ACE GLOBAL
5. ACE GLOBAL to issue protest letter
2. Covered
5. Covered
6. heating & self combustion 1. Defective lightning on board vessel holds
2. too high moisture
3. fresh goods
4. poor ventilation
5. lack of follow up
1. check on vessel electic devices
2. moisture testing on arrival
3. regular temperature testing
4. proper and adequate ventilation
5. Country Manager regular monitoring
6. Storage Location sites to be inspected and approved by ACE GLOBAL
7. Insurance cover
heating , sweating , condensation and spontanneous combustion covered whatsoever the cause
All the number 6 events are covered
7. damage to the goods 1. malicious
2. Force majeur
3. leakage/water infiltration
4. bad storage conditions
1. permanent presence of ACE GLOBAL
2. proper inspection of warehouse
3. Insurance cover
1. All the events ( point 7 ) are covered except the bad storage unless agreed by underwriters for the warehouse inspection
Risk Likely Cause Preventative action Marine Insurance
1. Loss of commodity 1. Lack of controls
2. Incompetent personnel
3. Collusion between Collateral Manager & Storer
4. Force Majeure
5. Weight recording incorrect
6. Stored too long - commodity spoiled
1. ACE GLOBAL independent controls verification
2. The Lender Insurance cover
3. ACE GLOBAL quantity & quality certificates retained as proof of value and exsistance
4. Storage period limited to 12 months
 
2. Damage to Commodity 1. Storage facilities sub standard
2. Manpower requirements inadequate
3. Theft or Misappropriation
4. Force Majeure
5. Spontaneous Combustion
1. ACE GLOBAL Engineers Report
2. Storage agreement defines responsibility
3. Insurance cover
4. ACE GLOBAL regular inspections
1. 3 , 4 are covered and number 6 could be covered subject to underwrters agreement and when the normal cycle of life is not concerned
3. Stored commodity infected/contaminated with disease - Bank sells to end user with subsequent claim for damages 1. Insect infestation
2. Fungi contamination
3. mould
4. Proximity of infested lots
1. Bank has taken out insurance (Public Liability )
2. Country Manager regular inspections
3. Refuse proximity / Proper separations
1. 3,4,5 covered
4.warehouse not covered by insurance 1. warehouse insurance not properly checked
2. premium not paid
3. insured value to low
4. Deductible to high
1. proper check of proper cargo all risks and misappropriation insurance Policy
2. Confirmation from underwriter that premium has bee paid
 
Risk Likely Cause Preventative action Marine Insurance
1. Non performance to maintain and store the commodity 1. Financial failure
2. Storage facilities sub-standard
3. Manpower not qualified to manage storage
4. Changes in statutory limitations
5. Force majeure
1. ACE GLOBAL leases or subleases Storage/warehouse
2. ACE GLOBAL Engineers issue Inspection Report on the Storage Location
3. ACE GLOBAL employs competent personnel
4. Bank are owners of commodity
5. Full commodity insurance cover with the Bank as first loss payee
6. Protection measures when feasible
1. 1 2 3 and 4 covered ( see above )
Risk Likely Cause Preventative action Marine Insurance
1. Non-performance of payment 1. Client unable to pay / insolvency
2. Economic downturn
3. Cash flow difficulties/financial distress
4. Cheque not cleared
1. Credit approval on off-taker, annual credit review
2. Commodity held at discount to market value for Intrinsic Value
3. The Bank owns commodities
4. Non Bank accepted clients must first either present bank guaranteed cheques or payment to be cleared
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Drop in price of commodity 1. Oversupply
2. Economic Downturn
1. Back to Back Sale and Purchase agreement.
2. Hedge purchase price or use appropriate discounting model
3. Use appropriate discounting model, institute triger price levels
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Incorrect calculation of cost by client
2. Incorrect calculation of purchase price by Bank
1. Inability of client to calculate and include all costs accurately
2 .Discount model flawed
1. Bank to review all orders and calculations
2. Generic Discounting Model - Any variations to be approved by Bank line management
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Unacceptable return on Capital
2. Changing interest rates
1. Interest rate change
2. Change in statutory requirements
3. Funding a short term advance with long-term funds
1. Rate linked to Prime
2. Funding to be determined by management on a case by case basis
3. Attempt to lock in rate with a short term instrument
4. Generic Discounting Model - 3% hedge
1. All these cases are not covered
Risk Likely Cause Preventative action Marine Insurance
1. Fraud / Misappropriation
2. Inadequate controls
3. Statutory
4. Documentation
5. Administration
6. Information Technology
1. Inadequate internal controls
2. Breakdown in basic controls
3. Changes to Act and Regulations
4. Documentation not legally binding
5. Administrative burden too big for administrative department
6. Admin system incompatible
1. Segregation of duties
2. Audit functions (Internal & External)
3. Approve documents through Bank Specialized Finance Legal department
4. Review admin procedures
5. Increase capacity to handle workload
6. Structured Trade & Commodity Finance system designed to mitigate associated risks
1. Only misappropriation/fraud are covered
Risk Likely Cause Preventative action Marine Insurance
1. Funding provided without adequate insurance on Bank owned commodity
2. Insurance Co unable to meet its obligations
3. Low class company
1. Insurance inadequate
2. Insurance not in place
3. Insurer over extended
4. wrong value insured
5. too high deductible
6. Insurance Company Not reliable
1. Recognised insurance company to be used
2. Bank to monitor insurance premiums
3. Other Insurance Companies to be approved by Bank
4. dedicated person to follow market
5. dedicated person to review insurance
1. Broker or client liability
2. client liability
3. Can be covered as an omission
4. Broker and/or client liability
Risk Likely Cause Preventative action Marine Insurance
1. Not a Tax Based Transaction      
Risk Likely Cause Preventative action Marine Insurance
1. Goods are rejected or condemned by Authorities due to absence of import/ export permits
2. Fake import/ export permits
3. 4Import/ export permit not valid on day of import/ export
4. Delay in delivery
1. Bank is not registered as a valid importer/ exporter
2. Bank does not possess a valid import/ export permit for the goods to be imported/ exported
3. Bank is not aware of special import/ export permit for a specific product
4. Bank is not allowed to be an importer/ exporter
1. Special Import/ Export Permits will be obtained if necessary.
2. Bank will consult with the client, the supplier, the FF, the insurer and the nominated collateral controller before entering into a transaction
1. NOT COVERED AT ALL
Risk Likely Cause Preventative action Marine Insurance
1. Bank suffers a loss as a result of financial default of the shipping line, or any other sub-contractor 1. The goods are claimed by creditors or liquidation due to financial default of the shipping line or sub-contractor 1. Bank shall be covered for any loss as a result of the impoundment of the goods or destruction of the goods as a result of insolvency or financial default of the shipping line. However, it has been agreed in the insurance policy that it shall not cover any loss due to insolvency or financial default of the shipping line, if the insured was aware of the situation prior to the transaction. 1. THE UNSOLVENCY OF THE CARRIER DURING THE TRANSIT IS COVERED
Risk Likely Cause Preventative action Marine Insurance
1. Bank suffers a loss as a result of damage of goods in transit 1. Negligence or intentional action(s) by the Carrier or one of his contractors Force Majeur
    1. 1. It is the obligation of the Carrier, in terms of the Carriage Agreement, to ensure that all reasonable steps are taken to prevent damage to the goods whilst the goods are under their control. Carrier must give notification of any damage to the goods to Bank upon discovery of such damage. Bank will then advise the insurers.
    1. 2. Loss or damage to the goods which may be presumed to have occurred during transit which is only discovered when the goods are unpacked, is recoverable under the policy provided that :
      i) the immediate packaging of the goods are examined externally when it becomes available for inspection (for example, after unstuffing of containers) and is then outwardly sound;
      ii) the packages have not been moved from the place from which cover seized, in other words, the goods have not been moved from the warehouse to the premises of the Forward Sale Purchaser;
1. FULLY COVERED
Risk Likely Cause Preventative action Marine Insurance
1. The goods are damaged after the insurance policy seized or prior to commencement of the policy 1. The timing of the loss is just before or after the cover of insurance policy 1. The policy has been negotiated that the cover commences at the same moment at the transfer of ownership/security to Bank and the cover seizes when Bank transfers ownership to the Forward Sale Purchaser or client. The financing period and the insurance period shall always match. 1. Not Covered
Input Finance

Input Finance facilitates the financing of production inputs (fertilizer, diesel, seed, insecticide etc) and hedge costs for selected agri-producers under a structure allowing for the hands-on and active management by the Bank approved contract administrator. Within this product the selected producers are contracted to grow a specific crop in a specific season on lands leased by the contract administrators. Insolvency risk for the agri producer is therefore mitigated by both the terms of the contract and a multi-peril insurance policy taken out on the crops.

The structure affords the Bank the opportunity to earn increased returns on advances whilst the ultimate credit risk for offtake lies with a Credit Approved Corporate Offtaker through either a fixed price offtake agreement or a min/max forward sale arrangement or a short (selling) position on an approved and recognised futures exchange or a OTC or derivative-based option (Put options only). Funding margins are calculated as if funding is being extended to individual farmers.

The Contract Manager enters into a supply agreement with a Credit approved client or recognised Futures Exchange (on behalf of the Bank) to supply a certain quantity, weight and quality of the commodity at a future date. The price paid per ton for the commodity is stipulated in the agreement and will vary according to the quality delivered. The Contract Manager insures the risks associated with non-production or production below the financed break-even tonnage with a recognized broker/underwriter.


BANK RISK MATRIX

RISK AREAS RISK LIKELY CAUSE PREVENTATIVE ACTION
1. Contract Manager (the BORROWER) Production schedules incorrect Farmer fraud Farmers are elected by peers in the region. Only bona fide farmers who have passed the selection process, third party credit vetting, deed searches and other KYC procedures conducted by the Contract Manager will be included in the scheme.
      Contract Manager has right to veto. Regular farm inspections by Contract Manager (yield estimates, etc.) by the Comprehensive Yield Insurance Company.
  Misappropriation of funds Fraud by the Contract Manager Production Agreement has dual control for disbursement of funds. Distribution of funds to be done based on related Good received Note issued by the Collateral Controller
  Lack of controls Poor management The Contract Manager has been operating for past 5 years on similar projects. The financing is only awarded to Contract Managers whom have a proven track record to effectively administer contracted farmers in adherence to best farming practices.
  Insolvent Bad internal controls and decision making Annual external audit performed. The Bank will have the right to replace the Contract Manager with an alternative Contract Management Company
  Loss of key management Death The Contract Manager is a Proprietary Company with adequate succession planning
    Sickness Multi - Leveled Management Structure
    Walkout/Retirement Contract Area Managers/Group Leaders to complete season
  Cost of production exceeded Incorrectly calculated by the Manager and the bank The Contract Manager to check and sign off on calculation. The Collateral Controller to do a Due Diligence and supervise the delivery of inputs. The payment to be done based on different step: x% based on hectarage contracted as well as crops committed, x% on submission of the Plant & Emergence report, together with physical inspection of all the lands by the comprehensive yield insurance company and spot checks by the Contract Manager, x% based on the Progress Report ant the last payment based on the pre- harvest yield estimate report , the whole process to be done under approval of the Insurer.
      The bank to check calculation
  Management succession Death, sickness, retirement Multi - Leveled Management Structure
    Maladministration The Bank has access to books and records
    Irreconcilable differences The Bank may call for an internal and external audit at any time and issues identified are implemented
      The Bank may request Manager to hand over all accounts and records etc.
  Losses incurred in the transaction due to the Manager Negligence, incompetence, theft of Silo Certificates Management Agreement
      Manager’s fee on sale of Commodity paid directly to the Bank. Bank allowed to deduct losses incurred from proceeds first before the Bank pays the Manager
      The Bank monitors the timeous delivery of crop. Inspection to be done from time to time by an independent and trusted source in the country of finance.
A monthly status report to be obtained from the Contract Manager which will include any adverse conditions expected or encountered.
    Poor Climate Insurance cover (The Bank is first loss payee) from a recognized entity. The insurance company is involved in all the stages of farming (until delivery of the products to storage in exchange certified silos or collaterally managed warehouses) including testing the soil moisture content at the time of planting
    Poor Quality of Seed Covered by Insurance as the quality is co-approved by the insurance company
    Production Risk All variations in quantity / quality covered by insurance policy.
The amount of finance is restricted to a pre- approved rate of the average yield at the value/ton as confirmed by the insurance company. Our maximum exposure will be capped at the level of insurance cover available
    Price Risk Put options and/or future contracts in place to hedge price risk prior to the disbursement. Decline in price because of poor quality of produce is covered by the insurance policy
    Insurance policy lapses due to non-payment of premium or delay in making claims The premium payments will made directly by the Bank.
The farmers have to make the claim within 24 hours. As all upside in the tonnage produced belongs to the farmer, this serves as an incentive to be very prompt in filing the claim. Hail occurrence is also normally spread throughout a region and the Contract Manager will start making enquiries should all farmers in a certain region not lodge claims within the prescribed period
2.FARMER Non performance Bad farming practice.

Only Farmers with proven track record. Only bona fide farmers who have passed the selection process, third party credit vetting, deed searches and other KYC procedures conducted by the Contract Manager will be included in the scheme. Signature of the Contract Farming/ Production Agreement. Option to replace a Farmer by another one. Lease Agreement and/ or Crop Charge to be dully executed.

All the upside (price / quantity) in tonnage harvested over and above the contracted tonnage belongs to the farmer who therefore has incentive to manage the farm properly within the standards agreed with the insurer & Contract Manager Security over the farming land is with the Contract Manager making them the legal owners of the produce. The proceeds on the sale of the produce is pledged to the Bank

  Damage to land Funds misappropriated Substitution Clause in Contract Growing/Production agreement
  Non delivery of the commodity Negligence Bondholder/Landowner/Lessor signs the Lease Agreement waiving its rights to the crop, and warrants that if the land is sold it will be subject to the Lease Agreement
    Theft Indemnity from Contract Manager Company
    Subleasee insolvent  
    Lessor/Landowner sells the land or the lessor/landowner becomes insolvent and the Mortgator/Bondholder forecloses on loan Landowner/Lessor waives its rights to the crop, and warrants that if the land is sold it will be subject to the Lease Agreement
3.CREDIT (OFF-TAKER) Non-payment by offtakers Offtaker unable to pay/insolvent. Due Diligence to be done on the Off Taker. Hedge of the production with an OTC or derivative- based option (Put Option). Credit approval in respect of each offtaker
    Economic downturn Sell credit risk to acceptable foreign/local bank
    Change in Government fiscal policy (local) Annual credit review
    Change in Government fiscal policy (foreign) Sell balance of stock not delivered to open market
    Political instability Sovereign risk assessment by the bank
    Political instability (foreign)  
    Invalid claim against foreign offtaker Sovereign risk assessment by the Bank
    De-valuation of local currency against foreign currency  Legal opinion from foreign based lawyer to ensure claim is valid Funding only in USD
4.Operational (THE BANK The Bank CRC) Fraud/Misappropriation Inadequate internal controls Segregation of duties
  Inadequate controls Breakdown in basic controls Audit functions (internal & external)
  Statutory Changes to Act and Regulations Include clause in Agreements
  Documentation Documentation not legally binding Approve documents through the Legal Department and/or 3rd party panel attorneys
  Administration Administrative burden too heavy for admin department Review admin procedures
  Information technology Accounting IT System incompatible Improve system to handle workload
  Documentary risk Claims not legally enforceable in foreign jurisdiction Contract in terms of appropriate international standard e.g. ICC or UCP
  System failure/collapse Virus infection System protected by latest anti-virus software
    Sabotage Disaster Recovery Plans in place
  System security breach or unauthorized access obtained Hacking Firewall and encryption to prevent unauthorized access to the web server
    Access codes compromised  
5.Statutory Non-compliance with local and international GAAP Structure to be amended Obtain both internal and external audit opinion and require client to do the same
6.Taxation Not a tax based transaction    
7.Pricing/ Margin Unacceptable return on capital Interest rate change (cost of funds) Variable rate plus a margin
    Change in statutory requirements Funding to be determined by management on a monthly basis
8.Insurance Funding provided without adequate insurance Insurance inadequate WB Legal to ensure insurance adequate and enforceable
    Insurance not in place The Bank CRC to monitor insurance premiums
      External insurance providers to be approved by the Bank
9.Commodity (Price Risk) Commodity market price drop below cost Quantity and quality of grain harvested below expectation Supply agreement with offtaker Fixed Price in Put Option Agreement/Futures Contract
    Oversupply of commodity in the market Insurance policy to cover cost per hectare in respect of changes in quality and quantity