Stock Monitoring Agreements (SMAs) are a useful addition to the Risk Management toolbox of lenders, including trading companies.

Under a SMA, Collateral Management Service SA (CMS) is committed to verifying the inventory level within an agreed timeframe, in addition to undertaking other inspection services as required.

Unlike Collateral Management Agreements (CMAs), SMAs do not provide for the control of goods by CMS, so they do not offer the same level of security. However, they are cheaper to execute, and suitable when the level of risk, either in amount or quality, does not call for a fully-fledged CMA.

SMAs are also often used in combination with CMAs, for instance at ‘feeder’ locations, where low stocks are held prior to delivery into a main storage facility where a CMA prevails.

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