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| 1 minute read

Tomorrow’s supply chain - Risks to be aware of related to supply chain finance

You have implemented what you have been told are the best-in-class gold standard controls for your supply chain, and you know this is important to protect your brand and reputation. One major risk area in supply chains is the procurement process and related to this, supply chain finance.

The dusty reams of paperwork and the complicated processes of the existing trade finance system make it susceptible to fraud and corruption. Innovations such as blockchain technology can help digitise documents and provide a secure environment.

There is now talk that central bank digital currencies (CBDCs), or fiat virtual currencies, will also help to transform supply chain finance. The hope is that CBDCs offer transparency and lower costs for cross-border payments and through the use of smart contracts and automated payments.

In Hong Kong, the Hong Monetary Authority (HKMA) has recently launched is e-HKD pilot programme, which is an ambitious initiative covering 14 pilot projects which will explore how e-currency can offer new payment functionalities as well as make payments faster and more efficient. This builds on earlier initiatives, such as Project mBridge, which is a single platform that facilitates cross-border trade between four jurisdictions – Hong Kong, Thailand, the United Arab Emirates and Mainland China.

How will all of this innovation measures combat bribery and corruption? Digitisation of documents will make it harder to forge documents, CBDCs will make payment flows transparent and easy to trace and an automated process will make tampering more difficult. Of course, criminals are endlessly creative; tackling bribery and corruption also requires a good understanding of topical issues (such as sanctions, risk of dual-use goods) and effective risk management (specific risk assessments, follow-up on red flags). In Hong Kong, there is the additional deterrent of an active anti-corruption agency, the Independent Commission Against Corruption, which was set up in 1974 and whose successful anti-corruption efforts have achieved world recognition, for example, from the World Bank, Transparency International, OECD, amongst others.

 Please contact author Jill Wong for further information about this post.


tomorrows supply chain, fintech, supply chain