Supply chains span multiple geographies today, with companies relying on multi-site production and diverse supply and distribution chains. This presents several advantages as well as challenges. Fragmented supply chains require companies to retain end-to-end transparency and visibility while seamlessly integrating a distributed supplier base. Diversified supply chains demand that companies maintain a balanced relation with their suppliers across geographies. Together, they form a significant trade strategy that requires companies to scale the scope of their working capital programmes beyond regional boundaries.
A diversified supplier base has its production and distribution activities spread across multiple suppliers and regions. It helps companies mitigate risks while retaining the flexibility and resilience that multiple resources afford. With a reduced dependency on any single supply source, enterprises can better adapt to disruptions in their supply chain. Fragmented supply chains, on the other hand, help lower labour costs by breaking down production processes across geos and optimising production through regional advantages. A fragmented and diversified supply chain is particularly relevant in regions with varying levels of development and diverse economic landscapes within the global value chain.
It is in the best interest of companies to ensure that their complex supply chains and geographically dispersed operations have enough funds to meet their commitments. Regional trade finance plays a key role, offering the required funding and risk mitigation instruments that companies need to manage their cross-border transactions smoothly.
Regional Trade Finance and the Global Value Chain
Regional trade finance cements the roles played by companies, their suppliers, and distributors, to support their businesses in international trade and supply. While global value chains bring the economies of the world together through business interdependencies, regional trade finance fuels supply chain resilience and predictability through timely working capital. It provides businesses with the necessary funding to expand their operations and stimulate economic growth.
Regional trade finance helps businesses avert risks, including those arising from currency fluctuations and political instability. Easy access to robust trade finance empowers enterprises to trade beyond borders with confidence, helping them optimise their supply chains. It helps cultivate a more inclusive base of global suppliers, vendors, and business partners into a company’s supply ecosystem. In the case of small and medium enterprises (SMEs), it can help make up for a possible lack of resources, by managing complex international transactions.
Empowering Supply Chain Partners through Regional Trade Finance
Enterprises act as guarantors, striving to secure favourable working capital terms that they extend to their suppliers, distributors, and other business partners through regional trade finance. Integrating regional trade finance into the global value chain allows enterprises to ensure that all partners within their supply chain, regardless of geographical location, can capably participate in the global market.
When suppliers integrate into the global supply chain, they benefit from greater market access, improved financial stability, and the ability to scale their operations globally. Regional trade finance provides them with the working capital to take on larger orders, reduce risk, and focus on their core business activities. With high costs involved in resetting the supply chain across geos – from local tariffs, logistics costs, infrastructure, and supply chain complexity – it is crucial that suppliers have a robust trade finance platform in place to address the financial challenges from such transitions.
As production relocates to newer regions, distributors must ensure that their working capital solution can support these changes. With adaptable capital, distributors can expand their reach, enter new markets in newer geographies, as well as increase their sales. They can negotiate better terms with suppliers and offer competitive prices to customers. Integration into the global value chain empowers distributors with better logistics capabilities, increased supply chain visibility, and the opportunity to leverage global distribution networks.
Regional Trade Finance in Asia and Beyond
Consider Asia’s growth over the past four decades. The region has faced uncertainties, including the financial crisis of 2008-’09. Despite setbacks, Asia has made a significant mark on the global economy. Cross-border trade and regional trade finance opened new opportunities. Suppliers and manufacturers were based in Asia and distributors were based in the Americas, the European Union, and other regions. Interconnected supply and production networks around the globe, with distribution extending across continents, allowed SMEs to expand beyond borders.
Not just in Asia, globalisation and regional trade finance have intensified competition all over the world, leading to the creation of global value chains. Large multinationals and SMEs that are part of these value chains demand flexibility, cost competitiveness, and reduced business risk. Globalisation has led to the emergence of sourcing intermediaries in financial hubs who cultivate SME networks to increase efficiency, avail local skills, and reduce costs.
Challenges in Regional Trade Finance
Integration into global value chains offers enterprises vast opportunities, exposing them to a broader customer base. However, regional trade finance presents challenges that can hinder their integration into the global value chain. Regulatory requirements in different countries, including Environmental, Social, and Governance (ESG) guidelines, require strict adherence even as SMEs struggle with fair access to capital, owing to stringent lending terms. Exchange rate fluctuations can sometimes play spoilsport in the absence of currency stability. With uneven adoption of digital trade finance solutions across regions, streamlining regional trade finance processes can be time-consuming and effort intensive. To ensure efficient and smooth participation in global markets, connected capital solutions are essential to enterprises and their partner ecosystem.
Connected Capital Solutions for Global Value Chains
Connected capital solutions are the backbone of regional trade finance and global value chains. They ensure seamless access to cross-border funding, along with liquidity and stability. A connected working capital platform can help enterprises manage cash flows, reduce transaction costs, and mitigate financial risks, keeping the continuity of the supply chains intact.
TASConnect offers a connected capital solution that optimises working capital management by boosting scalability, visibility, and cross-border connectivity. We develop integrated platforms for an enterprise’s business network – including suppliers, distributors, and financial institutions – by digitally connecting treasury organisations with their global value chains. Our platform enables enterprises to expand their operations, engage with cross-border suppliers and buyers, access more working capital financing programmes, and gain better supply chain visibility. A diverse and multi-market network of financial institutions ensures ample supply of liquidity and price discovery, resulting in better access to working capital on beneficial terms. Finally, buyers feel more confident in dealing with the risks that came with larger, more diversified supplier networks, as TASConnect’s digital capabilities make it much easier for companies to screen and qualify trade counterparties and monitor their financial health in real time.
As global value chains become increasingly complex, the role of regional trade finance and connected capital solutions becomes critical. Tailored working capital solutions that suit enterprise requirements can help fully capitalise on global market opportunities while maintaining flexibility and sustaining long-term growth.
Discover how TASConnect provides connected financial infrastructure to support seamless cross-border transactions. Contact us today.
