Risk assessment and management in import meat trade and supply chain business
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Author:Tony
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Published time: 2020-11-25
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In the imported meat trade, we generally classify the risks into three categories:
The goods safety operation risk：refers to the possible risks and problems in storage, transportation and origin of goods.
Counterparty credit risk：mainly refers to the credit risk and default risk of the counterparty.
The goods market price volatility risk：Inventory value impairment is caused by price changes caused by the influence of market supply and demand.
The goods safety operation risk：refers to the possible risks and problems in storage, transportation and origin of goods.
Counterparty credit risk：mainly refers to the credit risk and default risk of the counterparty.
The goods market price volatility risk：Inventory value impairment is caused by price changes caused by the influence of market supply and demand.
In the imported meat trade, we generally classify the risks into three categories:
The goods safety operation risk：refers to the possible risks and problems in storage, transportation and origin of goods.
Counterparty credit risk：mainly refers to the credit risk and default risk of the counterparty.
The goods market price volatility risk：Inventory value impairment is caused by price changes caused by the influence of market supply and demand.
The goods safety operation risk
Cold storage security
The security of cold storage includes two dimensions. One is whether the temperature control ability of the cold storage itself can guarantee the goods to be under safe temperature, and the goods will not be impaired or lost due to thawing, damage or non-standard operation.
Secondly, the main credit of the cold storage is also very important, the solvency in the case of loss of goods and the moral hazard prevention and control ability for the safety of goods.
Credible source
The authenticity of imported meat can only be guaranteed if the original package and the batch corresponding to the original production date are maintained. After the goods pass through the untrusted subject, it may happen that the actual goods do not conform to the batch, such as changing the case, reprocessing, changing the date and so on, causing losses to the buyer.
Possible risk cases:
After the downstream customers pay the deposit, due to the shortage of capital chain, collude with the cold storage prior to take delivery of goods sales. The cold storage side helps the downstream customers to cover up the inventory data of the actual goods, resulting in the loss of the actual owner's control over the goods.
Due to improper operation, the goods stay on the platform for too long, resulting in the loss of temperature and thawing of the goods. The return and economic losses caused by the value decline not conforming to the agreed indicators.
Loss of goods caused by unclear inventory count or inadequate safety management by cold storage operators.
Because the cold storage is not covered by insurance, in the event of fire, explosion or other extreme circumstances, large areas of goods are lost and the cold storage becomes insolvent.
In China, there are still counterfeits of imported frozen goods, using inferior processing capacity and imitation of original packaging to increase the selling price. Generally, traders do not have the ability to identify goods, but problems will be exposed when such goods are used in the terminal. The lower cost method is to do a good job of source traceability, and confirm that the handling party does not have the ability and suspicion of counterfeiting.
MIG's risk management recommendations:
To evaluate the main body of the cold storage, especially the operation specifications, hardware equipment and the main credit and solvency of the comprehensive evaluation, so as to ensure the safety of the goods and the payment in case of loss.
Try to choose state-owned enterprises, listed companies and large - scale cold storage for goods storage. Priority is given to cold storage that is solvent and insured.
You can refer to "MIG Port Cold Storage Rating Report" to choose a higher grade of cold storage to carry out business.
Conduct retrospective investigation on the handling party of the goods to ensure the authenticity of the source of the goods and that no reloading has occurred.
Counterparty risk
Counterparty risk can be divided into two categories, one is the upstream seller's true faith, the other is the downstream buyer's solvency.
In the frozen goods trade, the upstream seller of international trade has trade fraud, or the trading company fails to fulfill the contract, which causes the loss of the deposit to the buyer.
In the domestic trading link, there are also downstream customers can not continue to perform the delivery of the problem. Deduct the deposit, but still losses.
Cases：
The international fraud of frozen products has happened many times in China. Generally, the fraudsters will use the exporter's mailbox to inform the customer of the wrong collection account, or temporarily inform the customer of the modification of the collection account, and transfer the payment into the account of the fraudster without the customer's knowledge, causing economic losses.
Some smaller export traders have no upper right of speech and delivery ability, and cannot complete the delivery after receiving the customer's payment, or delay the delivery, causing the buyer's actual loss.
Because the buyer has no trading experience in frozen goods, high price orders or no sales ability will cause the seller to sell the order, thus causing losses to the seller.
MIG's risk management recommendations
When receiving the account change information from the seller, be vigilant and check carefully, and confirm the account by official phone if necessary.
When dealing with the seller for the first time, it is better to ask the other side to provide the transaction record in China, and confirm that the record is true, and take measures to prevent fraud.
You can check the International Exporter Bank Account Comparison Table included by MIG to confirm whether the receiving account of the other party is true or not.
When large orders are placed downstream, the downstream payment capacity, sales capacity and risk tolerance should be adjusted to ensure that there is no risk of selling orders due to default or lack of experience. Check the international price of the goods and provide the corresponding deposit proportion.
The "MIG Importer Rating Manual", which is based on MIG's research on the importer's import data, can be used to evaluate the buyer's historical transaction status so as to confirm the buyer's trade operation ability.
Price risk of goods
The risk of price fluctuations in goods is widespread in trade and supply chain financial services. In both the inventory risk management of traders and the value risk control of goods of supply chain finance companies, the price management of goods is very important.
Cases：
In trade, the main economic losses are caused by the decline in the price of goods in stock, the loss of high shipment opportunities due to insensitivity to spot market prices, and the decline in stock prices.
In the process of supply chain service, when the spot price of goods in storage falls below the residual value minus the margin, the downstream goods are dumped, and the disposal difficulties cause major economic losses.
In the case price in 2019, we can see that the fluctuation of the price of goods is often more than 20%-30%, which will cause the margin/deposit paid by the downstream to be insufficient to cover the falling range of the price of goods, thus turning the stable order into a risk loss order.
At present, most supply chain companies in the market carry out quantitative pick-up calculation for mixed container (a container contains more than two single goods) without distinguishing the value and quantity of single goods, which may cause customers to empty high-value products first and make the residual value of inventory far lower than the residual value of book inventory.
For example, tenderloin (100RMB/KG) and trimmings (30RMB/KG) are loaded into the container in a 50/50 ratio, weighing 100 tons, with a total value of 6.5 million. If the customer picks up the meat in quantity, the book value may be 3.25 million at the time of tenderloin lifting, but the real value of the remaining trimmings may be only 1.5 million.
MIG's risk management recommendations:
Continuously pay attention to the spot market price fluctuation of stock goods, be sensitive to price reflection, adopt corresponding sales strategy.
You can subscribe to and refer to the MIG Price Index Report as well as a customized mark-to-market service to ensure that you are aware of spot market fluctuations on a weekly basis.
Adjust the margin ratio according to the price fluctuation of spot market. Margin calls can be added to contracts with downstream traders.
In the supply chain business, the mixed container should be calculated by category, and the downstream margin should be added again according to category. The order evaluation service of MIG can be used to evaluate the circulation coefficient of category and residual value of goods, so as to increase the margin ratio of customers in line with market expectations and avoid the risk of mixed container loading.
MIG will make specific recommendations in the order evaluation on the price of the goods, the proportion of additional margin required and the difficulty of selling.
Establish disposal channels ahead of time. For unfamiliar products, even in the case of the downstream payment of margin, the disposal channel should be established first to solve the long tail risk.
Forward contracts can be used for risk disposal in advance. That is, in the case of the customer extended non-delivery of the default, and other buyers signed disposal price forward contracts. MIG can also offer clients counterparties to such forward contracts.
The goods safety operation risk：refers to the possible risks and problems in storage, transportation and origin of goods.
Counterparty credit risk：mainly refers to the credit risk and default risk of the counterparty.
The goods market price volatility risk：Inventory value impairment is caused by price changes caused by the influence of market supply and demand.
The goods safety operation risk
Cold storage security
The security of cold storage includes two dimensions. One is whether the temperature control ability of the cold storage itself can guarantee the goods to be under safe temperature, and the goods will not be impaired or lost due to thawing, damage or non-standard operation.
Secondly, the main credit of the cold storage is also very important, the solvency in the case of loss of goods and the moral hazard prevention and control ability for the safety of goods.
Credible source
The authenticity of imported meat can only be guaranteed if the original package and the batch corresponding to the original production date are maintained. After the goods pass through the untrusted subject, it may happen that the actual goods do not conform to the batch, such as changing the case, reprocessing, changing the date and so on, causing losses to the buyer.
Possible risk cases:
After the downstream customers pay the deposit, due to the shortage of capital chain, collude with the cold storage prior to take delivery of goods sales. The cold storage side helps the downstream customers to cover up the inventory data of the actual goods, resulting in the loss of the actual owner's control over the goods.
Due to improper operation, the goods stay on the platform for too long, resulting in the loss of temperature and thawing of the goods. The return and economic losses caused by the value decline not conforming to the agreed indicators.
Loss of goods caused by unclear inventory count or inadequate safety management by cold storage operators.
Because the cold storage is not covered by insurance, in the event of fire, explosion or other extreme circumstances, large areas of goods are lost and the cold storage becomes insolvent.
In China, there are still counterfeits of imported frozen goods, using inferior processing capacity and imitation of original packaging to increase the selling price. Generally, traders do not have the ability to identify goods, but problems will be exposed when such goods are used in the terminal. The lower cost method is to do a good job of source traceability, and confirm that the handling party does not have the ability and suspicion of counterfeiting.
MIG's risk management recommendations:
To evaluate the main body of the cold storage, especially the operation specifications, hardware equipment and the main credit and solvency of the comprehensive evaluation, so as to ensure the safety of the goods and the payment in case of loss.
Try to choose state-owned enterprises, listed companies and large - scale cold storage for goods storage. Priority is given to cold storage that is solvent and insured.
You can refer to "MIG Port Cold Storage Rating Report" to choose a higher grade of cold storage to carry out business.
Conduct retrospective investigation on the handling party of the goods to ensure the authenticity of the source of the goods and that no reloading has occurred.
Counterparty risk
Counterparty risk can be divided into two categories, one is the upstream seller's true faith, the other is the downstream buyer's solvency.
In the frozen goods trade, the upstream seller of international trade has trade fraud, or the trading company fails to fulfill the contract, which causes the loss of the deposit to the buyer.
In the domestic trading link, there are also downstream customers can not continue to perform the delivery of the problem. Deduct the deposit, but still losses.
Cases：
The international fraud of frozen products has happened many times in China. Generally, the fraudsters will use the exporter's mailbox to inform the customer of the wrong collection account, or temporarily inform the customer of the modification of the collection account, and transfer the payment into the account of the fraudster without the customer's knowledge, causing economic losses.
Some smaller export traders have no upper right of speech and delivery ability, and cannot complete the delivery after receiving the customer's payment, or delay the delivery, causing the buyer's actual loss.
Because the buyer has no trading experience in frozen goods, high price orders or no sales ability will cause the seller to sell the order, thus causing losses to the seller.
MIG's risk management recommendations
When receiving the account change information from the seller, be vigilant and check carefully, and confirm the account by official phone if necessary.
When dealing with the seller for the first time, it is better to ask the other side to provide the transaction record in China, and confirm that the record is true, and take measures to prevent fraud.
You can check the International Exporter Bank Account Comparison Table included by MIG to confirm whether the receiving account of the other party is true or not.
When large orders are placed downstream, the downstream payment capacity, sales capacity and risk tolerance should be adjusted to ensure that there is no risk of selling orders due to default or lack of experience. Check the international price of the goods and provide the corresponding deposit proportion.
The "MIG Importer Rating Manual", which is based on MIG's research on the importer's import data, can be used to evaluate the buyer's historical transaction status so as to confirm the buyer's trade operation ability.
Price risk of goods
The risk of price fluctuations in goods is widespread in trade and supply chain financial services. In both the inventory risk management of traders and the value risk control of goods of supply chain finance companies, the price management of goods is very important.
Cases：
In trade, the main economic losses are caused by the decline in the price of goods in stock, the loss of high shipment opportunities due to insensitivity to spot market prices, and the decline in stock prices.
In the process of supply chain service, when the spot price of goods in storage falls below the residual value minus the margin, the downstream goods are dumped, and the disposal difficulties cause major economic losses.
In the case price in 2019, we can see that the fluctuation of the price of goods is often more than 20%-30%, which will cause the margin/deposit paid by the downstream to be insufficient to cover the falling range of the price of goods, thus turning the stable order into a risk loss order.
At present, most supply chain companies in the market carry out quantitative pick-up calculation for mixed container (a container contains more than two single goods) without distinguishing the value and quantity of single goods, which may cause customers to empty high-value products first and make the residual value of inventory far lower than the residual value of book inventory.
For example, tenderloin (100RMB/KG) and trimmings (30RMB/KG) are loaded into the container in a 50/50 ratio, weighing 100 tons, with a total value of 6.5 million. If the customer picks up the meat in quantity, the book value may be 3.25 million at the time of tenderloin lifting, but the real value of the remaining trimmings may be only 1.5 million.
MIG's risk management recommendations:
Continuously pay attention to the spot market price fluctuation of stock goods, be sensitive to price reflection, adopt corresponding sales strategy.
You can subscribe to and refer to the MIG Price Index Report as well as a customized mark-to-market service to ensure that you are aware of spot market fluctuations on a weekly basis.
Adjust the margin ratio according to the price fluctuation of spot market. Margin calls can be added to contracts with downstream traders.
In the supply chain business, the mixed container should be calculated by category, and the downstream margin should be added again according to category. The order evaluation service of MIG can be used to evaluate the circulation coefficient of category and residual value of goods, so as to increase the margin ratio of customers in line with market expectations and avoid the risk of mixed container loading.
MIG will make specific recommendations in the order evaluation on the price of the goods, the proportion of additional margin required and the difficulty of selling.
Establish disposal channels ahead of time. For unfamiliar products, even in the case of the downstream payment of margin, the disposal channel should be established first to solve the long tail risk.
Forward contracts can be used for risk disposal in advance. That is, in the case of the customer extended non-delivery of the default, and other buyers signed disposal price forward contracts. MIG can also offer clients counterparties to such forward contracts.
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