Supply chain risks can emerge from anywhere, be it a natural disaster, a cyber-attack, or a pandemic. Today, COVID-19 has disrupted the entire global economy, leaving companies struggling with low revenue and mounting debts. This has highlighted the need for dynamic processes to manage growing supply chain risks. With the emergence of new suppliers across the world, transacting with unknown parties has become a major concern, with payment fraud and insolvency risks continuing to pose challenges for logistics businesses. However, all these challenges can be mitigated with the help of an escrow service.
Traditionally, escrow accounts were limited to certain domains like mergers and acquisitions, law firms, and real estate, mainly due to the time and costs involved in setting them up. However, with the internet-based economy, escrow accounts have expanded to cover other areas, including supply chains. Simply put, an escrow account is a secure account with predetermined conditions for the release of funds. With an escrow account, a buyer can place their funds under the supervision of a third party, who then disburses the funds to the seller only after all conditions have been met.
The use of an escrow account provides payment protection to the buyer while giving them a window to inspect the goods. The seller, on the other hand, is protected from unexpected chargebacks, and the shipment is tracked to ensure timely delivery. Additionally, the escrow solution provides due diligence, facilitation of payment in tranches and protection from insolvency – all of which can help manage risks effectively.
The ongoing crisis has highlighted the need for companies to explore new strategies to manage risk and control liquidity in their supply chains. Escrow facilities offer safe and secure payment options that help mitigate the risks associated with transacting with unknown parties. By using a Castler escrow solution, businesses can protect themselves from fraudulent sellers, manage risk, and securely manage their supply chain operations.