Our stock monitoring experts are available 24 hours a day at shipping points. FABER equity monitoring services are valuable and trustworthy tools for managing and activating transactions around the world. Quantity assessment and fertilizer trade financing are essential and effective methods of risk reduction. An important way to reduce the risks associated with inventory financing is to designate an independent third party, an inspection company, to monitor and/or retain funded products. To do this, lenders, borrowers and the company enter into an agreement in the form of a CMA or ADM. These agreements provide the lender with an additional level of comfort, effectively finance the assets indicated in the borrower`s application for use, and give the lender some visibility on its guarantees. “Many collateral managers work at customer sites, so there is a tendency for employee collusion or fraud. There have been few cases in recent years. It is always a risk to manage millions of dollars of shares of a person who earns a meagre salary in comparison. There are many controls and balances that need to be maintained,” says Dheerie Govender, CEO of Global Collateral Control (GCC).
In this article, we examine two important instruments available to a lender to reduce the risks associated with stock financing: Collateral Management Agreements (CMAs) and Stock Monitoring Agreements (SMAs). Commercial funds, which have more appetite for “risky” customers than commercial banks, also stimulate demand for collateral management services because they use collateral management in the activities they offer. As part of an inventory monitoring agreement (ADM), an auditor will monitor the situation in the warehouse and provide ADM counterparties with daily, weekly or monthly inventory reports. A CMA is a derailment agreement and is usually concluded between the borrower, the lender and the “Collateral Manager”. The borrower, as the original lessor of the property, transfers the assets to the guarantee manager and the guarantee manager as a leaseholder recognizes the transfer of the holding of the property to the lender (“Attornment”) and agrees to retain the assets on behalf of the lender in accordance with the terms of the CMA. The atornment is essential to ensure that the lender has good security. For many, however, technology will not solve the problem of a company or a person who really wants to commit fraud, steal shares or some other way to darken lending banks. 7.
Access: The borrower should allow the inspector to access or provide the storage facilities to provide the agreed services. In the case of CMAs, it will be particularly important for the warranty administrator to be able to prove that he has enforceable rights to access storage at all times and that he has only the intended section of the storage facility. Of course, the lender should also have the right to access the warehouse and inspect the financed products if it deems it necessary. While structured commodity bankers operating in sub-Saharan Africa have been using collateral management agreements (CMAs) in their stores for many years, the entry into force of Basel III regulation this year increases its importance as a useful risk reduction. From the borrower`s point of view, a CMA allows the borrower to use his shares as collateral and to provide financing or working capital to manage their operations before receiving payment of their assets. The warranty administrator is responsible for the physical detention and control of the financed products and is legally responsible for their storage, safety and control. It issues a reception to the lender after receipt of the financed goods and can only release it on the instruction of the lender.