Global Trade Management (GTM) is gaining pace with digitisation and in the process has significantly increased the business opportunities, the following blog highlights the factors influencing it.
The Indian economy has become global as economies around the world are increasingly expanding their businesses and services. An even more justifiable reason is the evolving new information technology and technology-based business models.
Businesses can make their presence felt and grow their revenue by finding new avenues and customers, irrespective of their location. Paving the way for such developments are significant changes in government policies for seamless trade across borders.
Trade War: India Is The Front-Runner In Export Share
India’s share of world exports rose to 1.71% in the first quarter of 2019 from 1.58% in the fourth quarter of 2017, according to a report by Bloomberg.
The trade tensions between the U.S. and China has had little impact on India while it has increased exports to both these countries. With that being said, India still must soon get integrated into the global manufacturing supply chains as peers due to a decline in exports in recent times.
Opportunity For Working Capital
Ultimately, the complexity and risk of global trade management translates directly into a deteriorating cash flow position and increased procurement and logistics costs, because businesses must maintain a greater amount of working capital.
First, businesses carry a large inventory to accommodate longer order cycles and uncertainty in the global supply chain, and second, businesses carry huge accounts receivable because they are inefficient at managing their global financial supply chain.
Why CFOs Need To Be At The Helm Of Global Trade Management?
Amidst all these developments, CFOs have a task cut-out to make the right decisions and help the finance supply chain to manage global trade effectively and preventing any unnecessary overhead costs that can impact the organisation’s revenue cycle.
Not surprisingly, service providers across the globe are now seeking growth opportunities that are not tied down to headcounts. They are willing to spend on automation, development of IP and building new platforms for service delivery to bring more value to their customers. For now, these models serve as differentiators, but it won’t be long before they become mainstream.
A business must automate, track, and provide visibility into the end-to-end process to optimise it’s supply and/or distribution chains. Across these flows, companies need to deploy tools that support the automation of standard workflow procedures, synchronise and reconcile the exchange of data, automate document generation, provide for exception management with detailed and flexible visibility into orders and shipments while complying with security, compliance and other regulatory requirements.
The current CFOs must be wary of today’s more digital form of globalisation, how business is done across borders, how rapidly competition moves, and where the economic benefits are flowing. Even though progressive economies, in general, continue to be the leaders in most flows, the opening has been created to more countries, to small companies and startups, and to billions of individuals. CFOs must emphasise and understand that the biggest benefits of trade flows go to countries at the centre of the global network. Apparently, countries at the periphery of the network of data flow gain even more than those at the centre. The convergence of globalisation and digitisation means that CFOs will need to reassess their strategies in spite of being in the infancy stages of this phenomenon, enormous opportunities are still at stake.