Definition of Collateral Management:

Collateral, according to the KBBI (Indonesian Dictionary), refers to a pledge, security, or guarantee. With this understanding, Collateral Management encompasses the supervision of receiving goods, including quantity, quality (if necessary), visual inspection, stacking, and the management of goods during storage in a designated warehouse. The release of goods can only be done upon the receipt of a written order from the bank or financier as the principal. Before the execution of work begins, a typical procedure involves inspecting the warehouse designated for collateral storage.

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Objectives and Benefits of Collateral Management:

The management of collateral by banks or other financiers, aside from banks, is necessary to ensure the details and certainty of income, inventory, and withdrawals related to the collateral goods. Thus, financiers need alternative credit disbursement methods by utilizing movable collateral as security. This is a response to the limitations of debtors in providing fixed assets as collateral. The presence of an independent third party to facilitate the management of changing and movable collateral aligns the interests of both parties.

The release of goods can only be done upon the receipt of a written order from the bank or financier as the principal. Before the execution of work begins, a typical procedure involves inspecting the warehouse designated for collateral storage.

The objectives of inventory/collateral management are to provide security to the bank or financier against the risks of managing/supervising commodities as the primary collateral for loans. It also aims to provide up-to-date information on the quantity and position of collateral/inventory quickly to the bank or debtor during the Collateral/Stock Management Agreement.

The benefits of inventory/collateral management include supervising goods for the benefit of the principal (banking and non-banking), serving as the main guarantee for credit facilities. It involves monitoring the quantity of inventory/collateral every day during working hours, including the receipt and withdrawal of goods, ensuring the existence of goods as the primary collateral at an approved location by the bank.

For more information about inspection and audit services and the Wholesale and Retail Trade sector, you can read our articles here. If you and your company need more information about our services, feel free to contact and consult with us here.

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