Solutions to minimize the risks in international payment in saigon hanoi commercial joint stock bank ( shb),graduation thesis

STATE BANK OF VIETNAM BANKING ACADEMY FOREIGN LANGUAGE FACULTY GRADUATION THESIS SOLUTIONS TO MINIMIZE THE RISKS IN INTERNATIONAL PAYMENT IN SAIGON HANOI COMMERCIAL JOINT STOCK BANK (SHB) Student: Nguyen Phuong Mai Supervisor: Nguyen Thi Hien Hanh, MA Class: K15ATCA Student ID: 15A7510142 21th May 2016 i ACKNOWLEDGEMENT First of all I would like to show my deep gratitude to Banking Academy lecturers, who have dedicated impart the knowledge platform for students during the academic year at university I am extremely grateful to my supervisor, Ms Nguyen Thi Hien Hanh, who supports me directly in the thesis orientation and implementation until the completion of the thesis I would like to express our most sincere thanks to the SHB staff in the international payment department of the Center for International Banking at Saigon - Hanoi Commercial Joint Stock Bank (SHB) headquarters who have created favorable conditions and enthusiastic guide for me during my practice here to complete this thesis Finally, I would like to express my gratitude to family, university and friends for their support, encouragement in the process of learning and researching as well so that I can fulfill this academic work Student Nguyen Phuong Mai i LISTS OF ABBREVIATIONS SHB: Saigon Hanoi commercial Joint Stock Bank ICC: International Chamber of Commerce L/C: Letter of Credit SBV: State Bank of Vietnam WTO: World Trade Organization SWIFT: Society for Worldwide Interbank Financial Telecommunication ii LISTS OF CHARTS AND FIGURES Chart Remittance procedure Chart The process of Clean collection 10 Chart The process of Documentary collection 11 Chart The process of Letter of Credit 12 Figure Total assets and total asset growth 2010- 2014 19 Figure Total fund mobilization and total fund mobilization growth 2010- 2014 19 Chart Organizing Center International Banking 21 Figure SHB international payment turnover 31 iii CONTENT CHAPTER INTRODUCTION 1.1 Rationale of the study 1.2 Objectives 1.3 Subjects and scope of research 1.4 Research Methodology 1.5 Structural thesis CHAPTER LITERATURE REVIEW 1.1 Overview of International Payment 1.1.1 The definition of International Payment 1.1.2 Conditions in international payment 1.1.3 Some commonly used international payment methods 1.2 The role of international payment 13 1.2.1 The role of international payments for the economy 13 1.2.2 The role of international payment for commercial banks 14 1.3 Risks in international payments 15 The concept of risk 15 1.3.1 CHAPTER RISKS IN INTERNATIONAL PAYMENT IN SHB 18 3.1 Overview of Saigon Hanoi Commercial Joint Stock Bank (SHB) 18 3.1.1 History of SHB formation and some developments 18 3.1.2 Recent business achievements 18 3.1.3 The model of international payment operation 20 3.1.4 The structure and organization of the Center for International Banking 20 3.2 Current status of SHB international payment 29 3.2.1 The features of international payment activities 29 3.2.2 Operating results of international payment 29 3.3 Risks of international payment activities of SHB 32 3.3.1 Legal risk 32 iv 3.3.2 Operational risk 32 In the contract of sale, the terms of reference are very important If there is any carelessness happening and the fault belongs to the bank, the bank will also have to bear the cost 32 3.3.3 3.4 Market risk 32 The causes of risks in international settlement 33 3.4.1 Objective causes 33 3.4.2 Subjective reasons 34 3.5 Assessment of SHB risk management 34 CHAPTER SOLUTIONS AND CONCLUSION 36 4.1 Solutions to minimize international risks 36 4.1.1 The basic solutions for risk management in the mainly international payment methods in SHB 36 4.1.2 Synchronization solutions for risk management in the international payments of SHB 39 4.2 Conclusion 44 v CHAPTER INTRODUCTION 1.1 Rationale of the study The international integration trend of the economy has opened up a world with full prospects for mankind today History has proved that no country can develop in isolation with the outside world, and those countries get closer together through the international trade bridge The circular flow of goods, services and money has created strong cohesion reliability of supply and demand in countries with different economic levels, which leads to greater complexity in the final link metabolism - international payments (international settlement) Today, international payment is considered as an inevitable factor to the economic development International payment is a type of service that relates to the assets of the bank balance sheet International payment operations help the bank to meet the diverse needs of customers in financial services that relate to international trade On that basis, it helps to increase sales, enhance the reputation of the bank and build customer confidence, which not only helps the bank to expand the scope of activities, but also creates advantage to make up for bank competitiveness in the mechanism of the market International payment operations are not just a simple operation, but also a work to support and complement the other business activities of the bank International payment operations performed well will expand export credits and develop foreign currency operations and bank guarantees in foreign trade International payment operations increase the liquidity of commercial banks When performing the international payment operations, commercial banks can attract foreign currency funds of enterprises that have international relationships with the banks in the form of deposit the pending payment International payments also facilitate modernization of banking technology The bank will apply advanced technologies to the international payment operations for rapid, timely and accurate performances to disperse risks and expand the scale and banking networks International payment operations are also the activities that expand relations between commercial banks in a country and the foreign ones, and its prestige in the international arena Thus, international payment plays an important role to commercial banks However, along with the development of the current international payment trend, there are certainly potential risks in each transaction of the commercial banks such as legal, market and operational risks, which has a great impact on the banking business Therefore, this study emphasizes these risks and gives certain solutions to minimize the influence of risks on international payment operation in one specific commercial bank, namely SHB 1.2 Objectives The first aim of the study is to codify knowledge, theory about international payments and the risks in international payments The second purpose is to analyze some situational risks in international payment methods in Saigon – Hanoi Joint Stock Bank, thereby generalize the causes Finally, the minor thesis recommends solutions and proposals to limit risk and improve quality International payment for Saigon Hanoi Commercial Joint Stock Bank 1.3 Subjects and scope of research The main subject of research thesis is the risk in international payment in Saigon Hanoi Commercial Joint Stock Bank (SHB) 1.4 Research Methodology The thesis combines different scientific methods such as analysis, comparison, statistics and illustration with tables and figures 1.5 Structural thesis Besides the introduction and conclusion, the thesis content is divided into four chapters: Chapter 1: Introduction Chapter 2: Literature review Chapter 3: International payment risks in SHB Chapter 4: Suggestions and conclusion CHAPTER LITERATURE REVIEW 1.1 Overview of International Payment 1.1.1 The definition of International Payment In the context of global economic integration today, economic, political, trade relations are significantly growing, which results in the formation of monetary income and expenses among international partners in different countries Currency relations are dramatically increasing with a rich and diverse growing scale They have contributed to the financial situation of each country that can be in a state of surplus or overspending In international relations, partners are in different countries with different languages and widely separated geography so the payment cannot be processed directly with each other Thus, it can be made through the intermediary organization- the commercial bank with its network around the world The international payment manual (Dinh Xuan Trinh, 2008) asserted: “International payments (international settlement) is payment made between countries in the settlement of a trade debt, a transfer of fund or for other purposes.” (Page 11) 1.1.2 Conditions in international payment As Dinh Xuan Trinh (2008) noted, in international payment relation, implementation of international settlement obligations and rights between the parties stipulated to the field events including monetary conditions, time, a set of documents and payment methods 1.1.2.1 Monetary Condition It is the prescription of uniform currency used to calculate and pay the import and export contracts, regulations and processing methods when there are fluctuations in the value of that currency In foreign trade contracts, currency that is chosen depends on many factors such as the correlation between the two parties position trading, the location of the settlement currency on international markets, especially the ability to ensure its exchange It can be divided into two types of money based on the use of money Calculation Currencies (Account Currency) are the currency used to express the price and calculate the total value of the contract The currency of payment (Payment Currency) is a type of money used to pay debt, foreign trade contracts Payment currency may be the currency of the importing country, the exporting country or may be provided for the payment currency of a third country (Dinh Xuan Trinh, 2008, The international payment manual, Page 30) 1.1.2.2 The condition of payment locations The place of payment is specified clearly in the contract signed between the parties Place of payment can be a country of the importer or exporter or may be a third party However, in the international settlement between states, parties will want to pay in their own country, as the site gets paid This happens because the payment in their countries results in many advantages (Dinh Xuan Trinh, 2008) 1.1.2.3 The condition of the payment period In 2008, Dinh Xuan Trinh asserted: “This is a very important condition as short payment period will reduce settlement risk, avoid the fluctuations in exchange rates, and significantly influence on the movement of capital and earnings of the parties In terms of payment period there are three following ways to choose” Pay in advance: The buyer pays the seller in whole or in part of the amount of money before receiving the goods Depending on the market and the importance of commodities, production deadlines, the relationship between the parties to the transaction to calculate how much cash will be paid in advance In this case, the method of the seller’s financial position has been strengthened to guarantee for the sale Risks to the exporter (seller): If the importer does not receive the goods, the exporters have to bear the cost of management, warehousing costs, insurance indemnity, or have to wait for return (if goods was sent), and find other buyers with expensive price or discount Risks to the importer (buyer): This method ensures exporters receive payment before delivery, as opposed to the importer incurs risks such as failure to deliver the Item number quality and commitment, or exporters’ bankruptcy, no goods to deliver, rising market price, the importer will sell to another partner with the higher price and accept contractual penalties if it contributes to his advantage SHB International payment turnover 1.8 1.6 1.4 1.2 SHB International payment turnover 0.8 0.6 0.4 0.2 2012 2013 2014 2015 Figure SHB international payment turnover (Source: SHB international payment data 2015) It can be clearly seen from the graph that there was an obvious upward trend in SHB International payment income from 2012 to 2015 The turnover in 2015 reached $1.7 billion, which approximately doubled 2012 level In 2013, international payment sales decreased 2,023,529.25 thousands of dollars compared to 2011 as the Euro zone debt crisis continues to spread and have yet to find Duo escape This had had a negative impact on export- import markets in the world as well as in Vietnam The supply and demand in the international financial markets and the market for the exports of goods and supply of goods, especially machinery, high-tech equipment of Vietnam such as France, Germany and Britain declined sharply SHB has achieved some positive results The international payment operations were restored quickly and achieve high growth rates In 2013, despite facing many difficulties due to the influence of the world and domestic economy, international payment activities of SHB still developed strongly At that point, quality of international payment services of SHB achieved a high level of international standards with STP (Straight-Through Processing) rate of 98% The extensive network of overseas correspondent banks had guaranteed the quick and safe provision of international payment services and trade finance for SHB’s customers that 31 operates in the export-import fields In 2014, SHB was awarded "Excellent International Payment Services" by Wells Fargo and Bank of New York Mellon (USA) for many years 3.3 Risks of international payment activities of SHB 3.3.1 Legal risk The national political situation of the parties involved in the purchasing process changes will affect international commitments and economic instability, especially the economic downturn of the country The political risks such as war, embargo, and violence will disrupt the economy, banks may be frozen, and documents can be lost or torn Also, concerning the relationship between national laws and international accounting practice, usually there is no contradiction, but when there is a conflict, the national law applicable to the settlement, it can cause damage to the party 3.3.2 Operational risk In the contract of sale, the terms of reference are very important If there is any carelessness happening and the fault belongs to the bank, the bank will also have to bear the cost 3.3.3 Market risk Exchange rate fluctuations will affect greatly to the import and export business, especially in financing export credit On early May 6/2008, sudden rate increased nearly 17,000 VND / USD (besides the free market, then sometimes rose up to 19,000 VND / USD), the bank's price ceilings Importers want to buy dollars to incur charges or sold to enterprises, according to the exchange rate (instead of selling dollars at the prices listed, the Bank has no measure for sale, the Bank requires businesses to buy EUR at the exchange rate fixed bank then converts dollars) Import businesses have missed the moment of signing the contract for the timely payment for goods should have accepted the additional charges incurred This creates profits for importers to suffer from heavy losses even more serious business losses However, for the exporters, on receipt of money each will be sold for a local currency, bank to get business, this time the amount of foreign currency purchased on, the Bank will pay more for businesses export a fee This will increase profits for exporters Moreover, the volatility in the exchange rate as 32 above gave the foreign currency position of the banks unstable, creating the risk of exchange rate to the commercial banks 3.4 The causes of risks in international settlement 3.4.1 Objective causes From the client: Vietnamese importers as well as exporters often have no higher position in relation to common purchase and face a certain number of difficulties in paying or demanding money Once importing, the foreign exporters force importers pay in advance, while overseas partners may delay the payment Domestic customers are in a difficult situation, and unable to implement commitments to SHB to bind the bank against the law Exporters who are SHB customers also have some restrictions on operational knowledge and practical experience when proposing changes in the form of collection to see the documents that contain errors, accept L/C with Terms fetched as short time limit presentation The correspondent banks not make the commitment deliberately with political and economic reasons that may cause losses for customers and SHB Trade Policy The disposition of import and export, tariffs, and customs are unstable with exchange rate policy volatility affecting imports and exports, which increases foreign exchange risk The foreign currency trading business is not well developed (mainly trading spot, forward, swap is very limited) This makes it difficult to calculate the efficiency and avoid the risk of exchange rate fluctuations Especially when the price of the dollar is fluctuating, it is difficult for the export and import business, causing significant impact on their profitability SBV does not manage and control the import Business credit information supply The main information comes from CIC However, construction work and information provided to the Bank sometimes are not concerned adequately attention resulting in the 33 fact that information is not updated, data are inaccuracy Otherwise, the Bank does no actively provide information regularly, leading to increased risk The degree of global integration entails has been increasing along with complex business environment, the legal system has many changes compared to the previous rate of payment and payment volume increasing, illegal acts from outside inexperienced to recognize and prevent 3.4.2 Subjective reasons Staff working in foreign exchange trading in the main office and its branches is in shortage and weak on qualifications, not really specialized in the field of professional services, and lack of trained staff In many branches, due to the lack of staff, a specialist has to be responsible for many parts of the procedure, even accounting and customer service In many cases after being trained to process international payments, specialists are transferred to other professional field while they lack knowledge of the law and international practice (UCP, URR), language skills that makes them unable to advise clients in the stages of project development, selection conditions, bar accounting, tools proposed insurance exchange rates, interest rates So far, SHB lacks a team of leading experts as the core that is strong enough for professional development as well as retraining deployment Regulation of trade finance services defines "Factoring (Factoring)", "Receipts Trust (Trust Receipt)", "Mode of vouchers paid (Cash Against Document)" but they not implement business processes for these products Therefore, if this business incur, it will cause confusion in the implementation and entail a certain risk 3.5 Assessment of SHB risk management To ensure safe operation of import and export payments, SHB has implemented a number of risk management solutions in international payments When SHB receives an advance payment profile of the customer first, SHB will check the reputation of the client, and ask if the importer has had a relationship with the exporter or the importer of this import contract through brokers or have known each other from before If necessary, the department of international payments through credit 34 appraisal department checks information and reputation of customers to avoid “money laundering" In addition, employees of international payments also have to check imported goods banned from export or import ban buyer's country or not, the country's importers subject to US embargo or not Under the provisions of the SHB is 45 days after the advance payment remittance to foreign partners, importers must supplement related documents (customs declaration, commercial invoice, bill of lading) for SHB Checking immediately after receiving the collection documents is about to see if the seller directly sends or not If there is no agreement in advance, SHB does not receive documents sent directly by the seller SHB also checks the right number of documents listed on a certificate from the bank with enough original receipt and transport documents to immediately inform importers When delivering the collection of documents to the importer, SHB requires bank staff to scrutinize the signatures and seal specimens registered at SHB, and take measures to ensure sufficient assets to pay for payments abroad if using the D/P (or affect the collateral or guarantee payment of the loan based on the client's debt paper) If the payment is D/A, the importer at the time of acceptance of the draft to get documents consignee must also check the seal forms, signatures and present the foreign trade contracts (duplicates) for SHB On the payment due date, if the collection of documents received original lack of transport documents, the importer must present declarations of goods to proof that the goods were adopted in relation to the information of the collection of documents that SHB has received 35 4.1 CHAPTER SOLUTIONS AND CONCLUSION Solutions to minimize international risks 4.1.1 The basic solutions for risk management in the mainly international payment methods in SHB 4.1.1.1 Transferring Method For the case of export: SHB only considers funding for export customers when the customer premises meet the minimum 50% of exports, with export contracts being paid according to payment methods, experience and reputation in the payment export, import customer has trusted in OECD markets for two years in a row closest to export sales from $ 1.5 million or more SHB will provide the exporters with a clear and detailed investigation based on the financial viability and credibility of the importer After that SHB will only apply to the transactions of small value and accept payments for large value contracts as exporters and importers have a close relationship with each other It should be noted that importing countries are not on the list of the US embargo, if the payment currency is USD When the contract specified payment terms are postpaid, exporters should be prescribed rate penalties for late payment SHB must clearly define the terms of the applicable law in the contract, arbitration and dispute resolution For the case of import: SHB regulations state that after the transfer of payments to partners for 45 days the importer supplies the relevant documents (customs declaration, commercial invoice, bill of lading) for SHB Importers must complete additional document as promised, if after 45 days the importer fails to comply with the commitment, SHB refuses to remit payment after shipment 4.1.1.2 Method of collection SHB consider funding only for the customers who have been granted a credit line in the import and export payments, assets and contracts to ensure payment of import and export in the form of documentary collection, in which the entire operation isolates the behest 36 of the bank levy and the bank send to serve abroad for collection (export customers) or all of lading established by order of the collecting bank to collect money (customers enter export), pursuant to rule practices and agree on collection documents of the International Chamber of Commerce (ICC Paris edition of 522) SHB should indicate on the direct implementation that documents are not delivered to the importer if the importer fails to pay the expenses incurred under such agreements to avoid presenting delivered documents for importers and automatically deduct from the amount of all document expenses incurred that importers refuse to bear SHB should also implement the documents twice in two different ways to avoid misplaced documents SHB should advise the customer when the customer requires the use of methods of collection despite the low and convenience, cost and SHB holds great risks for all parties in the relationship, and does not rule out the banks in this case of standing out banks prepay for your customers For exporters, adopting this method can only be done if and only if the purchaser sells goods with intimate relationships and mutual trust As for the banks, due to the absence of a clear international law regarding liability offset by the bank, customers should decide to pay in advance for the goods collection documents because the failure to ask for money may occur beyond their control 4.1.1.3 Documentary credit method For L/C import For the issuance of L/C import: Before accepting issuing L/C, it is necessary for SHB to apply a strict evaluation process such as granting of credit to customers in order to control liquidity as the bank pays for the perfect set of documents This is very important and the most effective measure to prevent risks All messages sent to the bank credit notification must be released with the format MT700 and transmitted on the SWIFT network to avoid being lost and delayed Between the fact that the issuing bank needs to consider when deciding to issue an L/C whether banks have recouped all or part of the amount paid from the sales if importers go bankrupt SHB will find out whether there are importers who certainly possess goods 37 with merchandise quality or damaged goods during transport, and if damaged, the bank has the right to claim insurance money to find out whether there is a fraudulent collusion between the exporter and the importer or not also is extremely important If the L/C comes with a letter of guarantee of contract performance, the L/C and the guarantee implementation of the contract must be valid in parallel The description of goods should have the generic name of the goods (mouse, keyboard, RAM, the common name of accessories and computer components - Components of computer) SHB should specify the number and types of goods of each delivery in the case that L/C have stipulated delivery many times each in different commodity types, names, special sizes the equipment To limit the documents before the goods which SHB pay when the documents are considered perfectly, SHB should calculate the amount of time on the road transport of routine, time to prepare documents of the seller, to negotiating, and to determine the time to present documents correctly For those special items, used goods importing from risky markets like China, India, Africa with a great value, SHB should require the production of receipt released by the purchaser of goods or paper check on the number and the quality of goods at the port of delivery independent travel/port to confirm that the seller has delivered sufficient quantity and quality in accordance with the contract Sometimes in order to reduce the cost of imported goods, importers propose in the application for opening L/C terms the import prices FOB or CFR For these conditions, it considers all risk after the goods have been loaded on the ship belonging to the importers If during transport risks occur that, the responsibility does not totally belong to the carriers, which measure the risk incurred entirely by importers If the importer has no goodwill or deliberately evade responsibility, as Issuer SHB forces to pay for foreign committed when the source documents pear Therefore SHB specifies L/C margin as less than 100% (the rest financed by SHB), importers are forced to purchase additional insurance voucher when opening L /C 38 4.1.2 Synchronization solutions for risk management in the international payments of SHB 4.1.2.1 Solutions to reduce political and legal risks Political risks, legal risks are inevitable; therefore it is difficult to take the preventive measures and effective restrictions However, to prevent the risk of political, legal, SHB should coordinate with enterprises engaged in documentary payment method, find out the environment for investment as well as the economic situation, the politics of the partners in order to limit the risks that may happen Today, with the development of information technology, information resources can be searched easily on the Internet, but need to be selective To minimize the political risk, SHB should guide enterprises to learn skills in commercial law of the country where they participate in trading and the market needs to diversify to spread risks SHB should provide customers with the evaluation board of country risk ratings in the world (source information from the magazine: Euro money, Institutional Investor); the customer can access the network for information through the website of OFAC (Office of Foreign Asset Management under the Ministry of Treasury) Additionally, SHB should also give customers a list of US embargoed countries such as Balkans payment and North Korea from time to time 4.1.2.2 Solutions to restrict foreign exchange risk by diversifying foreign economic operations Forex trading futures (Forward) and Swap are important tools to prevent exchange rate risks in banking business In Vietnam, all commercial banks, licensing to trade in foreign currencies carry out these transactions Accordingly, depending on the period, exchange rate futures and swaps are determined by the provisions of the SBV However, due to limited understanding, this professional business is still used with a degree of humility Only the headquarters or major new bank branches engage in these periods and swaps, while transactions in the smaller branches of foreign economic are mainly spot Options trading (Option) is also regarded as an effective tool to reduce the risk of exchange rate However, unlike the two operations above, not all banks are made of this foreign exchange transaction This type of operation has been implemented since 2008 in 39 SHB, but sales of the option transaction is not high, it can be said to be low compared with other monetary transactions However, whether in any case, the business of foreign exchange transactions is not only unfamiliar in Vietnam, but also the most professional option that operations staffs not have much experience Therefore, commercial banks want to participate in this profession need to boost training, intensive training of foreign exchange derivative transactions for staff, improve foreign language skills for employees in order to avoid the problem errors in operational problems At the same time, SHB must build and perfect the process of foreign exchange derivative transactions specifically, tightly to avoid embarrassing problems when operating Setting directly the limit for foreign exchange officials as the limit of customer transactions (to avoid the risk that customers are unable or unwilling to fulfill the obligations already committed in foreign currency transactions at the time the liability arises that commitment, banks need to worthwhile quality, determine limits for each customer and regularly inspect this periodic line), stop loss limits (exchange rate speculation being up or down are potential risks is essential to limit the risk of foreign exchange business activities that banks build process stops and construction hole for transaction alerts staff perform direct operations) The appropriate investment in promotional activities, marketing, and foreign exchange derivative transactions is still new to the business as well as an effective solution SHB customers need to clearly see that when being involved in a derivative contract, the business of import and export business will be stable, reducing the risk of an economic market integration has constant fluctuations and capricious as today 4.1.2.3 Solutions to limit risks from SHB partners Solutions to limit risks for importers Prerequisite to prevent moral hazard is to understand thoroughly the transaction partner Moral hazard problem is closely related to corporate culture When conducting business with a partner, first SHB must find out the legal status, financial capacity and level of partner credibility that they not really understand to apply the solution and the payment method to ensure safety As for banks, when implementing international payment transactions, especially L/C transactions they should choose a reliable bank that is highly respected in the international arena 40 To cater for that demand, many organizations assessing international banks have been published with the duty of doing the research and evaluation of the world's banks and credit rating, reputation, financial capacity, the credibility such as organization Standard and Poor, Fitch Rating For customers to make payment transactions by credit documentary method, SHB need to build customer policies for each object, apply preferential policies to customers who traditionally have good relations, reputation Conversely, for new customers and customers who have more potential risks, there have to have strict regulations to ensure safety for the bank SHB need regular monitoring and evaluation of the client's business to timely detection of problems arising for clients timely processing solutions In addition, SHB employees should also pay attention to advisory and apply the most appropriate modalities for each product and each customer: Product classification: For these products that are unsold goods, new goods for the first time need looking for new markets so the payment methods that create preferential conditions for the importers should be applied to attract sales such as the deferred payment, money transfer or collection method based on given documents accepted For processed goods, barter or regular shipment cyclical method, special documentary credit such as a revolving credit, counterpart should be applied For trading goods through intermediaries, SHB should apply appropriate payment types such as back to back letters of credit, letters of credit transfer For those commodities that are agricultural products, SHB should apply Perishable reserve letter of credit to ensure the implementation of the agreement of both export and import side Customer classification: For customers who have regular relations; the cyclical delivery method should apply a periodic credit method to save costs and time 41 For customers who have the knowledge and high confidence, simple payment method should be applied to shorten the time for transferring For first-time customer, the credit payment method which is attached to a special type of credit to guarantee their rights should be applied Even if all kinds special letters of credit are applied, the fees will be higher Additionally, SHB also needs to rely on the position of the importers and exporters in the market to take the right decisions and minimize risk 4.1.2.4 Solutions to improve the quality of personnel of international payments International payment operations are complex, risky, which causes risks to human largely by direct or indirect cause Therefore, the best measure is to increase investment, human resource training and service of international payment - SHB should stimulate employees to actively participate in training as expanded training measures are important and fundamental way to improve the quality factor for employees The employees who actively participate in training have a direct impact on the efficiency of training to help forming the autonomy and self-consciousness to participate in training Those impacts directly improve the quality of human resources, expansion of knowledge, creativity, invention and imagination skills practice each employee's career - SHB has to expand the training and retraining of knowledge about the law, trade practices in the domestic and international and thoroughly practical approach The regulatory environment is often quite complicated, but not obvious To avoid legal violations undesirable should have a certain understanding of the conventions, treaties - Finally, SHB has to have the recruit regulation that requires new staff to obtain qualified staff as well as ethics, staffing in place, the right people, boldly promoting young staff to appropriate locations 42 4.1.2.5 Solutions for information technology in the international payment operations As for a modern bank, the application of modern technology to serve the banking services that it provides customers is an indispensable factor Technology helps banks manage unified data that can be accessed at any time to reduce the strength of the mechanical tracking such as tracking the payments due and the quota of the enterprise It also helps the International Payment Department monitor the branch that is carrying out operations and perform monitoring functions of the Department Head of international payment The technological innovation and application of new solutions in the system administrator, transactions and payments in the Bank has been a vital element in a fair competitive market Technology will be a platform to help banks in the field of governance, in expanding the products and services, through which meet the increasingly demanding needs of the banking system Although proposing and thoroughly implementing risk management solutions, it is difficult for SHB to avoid all risks and losses in the international payment operations To mitigate risk, manage risk and contribute to improving operational efficiency in international payments, there are some certain from the Government and the State Bank solutions that are necessary 43 4.2 Conclusion In the current conditions, the international integration trend is going strong, international payment activities play an increasingly important role in the activities of banks in particular and the economy in general During the development process, international payment operations of each bank with more serious problems arising need to be studied in order to find solutions to help to enable banks to increase income and solid competitive advantages for banks' goods in the marketplace SHB is one of the jointstock commercial banks in Vietnam today International payment activities of SHB, though newly established but growing at a rapid pace and achieved many significant accomplishments However, international payment in SHB is considered as a new and an unfinished activity with both less technology and practical experience Recognizing the importance of international payment operations of SHB and their potential risks, the author has focused on the theory and reality to define possible solutions that contribute to minimize the potential risks in international payment activities in SHB In theory, the thesis has reached the overview of international payment, the role of international payment and risks in international payment This researching has oriented and establish a solid base that help the author to study about the reality and lead to certain solutions to reduce the influence of international payment risks in SHB The thesis also evaluates comprehensively the current status of SHB international payment and the risks of this service such as legal, operational and market risk It also stated the objective causes such as client, trade policy and business credit information supply and the subjective ones such as the lack of leading experts This evaluating has become the orientation of the author of the thesis when discovering solutions to minimize international payment risks The basic solutions are focusing on three payment methods, namely transferring method, method of collection and documentary credit one In addition, there are five solutions to reduce political and legal risks, to restrict foreign exchange risks, to limit risks from SHB partners, to improve the quality of personnel and to improve the information technology These solutions are the results of earnest evaluating process in the combination with the research methodology of the author Therefore, the content of the topic has met the demand of the objective and the task of the study 44 Appendices Professor Le Van Tu, Banking and financial market, (Vietnamese version) pages 723-727 Professor Dinh Xuan Trinh (2008), International payment manual Professor Tran Hoang Ngan (2006), International payment course book, (Vietnamese version) Dr Nguyen Van Tien (2002), Assessment and preventive measures in banking business, (Vietnamese version) Banking Academy Tran Manh Hung, MA (2007), “Risks in international payment in Vietnam commercial bank”, (Vietnamese version), Banking magazine (8), pages 19-22 Minh Tri (16/05/2015), SHB was awarded “Best Bank in international payment” (Vietnamese version) VN Express Unkown (2014, 2015), SHB Financial reports Retrived from its website www.shb.com.vn Unkown (19/01/2016), SHB has the best quality of international payment service Retrive from its website www.shb.mn.com.vn 45