Patrick DeVilbiss is a subject matter expert in trade finance and supply chain finance, with a specialized focus on the areas of receivables and payables finance. He also delivers SaaS product management services to clients, defining client needs based on ...
CGI’s What’s Happening in Trade podcast series covers the latest news and insights in the world of trade finance and transaction banking. The podcast is hosted by CGI trade expert Patrick DeVilbiss who invites trade finance and banking executives to share their perspectives on the current and future state of trade.
In the second part of this episode, Patrick speaks with Marcel Rokach, Senior Director of Global Solutions at RBC, to get his perspective on supply chain backlogs, a growing focus on sustainability in banking and the future of the trade finance industry. RBC is one of Canada's largest banks, serving 17 million clients in Canada, the U.S. and 27 other countries. It is one of North America's leading diversified financial services companies, providing personal and commercial banking, wealth management, insurance, investor services and capital markets products and services, globally.
Addressing supply chain backlog issues
While trade finance was once a niche industry generating little interest from the public, the COVID-19 pandemic and different geopolitical events have drawn attention to trade issues like the supply chain backlog. When pandemic lockdowns in major production cities impacted the supply chain, banks, including RBC, re-evaluated how they served clients. By being flexible, adaptable, willing to learn, and understanding the needs of their clients, RBC was able to provide individual client treatment plans and help them build a resilient supply chain. RBC has also shifted from “just-in-time” to a more proactive “just-in-case” inventory management strategy. Rokach emphasized how the digitization of transaction and document processing has minimized compliance requirement struggles.
Increasing ESG efforts
Companies around the world, including banks, are expected to have Environmental, Social and Governance (ESG) practices in place. While every bank is implementing ESG efforts differently, RBC has been a leader in this space, committing to the environmental initiative of achieving net zero by 2050 and aiming to help their clients shift towards sustainability. RBC has also launched a number of initiatives aimed at supporting black entrepreneurs and indigenous groups. Overall, a company’s commitment to environmental sustainability and social responsibility has become an important factor for talent acquisition, especially when companies want to attract younger professionals.
The future of trade finance
The continuing impact of the pandemic, inflation and supply chain backlog has created an overall sense of volatility and uncertainty. Over the next few years, Rokach predicts increasing globalization and a continuing acceleration toward digitization. During the pandemic, there was a shift toward reshoring to ensure the availability of medical supplies and vaccines. However, moving toward globalization allows companies to share capabilities, gain a competitive advantage and better understand suppliers. While digitization has happened much more quickly because of the pandemic, there isn’t currently legislation enabling electronic and digital documents. This is a hurdle Rokach hopes will be overcome in the next five years.
For more insights from Marcel Rokach related to RBC’s trade finance initiatives, listen to the full podcast.
For questions or comments, contact Patrick DeVilbiss.
Listen to part 1 of this episode, where Marcel discusses digitization initiatives, emerging technologies and APIs.
Read the transcript:
- Chapter 1: How is RBC resolving supply chain backlog issues for customers?
Welcome back to the “What's Happening in Trade” podcast from CGI. This is part two of our discussion with Marcel Rokach, the senior director of Global Solutions at Royal Bank of Canada. If you haven't already, please feel free to listen to part one to hear Marcel's thoughts on digitization initiatives, emerging technologies, and APIs in the trade finance industry.
Shifting in a slightly different direction. If we just talk about what we've seen in, I think we all feel this, actually, I would say, probably four years ago, I feel like I always referenced the fact that I work in this niche industry. No one's ever heard the term SWIFT. No one knows anything about trade finance. No one knows what's going on in the world of supply chain finance. Feels like all of a sudden, with the pandemic and what's happening geopolitically now, we seem to be at the forefront in a very surprising way, is what I'll say. If we talk just about that supply chain backlog and what we've seen in that space, is there anything that your bank is doing to try and help your corporate customers in terms of resolving some of the issues that we're seeing on the supply chain side?
Yeah, I mean, there's no question that's a tough nut to crack. I think when you're faced with the toughest of problems, it's important to step back and understand what you can impact and what you cannot impact, right? I think that's a little bit of analysis that we've done. But I would say first and foremost, and it relates to trade finance, but not only to trade finances, is we try to remain flexible on a day-to-day basis, client situations that arise with our clients. I don't think this is exclusive to RBC, but I know that we pride ourselves on individual heroism to step in and help clients. Whether if some goods are sitting in a port and let's say, I don't know, God forbid it's apples and things have to happen quickly.
I think what we readied ourselves with is a willingness to be flexible, to adapt, to learn about our clients' situation, whether additional funding is required, but to understand it in the context of our client relationship and to do that. That was a powerful one for us. We came up individually right across the bank with client treatment plans across every single business, which we've synthesized and showed to our relationship managers and to our trade sales force, so that people could right away understand. We look to cut fees, we look to do a variety of things that were just necessary as a global community.
I think that the other thing we did is focus on digital enablement. Like I said, we broke down some of the barriers with our compliance folks with some maybe slightly heated discussions and made sure we were able to break through some existing issues and maybe take on some risk that we didn't before. Taking on risk is another way to do things for clients sometimes. I think we did it here. Being able to process documents without ink signatures, using a variety of adapted methods, to be able to process transactions quickly, accurately and effectively. That was another thing.
I mentioned RBC Global Connect, and RBC Global Connect has been fed in to a broader thought leadership capability that RBC has put forward to the trade clients through the pandemic, and that's helping with supply chain issues.
We've numerous articles out there using the tool to help clients find, and maybe even sometimes alerting the clients to say, "Oh, look, there's a client in Spain who sells this component, and you look like you are offering this component. Why don't you get together," and sort of we're acting in the background to help those things go forward. But really sort of emphasizing the importance of building resilient supply chains, as opposed to the sometimes commonly cited inventory principle of just-in-time, which is, I think starting to fade a little bit these days because in some respects it hasn't worked, right?
That notion of just in time changing to just-in-case, right?
Yes, exactly. I think those are the things that we've done and we continue to try and do, because I don't think this one's quite done yet. You can picture certain things on the up, but I would say with the Ukraine/Russia situation, that there may be some things on the down. We always have to keep our eyes open.
We continue to live in very interesting times for better or for worse, right? I'd also point to what's happening within mainland China, right? The zero COVID policy has potential impact for supply chains. When you have to lock down large production cities, that's going to cause backlog whether you like it or not.
Unquestionably. Yeah. China, high proportion of our trade where we use letters of credit guarantees are with China, right?
- Chapter 2: What environmental, social and governance (ESG) efforts are you seeing?
Absolutely. Let's take a slightly different bent. Another area that has been in just about every press release, every conference junket, you can't turn left or right without talking about it, is the concept of ESG or the kind of sustainability linked to the S part of ESG or sorry, the E part of ESG. I think one of the questions we have for you and your bank is, and certainly, I think we see RBC as one of the leaders in this space, but what can you tell us about efforts that you're undertaking on the ESG side? And for folks that may not be familiar, environmental, social and governance, and kind of sustainable lending and practices that can come into play to help that angle of things, right?
It's been an area of critical focus, and I think there's been a ton of emphasis and effort behind this. Sometimes the press release may be out there, but I guess it would be interesting to hear what you have going on within your side of the house and what you're seeing on a day-to-day.
I think this is an important question. Without a doubt, everybody wants to do their part. I think for me, I have to start by saying that I'm proud to work for an organization that takes these things so seriously. For example, recently committing to net zero as a bank by 2050. Now that's a long horizon, but there's already people working on how that breakdown looks and how we're going to get there. Everybody knows fossil fuels are an absolutely essential part of living today. You just have to visit Ontario to know that virtually every house is run by natural gas. How do you make that transition effectively? And I don't know of an organization that takes it more seriously than RBC. From that perspective, I'm proud, but then it's about how do we do it in the trade finance line of business, right?
I think in that regard, I probably know more in this last month because this is getting so much attention and it's kind of filtering down to the individual lines of business than it did, by far, a few months ago. We've met with certain vendors and certain providers that offer really quite incredible solutions. I'll just list a couple things, a few things, sorry. First of all, I'd say, it's the attitude you take. There are companies, one of them we met, which I won't name, that has this remarkable data solution that is looking through the magic of big data to create an ESG score that will be applicable to virtually any company in the world. To break it down from where are the goods coming from? Where is it shipped?
It's an enormous amount of data, an enormous amount of specifics. The thought that we have is “that's nice, but how do we leverage that to help our clients?” Rather than throw an ESG score at them, how do you use the understanding of what comprises a great approach to sustainability, right, and help your clients get there and work with them to get a better understanding and be a cheerleader for your clients? It poses potential great advantages for any company that's going down this path, because as your stakeholders respond positively to the way you are behaving with your clients, to potential cost reductions through lower energy consumption, minimized regulatory interventions, because believe me, those types of things are coming and are already there at some level. I think you attract talent, right?
Like people, “well, I've been around a long time, so they're not attracting my talent,” but people like me who kind of are, like I said, proud that we're leading edge on these kinds of things. The E and the G on ESG in terms of BIPOC, systemic racism. I mean, RBC has launched several major initiatives for black entrepreneurs, indigenous support, probably second-to-none in the industry. I think that we look to support that any way we can. I just want to make one final point on this. I don't want to go too long on it, but the other solution in trade finance, specifically, relates to using export credit agencies to help, for example, the export of clean technologies from Canada. We're very good at it. Previously, the raised eyebrow might come for those kinds of deals and transactions. I don't know, but I know that will no longer be the case, and that EDC has already voiced an interest in working together with Canadian banks to provide something for our clients.
Yeah. It's interesting to see what kind of levers we have in the financial services sector, as well as in the world of trade, specifically, to really help support these initiatives, because they absolutely are critical. I think everyone recognizes it and we're all trying to kind of push in the same direction. Some of us are a little further ahead on the curve than others. Interesting point about attracting talent too. I think that's a really important one for folks to understand. I'll put my hand up and say, I'm from the Millennial generation. It's important to us. If you go a generation even further, I don't think folks want to be associated, if you're a Gen Zer, with companies that aren't thinking about this because they recognize the long-term implications for themselves, and that's just the reality of it.
I would also say there's a loop back on climate and supply chain disruption. When you look at extreme weather conditions, flooding in Vancouver, wildfires.
Some of this stuff, you have to think about it, not in terms of the next quarter, you got to be thinking about it in terms of the next five, ten years, right? It's really important that you have a little bit of a longer time horizon and understanding strategically of the importance and criticality of this. I mean, fundamentally not just your business, but to the globe.
- Chapter 3: What does the future of trade finance look like?
Great. We've had some really good questions here. I've got one more for you and then we'll do a little bit of a rapid fire at the end, maybe. The next item, just if we look broad spectrum, well, a little bit narrow and then a little bit broad and think about trade. What do you see really impacting the trade business kind of over the next year, and then if we look a little bit further out, let's say over the next five years, Marcel?
Yeah. I'm going to just go on a limb because I'm a positive guy and say that the trend is going to be positive. I haven't cleared that with my RBC economist. Although, I think they they're forecasting somewhere in the mid threes for growth in 2022 and something lower, one point something, 1.8 or so, that's a guess, but it's under two in 2023. I think there's a sense that things are potentially on the up, but the potential for volatility, the potential for things to get off the rails perhaps greater than it ever was. We've mentioned a few of them. Let's throw in inflation, right? Central banks kind of rallying around inflation. When you even have a bit of economics background like myself, enough to be dangerous, it rings true. The rates are going to go up, they need to go up. Sometimes that chokes off investment, to some extent. You look at Russia, Ukraine, it's really hard to foresee how that might progress.
COVID, I mean, have we heard the last of it or are we emerging from the pandemic as everyone hopes and expects, or is there another something else that's going to materialize? Being a prognosticator is going to be a tough business, so I'm not in that business. What I am going to say though, is that those that understand the mix of forces that are at work, are the ones that are going to be ahead of the curve and be able to win over their clients. It's not so much in being able to prophesy the future, but to know what are the threads, what are the important forces at work? I think supply chain is one that's already there and that we need to kind of get ahead of how we help our clients rebuild those, okay?
I think, broadly speaking, I think globalization is a macro trend, okay? You hear about reshoring, and some of that out of necessity because of the pandemic, certain things like medical supplies, vaccines. I, as well as others that I've heard many in the trade business, truly believe that globalization is not going away, and it's inevitable. Not only is in inevitable, it is incumbent upon us as participants in the industry to make that case clear, that we all win when we share capabilities across the globe, rather than try to compartmentalize the reshore, onshore. I think that's something that's going to be important going forward, as well. There's a lot of rhetoric on the reshoring and these sorts of things, but I believe that businesses who have managed to get some kind of competitive advantage, who know or understand their suppliers in China or wherever it may be, it's pretty hard to break that connection. I think the members to some extent show that's true.
I think that being digital was always going to happen, but now, over the next few years, you could see it happening quicker. I think one of the actions that we want to take, Pat, is to sort of get involved with the government and talk to them about paving the way for legislation that will enable electronic and digital documents, and to start to act within the Chamber of Commerce, this is in Canada, right, and we have certain political avenues. To just show how important this is, and to ultimately electronify the bill of lading and bold prediction as I do with my son, we do the top five NBA or NFL predictions, bold prediction from Marcel, that digitization hurdle will be crossed in the next five years. I'll just throw that out, but we're going to need to-
We like bold predictions here.
There you go. Why not, right? Not so much of a bold prediction, but I would also say that all the technology that we're going to use in the next five years, we already know about. I think that there's some truth there, right? I think you look around and what's there is amazing. The idea is, how do you deal with switching costs? How do you deal with integration costs? How do you deal with the information security aspects? How do you deal with the compliance and AML aspects? Let's get moving on these capabilities. I think the CGI advisory that we work with, you guys, those ideas are already there and we're already talking about them and it's up to us to put them into action going forward. I think what I see is really just a positive trend going forward, where we understand where the greatest impact can be had, and we're going to have some clarity because of the water that's passed under the bridge. Maybe a few years of clarity in terms of where we're aiming.
- Chapter 4: Rapid-fire questions
Yeah. I think that's a really astute point, the notion that the technology that we're going to be relying on over the next five years, it's already out there, right? We have a ton of tools available to us today. It is amazing what we can do. I think it's going to be a matter of adoption and implementation and looking at novel ways to apply this technology to really solve problems. That's what we're here for. All right, so on that note, Marcel, I'm going to take us down a rapid fire route. You had no prep on this. I'll-
No prep. Three questions, keep it simple and straightforward. You can be as short or as long-winded as you choose to be. First question, easy one, your favorite book, movie, or sport?
For book I'm going to, I'm a fiction reader. I got to say that. I love fiction. It makes me weird in my area. Everybody's reading, it seems, non-fiction, but I like fiction. I like non-fiction too. The book “Enlightenment Now” by Steven Pinker. I agree with, that's not why I read it, but I agree with Bill Gates. He was a professor of a friend of mine at Yale. Steven Pinker is an amazing guy. He lays out in the, I would suggest because it's a big book, if you only want to read the first half, read the first half. It is the most amazing compilation of statistics showing how history has progressed in a positive way when it comes to the reduced hunger in the world, the reduced number of deaths due to war. It is a statistical compendium without match. An incredible book that I would recommend to anybody that's reading, it's called “Enlightenment Now” by Steve Pinker.
I'll have to check that one out. That's an interesting choice. Good. Very good answer. All right. The second question, is the future of the trade experience, the trade finance experience, and I would view this from your customer perspective, is it more like an Apple experience or more like an Android experience? Interpret that however you want to.
Yeah. You're not going to get a good answer from me on this one because I'm an Android person who uses Apple. Just figure that out. I think Apple is the answer, ultimately, because we over complicate things for our clients and trade is already complicated, and I always beg my people internally to simplify any screens. I think you might have even heard that from me. I always say, "No, no, no. We got to simplify this," so yeah.
That's great. Good. Very good answer. Very good answer. Okay, last question. If you had a magic wand, you could change anything about the way we do trade finance today, what would you change and why?
We've talked about this, so I'm going to have to say, be a little practical, because I guess that's been the theme anyways. So eBill of lading, right? I mean, I've talked with my team, people who know more than me about in trade-specific things, the rules that govern it, and they view the eBill of lading as the tipping point. I think if we do that, that all of the technology will coalesce around it, and we'll be here doing a podcast in a year from now or two years from now in a fully digitized trade environment. We're not there yet.
I sincerely hope that that is the case. I look forward to that true end-to-end digitization. On that note, Marcel, really, really thank you so much for joining us today. We appreciate you taking time out of your day. Nancy, as always, thanks for joining, as well. That's it for the “What's Happening in Trade” podcast. Thank you all. We will see you next time.
Thank you, Pat and Nancy,
Thank you, Marcel.
Marcel Rokach, Senior Director of Global Solutions, Royal Bank of Canada (RBC)
In his current role at RBC, Marcel oversees the bank’s trade finance and global banking products offered to RBC’s business clients. He has been with RBC for more than 25 years and has previously held various leadership roles in product development, e-commerce and retail banking.
Marcel has an undergraduate degree in economics from McGill University and an MBA from Dalhousie University. He also served as an infantry officer in the Canadian Armed Forces and currently lives in Toronto with his wife and son.