The Trolley Was Always Moving

Welcome to Part 2 of the Trade Finance Skills Cliff series. If you haven’t read Part 1, here is the summary:

You are driving a trolley heading unstoppably toward a group of five people sitting on the tracks. If you do nothing, the train will run them over. The alternative is to pull the steering lever, and it diverts to a second track, where one person is sitting instead. There is no clean option here, every choice has a body count. I know, philosophy is rough!

Trade finance had its own version of this a decade ago. Stay on the track and you get the skills cliff: no succession plans, no staff pipeline, and eventually trade finance finds itself where it is now. Pulling the lever back then meant short-term disruption, moving people to other parts of the bank before they were ready and paying to train replacements, in exchange for not being here today. Neither option was free. Trade finance took the first by default, without ever admitting it was a choice. We never pulled the lever, and here we are, coasting toward the group of five.

What "not enough talent" looks like on the job

When you say "not enough talent" out loud, it sounds like an HR problem. For trade finance, it is not. It is an operational one, and it shows up in the places you would least want it to.

A discrepancy in a presentation that used to get resolved by an expert on one call now can take several discussions. Not because anyone is slow walking it as the reasonable-time clock is running, but because resolving it now means escalation, tracking down the subject matter expert on the team, and possibly pulling in a compliance person. One person used to make that call alone. An alleged document discrepancy that used to get cleared by someone who knew, on sight, which flags were false and which were not, now goes into a queue to be reviewed by a team, because the people who knew the answer retired to a beach in Florida last year, and none of that judgment could ever be written into an SOP.

Getting discrepancies and amendments resolved takes longer now because there is simply not enough expertise left on staff to review. In practice, this is not necessarily a problem on a transaction-by-transaction basis right up until it becomes one. Fraudsters do not leave telltale signs that say “Hi, fraudulent transaction here!”. Mostly it is the little things coupled with experience that allow staffers to identify these frauds. The staff who could spot a "Solo Industries" style clue on sight (I'm looking at you, Neil Chantry!) are mostly retired and out of the bank now, and when that style of fraud comes back around wearing new clothes, as it has the last few years out of Singapore here and here, there is a real chance it gets missed.

The cost that does not show up on a P&L line

Here is the distinction that matters: this is not a staffing shortage in the normal sense, where you post the job and wait for resumes. What is leaving is not headcount alone, but judgment and expertise.

Part 1 said you cannot write tacit knowledge into a manual. That is not just a nice turn of phrase, but it is the actual mechanism of the crisis. The examiner who could look at a B/L or other document and feel that something was off was not running a checklist faster than everyone else. She had built a pattern recognition library out of hundreds or thousands of real transactions, most of them boring, a few of them fraud, and she knew the difference before she could explain it in a memo. That knowledge base is either going away or gone. It left when she did, and it left in a form nothing fully replaces, because it was never explicit knowledge to begin with. Worth saying plainly, since it matters later: the technology of ten or fifteen years ago was never going to touch this. It was not close.

The junior person filling a veteran’s seat has nobody to absorb judgment from, so they might over rely on the checklist and miss everything it does not cover, or they guess. The challenge is that we are not just one expert short. It is a new generation being built with a different, potentially slower and most likely less prepared version of the same challenge. That is the part that should scare a risk committee: this is not a gap that closes when hiring picks back up. It is a gap that reproduces itself.

The default response, and why it is the wrong lever

Faced with this looming problem, the industry has settled into three options:

Poaching. One option is to hire the other bank's retiree, or near-retiree, and call it a solution. For the bank doing the hiring, on paper and in the short term, it works. For the industry, the expertise did not multiply, it just moved from one line on the ledger to another, and the bank likely paid a premium for it. The clock on that person's career was already ticking before you signed them. Also, every institution doing this is bidding against other institutions choosing this option. It is not really a hiring strategy, but a combination of musical chairs and kick the can.

Cutting the LC business. Another option is to quietly exit some LC and trade finance lines rather than fix the pipeline underneath them. This choice dresses itself up as discipline, a strategic focus on core competencies and possibly streamlining the balance sheet. However, strip the language away and look at what happened: a bank gave up on a product line because it does not want to pay to train the people who run it. There might be good reasons now (versus 10 years ago) as training costs are high and LC fees are low. On the trade finance expertise ledger, this does not even shuffle expertise between columns; it deletes a column. Every bank that exits does not just create a competitor's opportunity, but also shrinks the total number of seats where the next generation could have been trained, which makes the industry-wide shortage worse for everyone left standing, including the banks that stayed.

Crossing your fingers. Of course, some banks choose to keep on keepin' on as they say, and do nothing particularly different. They keep the same headcount, the same training budget, the same tools, and hope volume stays flat and the client base does not notice fewer experts around. This is quite a common response, and possibly the most dangerous because it is invisible right up until it is not. Ask your corporate clients if they are happy with the level of expertise they can access when needed, and if their answer is anything like what I hear at my events, hint: they don't. In Part 1 of this series I made the case that a little short-term pain taken on purpose beats a much bigger headache later. The "crossing your fingers" option basically hopes the bill will never come due. Taking a look at our imaginary expertise ledger, this move does not change anything right now. But, as we apply time here, the entries will disappear, because retirement does not wait for anyone's budget cycle.

Each of these three options share an underlying failure: none adds any skilled practitioners to the bench. All three leave the industry-wide ledger exactly as thin as it was, or thinner, all while HR gets to feel like something is being done.

The wave has not crested. Yet.

The uncomfortable part is that this is not a one-time correction working its way through the system. It is ongoing, more like a tsunami than a rogue wave. The retirements that already happened are the leading edge, not the whole thing, and the people behind them are on the same clock. Meanwhile the work itself has gotten harder, not easier: sanctions regimes more complex, compliance overlays thicker, scrutiny higher, at the exact moment the institutional memory built to handle all of it is walking out the door for less demanding pastures.

The people covering the gap right now were never given the decades the retirees had to build the same judgment, so when their turn comes, in five or ten years, there will be even less behind them than there is today. Each wave leaves the shore weaker for the next one.

Next: the lever

Every response covered here treats the symptom and leaves the cause. The lever is exactly where it was: waiting to be pulled a decade ago. The industry-wide ledger keeps thinning no matter which of the three moves any given bank makes.

I have to say in re-reading Part 2, it feels a bit of a downer. Much like The Empire Strikes Back in that it ends with Han frozen (the poaching option), Luke losing his hand (literally cutting the LC business), and the Rebel Alliance all scattered (definitely crossing fingers). But don't worry, Part 3 will return the Jedi, or at least provide more amusement.

Next month: Part 3 is the lever you can pull today: digitalization that actually augments team judgment instead of pretending to replace it, a fractional expertise model that gets real experience into more seats without needing forty years to build it, and a Build/Borrow/Buy framework for deciding which of those tools fits which problem. A way to actually add to the ledger, not just move numbers between columns. Stay tuned for October!