On 10 March 2016 the International Chamber of Commerce (ICC) released its 100-page new Standard Definitions for Techniques of Supply Chain Finance providing a master definition for Supply Chain Finance and its different techniques. Keen to learn more about Supply Chain Finance and our new terminology for this rapidly growing market? According to the ICC there are six on-the-go answers to your frequently asked questions.
What is Supply Chain Finance? Supply Chain Finance (SCF) is defined as the use of financing and risk mitigation practices and techniques to optimise the management of the working capital and liquidity invested in supply chain processes and transactions. Visibility of underlying trade flows by the finance provider(s) is a necessary component of such financing arrangements which can be enabled by a technology platform.
What is the objective of the new SCF terminology? The Standard Definitions for Techniques of Supply Chain Finance aim to standardise and harmonise the existing Supply Chain Finance market terminology to make it operational and usable in daily practice by banks and non-banks when processing, financing and mitigating risk in trade transactions.
Why is there a need for a common terminology on SCF? The novelty of the subject matter of Supply Chain Finance led to the usage of a range of expressions, terms and terminology that were - and remain today - often inconsistent, opaque and even contradictory. There is an agreement on the clear benefits of the development and dissemination of standard definitions and terminology.
Who should use the SCF terminology? Definitions featured in the publication will be useful to finance providers, corporates, commercial and SME clients, investors, regulators, legal practitioners, information technology and infrastructure providers, as well as other trade finance related communities.
Who developed the SCF terminology? The publication is a joint initiative of the International Chamber of Commerce (ICC) Banking Commission as project facilitator, BAFT, the Euro Banking Association (EBA), Factors Chain International (FCI) and the International Trade and Forfaiting Association (ITFA).
According to the ICC the drafting effort has benefited from the guidance of an international and multi-industry steering group, and has actively sought a wide range of commentary and feedback from the market, including providers of supply chain finance solutions as well as end-users.
In a global effort to promote the new supply chain finance terminology, the publication was launched yesterday at the ICC Academy 4th Annual Supply Chain Finance Summit in Singapore and RFIx conference in Lisbon. Members of the global drafting group presented in both locations how this new initiative addressed the global need for a common terminology on Supply Chain Finance.
If you are interested in obtaining a PDF copy of the ICC’s Standard Definitions for Techniques of Supply Chain Finance, simply send us an email with ‘Supply Chain Finance’ in the subject line.