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Collateral Control Services COLLATERAL CONTROL SERVICES ACE GLOBAL - Collateral Control Services ACE GLOBAL provides a “One-Stop Shop” across the commodity value chain. ACCS Local/Region Transport/Lo Transport/Lo Exporters/ Transformers Traders Countries al Producers gistics gistics Importers Crop Finance • Tanks/Silos • Refiners • Tanks/Silos • Distribution Tax and Duty • Shipping • Mills • Shipping • End Users collection • Rail • Crushers • Rail • Pipelines • Factories • Pipelines • Breweries Existing relationship 1 COLLATERAL CONTROL SERVICES ACE GLOBAL – Solutions Financial Structuring Commercial Engineering Operational Risk Management services General Services services services • Structured Trade and • Contract Farming Services • Field Warehousing • Consultancy Commodity Financing • Trade Flow Facilitation • Collateral Management • Advisory • KYCC services • Commodity Pricing • Secured Distribution • Legal • Commodity profile • Supervising Aid management • Certified Inventory Control • Training • Certified Accounts Receivable Services • Monitoring • Field Audit and Inspection 2 COLLATERAL CONTROL SERVICES ACE GLOBAL BUSINESS PROCESS & OVERVIEW 3 COLLATERAL CONTROL SERVICES ACE GLOBAL & Lenders - Synergies ACTORS SUPPLIER LOCAL AGENT PORT EXPORTER OFF-TAKER Export/Shipm STEPS Delivery of Raw Material Warehousing Processing Warehousing Transit Warehousing Loading Receivables ent TYPE OF Working Capital Financing Receivable Raw Material Financing Export Product Financing FINANCING (Tolling) Financing Supplier Quality/Quantity/Weig Supplier/Processing Carrier Terminal Carrier PAYMENT RISKS Performance ht Performance Performance Performance Performance ACE SUPERVISON ACE COLLATERAL MANAGEMENT st MONITORING 1 Class Offtaker or MITIGANTS Secured Payment Plant Management / Technical Exporter/Carrier Expertise, Reputation & Technical Instrument Assistance Support COLLATERAL RAW MATERIAL WARRANTS EXPORT GRADE PRODUCT WARRANTS SHIPPING DOCUMENTS 4 COLLATERAL CONTROL SERVICES ACE GLOBAL & Lenders - Synergies ACTORS SUPPLIER Lender’sLOCAL AGENT CONVENTIONALPORT EXPORTER OFF-TAKER Warehousin Processi Warehousin Export/Shipmen STEPS Delivery of Raw Material SCOPETransit Warehousing Loading Receivables g ng g t TYPE OF Working Capital Financing Receivable Raw Material Financing Export Product Financing FINANCING (Tolling) Financing Supplier Quality/Quantity/Wei Carrier Terminal Carrier PAYMENT RISKS Performanc ght Supplier/Processing Performance Performance e Performance Performance ACE GLOBAL’s ACE SUPERVISON ACE COLLATERAL MANAGEMENT 1st Class MONITORING SCOPE Offtaker or MITIGANTS Secured Payment Plant Management / Exporter/Carrier Expertise, Reputation & Instrument Technical Assistance Technical Support COLLATER RAW MATERIAL WARRANTS EXPORT GRADE PRODUCT WARRANTS SHIPPING DOCUMENTS AL 5 COLLATERAL CONTROL SERVICES 6 COLLATERAL CONTROL SERVICES 7 COLLATERAL CONTROL SERVICES Financing and Structuring Opportunities – ACE GLOBAL Services 8 COLLATERAL CONTROL SERVICES Risk Mitigation approach Risk Area Risk Likely Cause Preventative action 1. Misrepresentation 1. Inspection by Collateral Manager 2. Incorrect assessment 2. Analysis by independent laboratory 1. Commodity 1. Grade/Quality inferior 3. Inadequate handling procedures 3. Calibration of equipment by Collateral Controller 4. Weighbridge not calibrated accurately 4. International standards used for analysis 5. Certificate of weight and Analysis issued by Collateral Controller 1. Inspected incorrectly 1. Collateral Control Engineers issue Certificate on Storage structure 2. Measured incorrectly 2. Storage Agreement defines responsibility 2. Moisture 3. Exposure to elements prior to loading 3. Insurance Cover 4. Climatic conditions 4. Certificate of Analysis issued by Collateral Controller 5. Inferior Storage construction 1. Misrepresentation 1. Storage Agreement defines responsibility 2. Incorrect inspection 2. Insurance Cover 3. Infiltration 3. Inspection by Collateral Controller on fortnightly basis 3. Insect infestation 4. Inferior Storage construction 4. Fumigation on recommendation from Collateral Controller 5. cross contamination 6. Proximity of infested lots 1. Bank holds original documents of title 4. Defective 1. Fraud by Supplier/Storer 2. Storage agreements with storers title/counterfeit title 2. Commodity stolen 3. Supplier warrants full title documents/ Borrowers 3. Dispute over ownership of commodity 4. Supplier is also storer in majority of cases reputation 5. Country Manager through KYCC will determine the Crediblity of the borrower 1. updated calibration certificate 1. Inadequate equipment 2. Country Manager will check for possible by-passes 2. fraud/storer deviating goods 3. Country Manager will request regular test weighing 5. weight shortage 3. weightscale not calibrated 4. weighing under surveillance of Local Collateral Manager on 4. Silo scales not calibrated behalf of ACE GLOBAL 5. Bad handling favoring spillage 5. Country Manager to issue protest letter 1. Defective lightning on board vessel 1. check on vessel electic devices holds 2. moisture testing on arrival 6. heating & self 2. too high moisture 3. regular temperature testing combustion 3. fresh goods 4. proper and adequate ventilation 4. poor ventilation 5. Country Manager regular monitoring 5. lack of follow up 6. Insurance cover 1. malicious 1. permanent presence of Local Collateral Manager on behalf of 7. damage to the 2. Force majeur ACE GLOBAL goods 3. leakage/water infiltration 2. proper inspection of warehouse 9 4. bad storage conditions 3. Insurance cover COLLATERAL CONTROL SERVICES Risk Mitigation approach Risk Area Risk Likely Cause Preventative action 1. Lack of controls 1. Collateral Controller independent controls 2. Incompetent personnel verification 3. Collusion between Collateral Manager 2. The Lender Insurance cover 2. Commodity Storage 1. Loss of commodity & Storer 3. Collateral Controller quantity & quality 4. Force Majeure certificates retain as proof of value and 5. Weight recording incorrect exsistance 6. Stored too long - commodity spoiled 4. Storage period limited to 12 months 1. Storage facilities sub standard 1. Collateral Control Engineers Report 2. Manpower requirements inadequate 2. Storage agreement defines responsibility 2. Damage to Commodity 3. Theft or Misappropriation 3. Insurance cover 4. Force Majeure 4. Collateral Controller regular inspections 5. Spontaneous Combustion 3. Stored commodity 1. 1. Insect infestation 1. Bank has taken out insurance (Public infected/contaminated with 2. 2. Fungi contamination Liability ) disease - Bank sells to end 3. 3. mould 2. Country Manager regular inspections user with subsequent claim 4. 4. Proximity of infested lots 3. Refuse proximity / Proper separations for damages 1. warehouse insurance not properly checked 1. Proper check of insurance Policy 4.warehouse not covered by 2. premium not paid 2. Confirmation from underwriter that insurance 3. insured value to low premium has bee paid 4. Deductible to high 10 COLLATERAL CONTROL SERVICES Risk Mitigation approach Risk Area Risk Likely Cause Preventative action 1. Collateral Controller leases 1. Financial failure 1. Non performance to Storage/warehouse 2. Storage facilities sub-standard 3. Storer maintain and store the 2. Storage agreement with storer states that the 3. Manpower not qualified to commodity Lender is the owner of the commodity manage storage 3. Full commodity insurance cover taken by the 4. Changes in statutory limitations Lender 1. Credit approval on off-taker, annual credit review 1. Client unable to pay / insolvency 2. Commodity held at discount to market value 2. Economic downturn 1. Non-performance of for Intrinsic Value 4. Credit 3. Cash flow difficulties/financial payment 3. The Lender owns commodities distress 4. None Lender accepted clients must first either 4. Cheque not cleared present bank guaranteed cheques or payment to be cleared 1. Back to Back Sale and Purchase agreement. 2. Hedge purchase price or use appropriate 5. Commodity Value 1. Oversupply 1. Drop in price of commodity discounting model (Sale) 2. Economic Downturn 3. Use appropriate discounting model, institute triger price levels 1. Incorrect calculation of cost 1. Inability of client to calculate and 1. Bank to review all orders and calculations 6. Commodity Value by client include all costs accurately 2. Generic Discounting Model - Any variations to (Purchase) 2. Incorrect calculation of 2. Discount model flawed be approved by Bank line management purchase price by Bank 1. Rate linked to Prime 1. Interest rate change 2. Funding to be determined by management 1. Unacceptable return on 2. Change in statutory requirements on a case by case basis 7. Pricing Capital 3. Funding a short term advance with 3. Attempt to lock in rate with a short term 2. Changing interest rates long-term funds instrument 4. Generic Discounting Model - 3% hedge 1. Segregation of duties 1. Inadequate internal controls 1. Fraud / Misappropriation 2. Audit functions (Internal & External) 2. Breakdown in basic controls 2. Inadequate controls 3. Approve documents through Lenders Legal 3. Changes to Act and Regulations 3. Statutory department 8. Operational (Bank) 4. Documentation not legally binding 4. Documentation 4. Review admin procedures 5. Administrative burden too big for 5. Administration 5. Increase capacity to handle workload administrative department 6. Information Technology 6. Structured Trade & Commodity Finance 11 6. Admin system incompatible system designed to mitigate associated risks COLLATERAL CONTROL SERVICES Risk Mitigation
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