CREDIT MANAGEMENT KEY TO IRISH RECOVERY · Salima Paul and Dr Eleimon Gonis for sharing their work with us. You can read more on page 48, where there is also exclusive news on new

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June 2010

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june cover 14/5/10 20:16 Page 1

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right here and now.

That’s where Emerald Isle Collections are perfectly positioned to respond. Our dedicated, fully trained team of locally-based staff can co-ordinate a letter, telephone or field-based strategy for robust debt collection at every stage.

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EIC_A4 master.indd 1 14/5/10 12:07:41

WELCOME

3June 2010

EDITOR’S LETTERHello and welcome to the Summer edition of CCR World.

It seems a long time since those freezing months earlier this year, when airports

were paralysed, Eurostar came to a grinding halt and volcanic ash shut down much

of European business for days. We still have the ash problem of course, but it is

receding as I write this – though colleagues have been stuck in Dublin, Murcia and

Madeira in the past few days.

And it is surprising how much technology can do to trip up even the most

sophisticated credit and risk management systems. We speak quite freely of moving

on from ‘the bad old days’ of silo mentality, just pouring data into a simple database

and then attempting to extract meaningful files which could be used to improve

collections and cashflow.

We have some special interviews and articles on Ireland in this edition, its

importance as a European business hub and the reasons why it is still a good

place to do business. Be sure to take a read from page 12 through to page 30.

Benchmarking research

Elsewhere in Europe, we are seeing some very sophisticated business research

emerging from academic and commercial studies. The University of the West of

England has been working with the EMEA Credit Forum (ECF) for some time,

benchmarking credit management processes and the impact certain changes in

day-to-day activity can have on DSO and bottom lines. Our thanks to both Dr

Salima Paul and Dr Eleimon Gonis for sharing their work with us. You can read

more on page 48, where there is also exclusive news on new research which is

just beginning and should be of benefit to all working in credit management.

European data protection

From a legislative point of view, this Summer is going to be busy in Brussels, with

the European Commission pushing forward on several fronts. Data protection is

back in the limelight, with commissioner Reding of the Directorate for Justice,

Freedom and Security, telling us that Europe must revisit its Harmonisation

Directive and be seen to be the leader in data privacy, for the individual and from

a corporate governance stance.

It was not so many years ago that the US was blindly demanding control of

personal data, with it’s ‘catch-all’ Safe Harbor rules. That initiative died a natural

death, only to re-emerge when the 9/11 atrocity took place. It was not long before

the US, Spain and several others clamped down and demanded huge amounts of

personal data be lodged with them as soon as individuals wanted to cross borders.

This, of course, goes totally against the EU ideal of open borders and free movement

of citizens and trade.

The credit management industry, especially the collections and enforcement arms,

need to have a clearly-defined and level playing field when pursuing their tasks. Will

more legislation from Europe help? Can European law-makers turn the tide of the

USA’s demand for more data? Is there such a thing as data security, when it comes

to the individual’s right to protect information from the state

and lenders?

The data and compliance experts will be working long

days through the Summer, preparing for the consultative

meetings which will begin late in 2010 in Brussels.

CCR WORLD

EDITORIAL

BOARD MEMBERS

Commercial Credit

Mark Lewis

Aggreko Deutschland, Belgium

Stephen Skipwith

Consultant, Order2Cash

Laurie Beagle

Chairman, EMEA Credit Forum

Sean Stevens

Senior manager, credit & collections

EMEA, Wind River, Germany

Consumer Credit

Adam Goldhagen

Credit director, Fiat Auto Financial

Services

Eric Leenders

Director, British Bankers Association

John O’Mulloy

Managing director, Standard Bank

Collections

Ebrahim Jawad

Founder, Al-Nabaa Commercial Services,

Bahrain

Carlo Pegna

Managing director, Euro Pay, Italy

Andrius Pranckevicius

Senior partner, Pranckevicius &

Partners, Lithuania

Tim Sutton

International sales & marketing, Global

Recovery Alliance, Germany

Risk

Matt Angell

Chief operating officer, Credit Corp

Group, Australia

John Garde

Hoofbestuurder, ABSA, South Africa

William Balduino

Vice president, Risk Management

Practices, Dun and Bradstreet, USA

Kalpouzanis Vassilios

Credit analyst, Emporiki Bank of Greece,

Greece

Freddie Dawkins

Editor

CCRworld

www.CCRWorld.net

3 ed's letter 14/5/10 20:19 Page 1

5 October 2010The Tower Hotel, London

t The most knowledgeable and experienced speakers in creditt Key editorial issues discussedt Network and share knowledge with other senior professionals

For the latest information and an up-to-date speaker list visit

www.ccr-interactive.comAbout CCR-interactiveA host of senior figures have already agreed to be speakers at this year’s fourth CCR-interactive one-day editorial conference.

We distil the knowledge of the world’s leading industry analysts into one easy-to-follow day, streamed to your particular interest area. All streams have their own room and chairman, and are in round-table format, so that speakers and listeners can more easily converse and swap ideas.

We use our editorial experience to seek out the very best and most-informed speakers to share their knowledge. Key speakers this year include:

t John Kelly, senior credit manager EMEA, Doosan Infracore International, Ireland

t Bert Pijls, country business manager – consumer bank UK, Citi

t John Oldham, regional head risk analytics (Europe), HSBC

t Paul Buckham, customer financial services manager, Nike UK & Ireland

t Josef Busuttil, director general, Malta Association of Credit Management

t Massimo Lepri, EMEA credit manager, Xilinx, Ireland

t Gary Brooks, group credit manager, Hitachi Europe

For more details about attending in 2010, contact Alison Lucas on +44 (0)1702 341948 or e-mail [email protected]

In association with and

CCRi june ccrw.indd 1 14/5/10 23:19:54

CONTENTS

5June 2010

CONTENTSEditor

Freddie Dawkins

Reporter

Ian Willcox

Illustrations & Images

Dreamstime.com

Editorial Correspondence

3 Seaforth Road,

Westcliff-on-Sea, Essex, UK

SS0 7SN

Tel: +44 (0)1702 441790

E-mail: [email protected]

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Gary Lucas

Tel: +44 (0)7785 268404


Group Production Manager

Angela Willcox-Kiely

Tel: +44 (0)1206 212009


Subscriptions and Delegate Sales

Alison Lucas

Tel: +44 (0)1702 341948


Editorial Director

Stephen Kiely

Tel: +44 (0)7766 416693


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Published by

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© GTS Media Ltd (except where otherwise

stated). All rights reserved. No part of this

publication may be reproduced or transmitted

in any form or by any means without the prior

written permission of the publishers.

All currency conversions correct at time of going to

press using www.xe.com. As current rates are used,

there is no allowance for historic changes.

News 6-11

Irish bad debt agency formed 6

Risk managers’ chinese exams 8

Group set up to study mortgages 9

Reporting rules ‘false economy’ 10

Nominations open for new awards 11

Profile 12-13

John Mullins

Special feature 14-15

Commercial credit 16-19

Could segmentation work for you? 16

Spanish survey results 18

Briefing & Column 19

Consumer credit 22-24

Retail top-up loans 22


Republic of Ireland – Northern Ireland 25-30

Collections 31-34

Speed up collections 31

Outsourcing to Malaysia 33


Risk 35-37

Confidence is returning 35

Briefing & column 37

International trade 38-40

How to measure credit managers 37

Briefing & column 40

Events, web links 41

Appointments & updates 42-44

Statistics 45

Association news 46-47

ECF Q&A 48-49

Letters 50

25

28

31

35

CCRworld

www.CCRWorld.net

5 contents 15/5/10 09:43 Page 1

NEWS

6 June 2010www.CCRWorld.net

CCRworldIRELAND

WITH so many Irish creditors facing

larger and larger bad debt mountains, the

government has formed a special

department to tackle the problem, the

National Asset Management Agency

(NAMA). The role of NAMA is to collect

and manage bad debts from those

institutions seeking its help. So far, five

have applied and been accepted.

NAMA has acquired some €10bn of

the loans of the largest ten borrowers

with AIB, Bank of Ireland, Irish Nationwide,

EBS and Anglo Irish Bank. For these, the

consideration paid was €4.85bn, a

discount of about 51%. That discount is

unlikely to change very much after it

acquires the residual of the first tranche

loans from Anglo Irish Bank, which will

bring the total first tranche transfer to

about €16bn.

With the second and third loan tranches

amounting to about €21bn transferring

over the coming months, NAMA aims to

have close to half of the overall transfer

completed by the end of July.

Frank Daly, chairman of NAMA, told

CCRW: “We expect that the pace of loan

transfers will accelerate during the

second half of the year as smaller and

less complex loans can be valued and

transferred more easily. Our objective is

to transfer the remaining loans from the

five institutions by the end of the year,

and certainly no later than the end of

February 2011, the deadline set by the

European Commission.

“The Agency’s activities will have a

significant bearing on the economic

wellbeing of Ireland for the next decade

and probably well beyond. The story of

why it was necessary to establish NAMA

has been well documented. We now

know all too well of the extraordinary

expansion of bank balance sheets in the

middle part of the decade, the reckless

rush to direct too much lending into one

sector, the associated failure to secure or

document loans properly, the apparent

absence of any recognition that markets

fall as well as rise and, of course, the

failures of regulation and oversight.”

NAMA has been in existence since

November 2009, and the model itself is

relatively straightforward although the

practicalities associated with giving

effect to it are not. It is a workout vehicle,

not a mechanism for liquidation, and it

has the breathing space to take the

longer view on borrowers and assets if it

makes commercial sense to do so.

“Financial institutions in Ireland have

been paralysed in recent years by the

burden of their commercial property

loans,” said Mr Daly. “Cleansed of these

exposures and provided with securities

which can be used as collateral with the

ECB and with the market, the aim is that

institutions will revert to their core

business of business and personal lending,

and thereby facilitate the process of

economic recovery.”

To do this, NAMA will acquire about

€81bn of loans. In exchange, it will pay

consideration in the form of senior and

subordinated bonds to a value which

will be much less than the €81bn. It

was always the intention that NAMA

would acquire both performing and

non-performing loans, on the basis that it

would not be acceptable from a public

policy perspective that institutions could

pick and choose which loans were

transferred to the state. In addition, it

was envisaged that interest on the

performing loans would offset the interest

cost of securities issued by NAMA.

“The price paid for a loan by NAMA

will be based, to a large extent, on the

current market value of the underlying

property which, in turn, will incorporate

local supply and demand considerations,”

explained Mr Daly. “In the case of many

properties, the current market value may

be uplifted to reflect NAMA’s view of its

long-term prospects. This is the price

that NAMA can realistically expect to

realise on the property over a seven to

ten year horizon and is known as its

long-term economic value.”

He said that each loan would be valued

individually on behalf of NAMA and, in

addition to the value of the underlying

property, other factors taken into account

would include any other collateral

offered by the borrower and whether the

loan was performing or non-performing.

He also pointed out that where the

underlying security on a loan was

deficient, NAMA would apply a further

discount. In cases where the security

was non-existent, NAMA will acquire

loans for no consideration at all.

After acquisition of their loans, the

largest 100 borrowers – which comprise

about 60% of the portfolio – will be

intensively and directly managed by

NAMA, with key credit decisions and

IRISH GOVERNMENT SETSUP BAD DEBT AGENCYNAMA established to cover largest debts from Ireland’s

biggest financial institutions, to help ease recovery

By Freddie Dawkins

The current financial crisis highlighted once again the importance of transparencyacross the financial markets

Frank Daly, chairman, National

Asset Management Agency

6-11 news 14/5/10 20:27 Page 6

NEWS

7June 2010

IRELAND

www.CCRWorld.net

relationship management carried out by

its staff. Loan administration will continue

to be performed by participating

institutions.

For other NAMA borrowers – of which

there are expected to be about 1,400 –

credit decisions will be made by NAMA

with some very limited authority delegated

to the participating institutions.

Acquired loans will be managed so as

to achieve an optimal return for taxpayers.

Income from performing loans will

accrue directly to NAMA and, where a

borrower defaults and NAMA takes over

the underlying asset, the proceeds from

the sale of those assets will also accrue

to NAMA.

NAMA’s core commercial objective will

be to recover for the Irish taxpayer

whatever it has paid for the loans in

addition to whatever it has invested to

enhance property assets underlying

those loans. It is expected to have a

lifespan of seven to ten years, being

wound up when it has achieved its core

objective.

“After their loans have been acquired

by NAMA, borrowers will be asked to

produce business plans which will set

out detailed and credible targets for

reducing their debt, including any asset

disposals which will contribute to that

end,” explained Mr Daly.

“We expect that NAMA’s engagement

with some borrowers will be robust. Not

all of them have yet abandoned the

extravagant mindset of the 2003-2007

era. At this stage, the first ten borrowers

or their representatives have all had face-

to-face meetings with us and are now

fully aware of what is expected in terms

of the thoroughness and stringency of

their business plans. Their detailed plans,

based on a three-year horizon, must be

submitted within a thirty-day deadline,

and NAMA will then approve the plans,

reject them or refer them back to

borrowers for amendment.”

Where plans are approved, NAMA will

monitor the borrowers’ subsequent

performance to ensure adherence to

approved targets. Some borrower

projects will be commercially viable but

may need investment in order to be

completed and to generate cashflow

through rental activity or through sales.

“One of the features of a review of the

lists of eligible assets submitted by the

participating institutions is that there is a

large concentration of borrowers in the

€5m to €20m range of indebtedness,”

said Mr Daly. “Many of these are not

professional property developers: they

are people with full-time jobs who got

involved in the purchase of undeveloped

land. It is difficult to understand how

borrowers on relatively modest incomes

were advanced large sums of money to

invest in undeveloped sites in unpromising

locations. There are serious questions to

be asked about the governance of

institutions which created a system of

incentives for their staff which enabled

this lending to take place.”

Debt buyer organisations will be

interested to know that NAMA intends to

develop strategies for the potential sale

of loans or loan portfolios. A key project

will be an extensive analysis of supply

and demand factors at work for different

regions and asset classes; this will

enable NAMA to develop appropriate

and informed strategies for regions and

asset classes.

The Malta Association of Credit

Management (MACM) is celebrating its

10th anniversary this year. During the

past ten years, MACM has achieved its

objectives and has established itself as

the central national organisation for the

promotion and protection of all credit

interest pertaining to Maltese businesses.

MACM has been the catalyst to

suggest good credit management

practices within the Maltese business

environment, providing the right tools

and systems, which assist businesses to

act proactively when granting and

managing credit.

Josef Busuttil, MACM director general,

told CCRW: “MACM has also been a

pioneer, offering training and education

in the field of credit management, hence

supporting the Maltese business

community. A number of seminars,

workshops and conferences have been

organised, and an internationally

recognised education programme, leading

to diploma level in credit management

has been introduced. MACM believes

that credit management education will

present skilled credit controllers to local

businesses.

“Through its consistent lobbying

activities, a number of pertinent issues

have been addressed with the respective

stakeholders and the local business

community can now enjoy a safer credit

environment.”

In the coming year, MACM plans to

continue enhancing its existing systems

and services, whilst introducing other

services to its members.

“MACM is in the process of signing

partnership agreements with Maltese

and foreign institutions to provide new

services to its members. The objectives

of these services are to help creditors,

members of MACM, to grant and

manage credit in a more professional

manner,” explained Mr Busuttil.

In-house credit management training,

tailored to the needs of its members, will

soon be provided by MACM. This service

will aim to help members train their

employees at their office environment.

These training programmes will try to

sustain the long-term customer relation-

ship, closing more profitable credit-sales,

gaining competitive advantage in the

market, whilst securing sound cashflow,

which is the lifeblood of a business.

MACM CELEBRATES 10TH ANNIVERSARY

CCRworld

MALTA

Josef Busuttil, director general,

MACM

6-11 news 14/5/10 20:27 Page 7

8 June 2010

NEWS

www.CCRWorld.net

CHINACCRworld

CHINA’S banking watchdog has called on

the nation’s banks to ensure “balanced

and steady” credit growth, amid

concerns over the risk of bad loans

following rampant lending in 2009.

The China Banking Regulatory

Commission said it urged banks in a

nationwide conference call to “strengthen

credit management” and “strictly control”

any rebound in non-performing loans.

The commission said: “The domestic

and global macroeconomic and financial

situations suffer from complexity and

uncertainty, which has highlighted the

need for scientific management in our

banking industry.”

The banking regulator said it also

encouraged lenders to beef up

supervision of loans to the real estate

sector, which some analysts believe is at

risk of overheating.

The statement comes after reports

that authorities had ordered several

banks to stop issuing new loans amid

growing fears that the extra money is

fuelling inflation and could lead to a

sharp rise in bad debts.

Credit Suisse said in a recent research

note that six banks had confirmed new

lending had been suspended in the first

quarter of 2010, after an emergency

meeting by the central bank’s monetary

policy bureau.

New loans at Chinese banks totalled

¥9.6tn (€0.16tn) last year – nearly

double the 2008 figure – and the

banking regulator has set this year’s

target at about ¥7.5tn (€0.87tn).

Liu Mingkang, chairman of the banking

regulator, has denied state media reports

that banks had been ordered to stop

lending.

FIRST CHINESE-LANGUAGEEXAMS FOR RISK MANAGERS

WATCHDOG CALLS FOR STEADY GROWTHCHINA

THE Professional Risk Managers’

International Association (PRMIA) and

PRMIA’s partner in China, Beijing Prming

Education Counseling Corporation

(PECC – www.prmiachina.org.cn) have

announced that on April 24 the first

sittings of PRMIA’s international risk

management examinations were run in

Chinese.

Chinese students can now take

internationally-recognised qualifications

covering all aspects of financial risk

management, being able to both study

for and sit the examinations in Chinese.

In this way PRMIA and PECC are

contributing to the development of risk

management standards both in China

and the rest of the world.

The qualifications consist of PRMIA’s

advanced professional risk manager

(PRM) designation, and the Chinese Risk

Management Certificate, comprising

PRMIA’s Associate PRM certificate and a

specially developed second examination

consisting of a China-specific risk

management syllabus. PRMIA’s exams

are identical both in English and in

Chinese.

David Millar, chief operating officer of

PRMIA, told CCRW: “This is a real

advance for us and a serious expansion

of our status and qualification in China.

We have been working hard for some time

to establish our professional credentials

in China, and this is further proof of our

commitment to business there.”

Dr. Wang Li, executive director of the

TEHUA Post-Doctoral Research Station,

told CCRW: “It is wonderful that PRMIA

has set up two exams for the Chinese

Associate PRM in Greater China, which

involved the Chinese risk management

practices.

“Regarding the features and

achievements of ‘a road with Chinese

characteristics’, the development path of

China’s financial industry gradually

formed its different market environment,

innovation environment and regulatory

requirements, so it is necessary for

China’s financial industry to develop the

standard of risk management based on

realistic local demands.

“From this perspective, I believe that, by

combining international risk knowledge

and Chinese risk practice together,

PRMIA will have set the higher standard

of risk management in China.”

There was a high pass rate of the two

examinations of 78%. Candidates

passing both examinations will receive a

certificate of Chinese Risk Management

prowess as well as PRMIA’s Associate

PRM certificate.

Dang Junzhang, general manager, risk

management department, Postal Saving

Bank of China, told CCRW: “How to train

more qualified risk management talent for

banks is one aspect of my work. Besides

banks organising training for their staff,

we also like to see more independent

third-party professional institutions

appearing on the market, and help per-

sonnel working in related fields to

improve their professional skills.

“This is why I came to sit the

examination: in terms of exam book,

teaching arrangements, quality of exam

questions, the effect fully satisfied my

objectives.”

David Millar, COO, PRMIA

6-11 news 14/5/10 20:27 Page 8

NEWS

CCRworld

9June 2010

AN expert group, appointed by the

Irish Government to recommend ways to

help people in mortgage arrears, has

met for the third time.

They are tasked with presenting

recommendations to the government to

help individuals and small businesses in

financial difficulty.

The group is focusing initially on

bringing forward recommendations to

deal with the growing mortgage arrears

problem, and will later address the issue

of personal debt.

Declan Flood, of the Irish Institute of

Credit Management, told CCRW: “It will

be interesting to see what implications

this will have for credit managers – who

are not represented on the group.”

Irish ministers Brian Lenihan and

Eamon Ryan announced the establishment

of a group of experts to work with the

government on a response to the issue

of indebtedness.

The experts will work within government

and present their recommendations on a

rolling basis to the minister for finance.

The terms of reference are based on

the ‘Renewed programme for government’

and include mortgage and non-mortgage

debt. They include an examination of

measures to assist those in mortgage

arrears to keep possession of their family

home, with reference to the measures

adopted in other jurisdictions.

The ongoing deliberations of the Law

Reform Commission will be considered,

specifically reform of personal insolvency,

bankruptcy law and debt enforcement.

Minister Brian Lenihan told CCRW:

“Keeping families in their home is a social

and economic priority. The government

also wishes to remove, as far as practicable,

debt enforcement proceedings from the

courts. In our efforts to achieve our aim,

it is important that we do not jeopardise

the ability of the financial system to access

credit. There are no simple solutions to

the debt issues we now face.

“We are confident that the wide

membership and expertise of all the

individuals involved, working closely with

government, will bring forward innovative

recommendations on debt management

and enforcement.”

Minister Eamon Ryan told CCRW: “ We

will introduce new measures to protect

families having difficulties with their

home mortgage payments.

“The existing statutory Code of

Conduct on Mortgage Arrears and the

recently-agreed protocol between the

Irish Bankers Federation and the Money

Advice and Budgeting Service on debt

default will be further reviewed, with a

view to expanding the options available

for dealing with debt situations including,

for example, the use by banks and

lenders of more flexible mechanisms to

avoid foreclosure in appropriate

circumstances.” Minister Ryan added

that changes might include:

� Reduced rates.

� Longer maturity dates.

� Rolling-up of outstanding interest.

� Bank taking equity in the house.

� Bank taking ownership and leasing

back the property to the resident, with

rent payments coming off the loan.

He said: “We will reform debt

enforcement in light of the deliberation

of the Law Reform Commission, which

has recently published a consultation

paper on the matter. We will certainly

regulate debt collection agencies and we

will create a new system of personal

insolvency regulations, allowing for a

statutory non-court-based debt

settlement system.

“We will also seek to establish a

central Debt Enforcement Office to

remove as many debt enforcement

proceeds from the courts as possible.”

www.CCRWorld.net

EXPERT GROUP TOSTUDY MORTGAGES

IRELAND

LATE payment continues to be an issue

for businesses in Ireland, according to

new research. On average, in 2009, Irish

businesses settled their bills 25 days

beyond credit terms, five days slower

than companies in Northern Ireland,

which paid their bills on average 20 days

beyond terms.

By analysing the payment records of

tens of thousands of businesses in

Ireland and Northern Ireland, including

those owned by overseas companies,

Experian was able to identify both if and,

crucially, when they are going to pay their

debts. The latest payment performance

analysis reveals that:

� Irish businesses paid their bills on

average 25.33 days beyond terms in the

final quarter of 2009, compared with

24.66 days beyond terms in the third

quarter.

� However, the final quarter figure of

2009 was much improved on the first

quarter, when Irish businesses were

paying their bills on average 27 days

beyond terms.

In comparison, businesses in Northern

Ireland paid their bills on average 18.14

days beyond terms in the final quarter of

2009 and 20.41 in the first quarter of

2009.

The second quarter of 2009 recorded

the worst performance, when Northern

Irish businesses paid their bills on

average 22.41 days beyond terms.

Cavan businesses were the quickest in

the country to pay their bills, averaging

just 21.28 days beyond terms in 2009.

At the other end of the scale,

businesses in Waterford were the slowest

to settle bills, paying on average 32.15

days beyond terms.

LATE PAYMENT IS STILL

AN ISSUE IN IRELAND

IRELAND

Declan Flood, of the Irish Institute of

Credit Management

6-11 news 14/5/10 20:27 Page 9

10 June 2010

NEWS

www.CCRWorld.net

EUROPE

A EUROPEAN Parliament (EP) vote back

in March, to allow micro businesses to be

exempt from the EU financial reporting

regime as laid out in the Fourth Company

Law Directive, could be a vote for less

financial transparency.

According to the proposals agreed on

10 March, incorporated businesses

meeting two of the three criteria laid

down by the EP will no longer need to

file statutory accounts at official registries

such as Companies House, for public

scrutiny.

Businesses with fewer than 10

employees, a balance sheet total under

€500,000 or a turnover of less than

€1m, will be eligible under the new

rules, should individual member

governments follow suit and vote for the

exemption in their own countries.

Martin Williams, managing director,

Graydon UK, said: “During the recessionary

years, trade suppliers, credit insurers and

banks have been demanding greater

financial transparency from potential

customers, including micro businesses,

in order to grant finance and credit to

those in desperate need of it.

“Less financial information on limited

liability companies, however small, may

well lead to that crucial door to trade

credit being more difficult to open.”

Supporters of the proposal have

praised the vote as a step towards the

European Commission’s target to help EU

businesses grow by reducing their

administrative burden by 25% by 2012,

in line with the Commission’s ‘Think

Small First’ principle.

Philip King, chief executive of the UK’s

Institute of Credit Management, said: “It

will have exactly the opposite effect. Less

information means less credit will be

extended and, as a consequence, growth

will be impaired rather than encouraged.

Mr Williams agreed: “What worries me

is that any cost savings that micro

businesses accrue from this proposed

change to the law will be more than

offset by the losses incurred to them by

making it far more difficult to obtain

credit. It is a false economy.”

FINNS HAPPY WITH OWN MORTGAGES,

BUT THINK OTHERS ARE OVERINDEBTED

CCRworld

FINLAND

A NEW survey in Finland indicates that

7% of Finns think that they have too

large mortgages. However, nearly 70%

of the respondents who have a mort-

gage on their home thought that many

other households have taken out too

large loans. Eight out of ten are satisfied

with their living and housing loan

situation.

One in three respondents spends 20%

or less of their monthly net income on

mortgage payments. Young people

generally spend more of their monthly

net income on repaying their housing

loans than the older age groups. One in

six respondents aged between 25 and

34 says that they spend over 40% of

the household’s monthly net income on

mortgage payments.

The survey, commissioned by Nordea,

also shows that Finns are uncertain

about how much higher monthly mortgage

payments their household could cope

with: 37% of the respondents chose the

alternative “cannot say”.

“This is alarming given that, at

present, interest rates are very low.

These households in particular should

absolutely be prepared for a rise in

rates, especially if they have much left

of the loan to repay and they have not

put aside much savings and have less

flexibility overall,” Anu Numminen,

Nordea’s private economist, told

CCRW.

One of the questions of the survey

dealt with the sense of safety in relation

to the size of the housing loan. Eight out

of ten respondents said that they feel

safe when the mortgage represents 50%

of the market value of the home or less.

Young people are generally more

comfortable than older people, even if

the mortgage was higher than this.

Six out of ten respondents believe that

interest rates will rise in 2010, and 40%

of them also expect the prices of flats

and houses to rise in 2010. Nearly all

the respondents are amortising their

housing loans, and few households are

paying interest only.

“Paying interest only is, perhaps a bit

surprisingly, more common in the older

age groups, but the majority of them,

too, are repaying their loan regularly. This

would seem to indicate that Finns still

have a relatively sound attitude,” said Ms

Numminen.

� Nordea examined the situation of

Finns and their attitudes towards

mortgages and housing loans. The target

group of the survey was homeowners in

the age group of 25-65 who have taken

out a loan for their flat or house.

In Finland the survey included 994

interviews. A corresponding survey was

conducted in Sweden, Norway and

Denmark between 19 February and 1

March 2010.

REPORTING RULES‘FALSE ECONOMY’

Philip King, chief executive, Institute

of Credit Management

6-11 news 14/5/10 20:27 Page 10

CCRworld

11June 2010 www.CCRWorld.net

NEWS

INTERNATIONAL

NOMINATIONS are now open for the

international credit industry’s new

awards scheme, called for by senior

industry professionals and produced by

GTS Media, the publishers of CCR World.

The Credit Excellence Awards, in

association with Philips’ Homecoll service,

will bring together the most outstanding

participants in each of eight awards

categories.

They are unique, as applications for

each category are open to the whole

range of the industry in those sectors.

So you can apply if you are an individual

credit professional, a team, a consumer

or commercial creditor, or a supplier

company, or a product.

The Credit Excellence Awards will be

rigorously judged, by an independent

panel of experts, so applicants must be

prepared to give significant amounts of

relevant information to support their

application. They must also be prepared,

if asked, to come before the judges

so that they can answer questions face-

to-face.

Stephen Kiely, editorial director of

CCRW, said: “It is a very proud moment to

be able to officially open the nominations

for the Credit Excellence Awards.

“Feedback so far suggests that we

are going to have a very strong list of

candidates and we intend that a Credit

Excellence Award in each area will be

seen as the highest level of award in

that area.”

The event will be held on the evening

of the CCR-interactive Gala Dinner, on

5 October 2010 at the prestigious

Guoman Tower Hotel in central London.

It will be run in aid of Great Ormond

Street Hospital, and a proportion of all

sponsorship revenue will go directly to

the charity.

� For more information on submitting a

nomination, contact Stephen Kiely on

[email protected] or visit

www.creditexcellenceawards.com.

NOMINATE NOW

FOR NEW AWARDS

in association with

CCRcreditexcellenceawards2010

Credit Excellence Awards nominations are now open, for

outstanding applicants in eight categories

By Ian Willcox

AWARDS CATEGORIESCredit Excellence Awards will be awarded in eight categories, six of which run in

parallel to the conference streams at CCR-interactive:

� International credit management.

� Consumer credit management.

� Commercial credit management.

� Collections.

� Risk.

� The legal and enforcement profession.

� Newcomer to the industry.

� Contribution to the industry.

CCRW is pleased to welcome on board the

Credit Services Association (CSA) and

Debt Buyers & Sellers Group (DBSG) as

the latest members of their Association

Zone at the CCR-i conference in October

2010, where the trade bodies will be

launching their well-established diploma

course for the debt collection industry.

The CSA will be attending

CCR-interactive, in association with

Philips’ Homecoll service, with the team

from head office ready to answer both

members’ and non-members’ questions.

It will play a key part in the day, with a

stand in the newly-created Association

Zone, where members of the head office

team will be on hand for delegates.

Peter Wallwork, chief executive officer

of the CSA and DBSG, who will be

chairing the Collections stream at

CCR-interactive, said: “Meeting members

and other industry bodies, as well as

being provided with the opportunity to

promote our well-established diploma

course, is our main objective, and

CCR-interactive provides us with the

perfect platform and opportunity to

reach a wide target audience with their

ever-growing delegate numbers.

“Our own conference will be taking

place on 8 and 9 September, however

CCR-interactive allows us to explore

further their excellent networking

opportunities as well as an additional

chance to show to the industry just what

we have to offer with our Diploma 2011.”

CCRW and the CSA will be working

together to promote both industry

conferences, engaging the industry and

providing further networking opportunities

for all.

Stephen Kiely, editorial director of

CCRW, said: “We are very proud to

welcome the CSA and DBSG as part of

the Association Zone at CCR-interactive.

Working with, and bringing together, all

the trade bodies in the credit industry

has always been a big part of what we

do at CCRW.

“They play a crucial role in the

industry and we are pleased to promote

that, and in return we are delighted that

they will be promoting the benefits of

CCR-interactive.”

CSA TO JOINWITH CCR-I

6-11 news 14/5/10 20:27 Page 11

PROFILE


FACING NEW CHALLENGES INTHE CONSUMER MARKET

John Mullins was appointed chief

executive and member of the

board of Bord Gáis in October

2007. With more than one million

residential customers and nearly 50,000

business customers, turnover for BGE

(the group) for 2009 was €1,349m.

The commercial scene has changed

substantially in Ireland, with the

introduction of deregulation and a more

open, competitive energy supply market.

Bord Gáis Energy has been supplying

electricity to Irish businesses since 2001.

“Our credit management mission is

quite straightforward,” explains Mr

Mullins. “To manage the credit risk

exposure by balancing the credit

policies and cashflow requirements of

the organisation with the needs and

financial capabilities of our customers.”

The compay’s mission is set within a

structure of a team of 25 in-house, with

a further outsourced team providing

first-line support to residential customers

for payments and collections of arrears.

“With the deregulation of the Irish

energy market and increased competition,

our customer base has increased and

therefore our accounts receivable is

increasing as a result,” he says.

“To measure and control our internal

finances, we naturally measure day from

sales outstanding, total cash collected,

and we also have other relevant key

performance indicators.”

Of course, like much of the world, the

national economic climate has changed

radically in Ireland in the past two years.

“Credit management is vitally important

to a business that interacts with a million

customers in gas and electricity, and

deals with every form of demography,”

says Mr Mullins.

In addition to that, he adds, the

company has relationships with industry

as well. “At industrial level, we have very

large users of gas and electricity, and

then we have medium size users at a

commercial level. So, we are dealing

with effectively every segment of society,

and as a result, you have to orientate

your collections and credit towards each

element in turn – and there are different

expectations from each segment. So, it

can be quite a complex area.

“I would say – particularly over the

last few years – what we have seen in

times of boom was maybe less of a

concentration on credit and collection

management. Because essentially

revenues and growth were effectively

providing increased profits – not only for

utilities but clearly across other sectors.

“But we all knew the good times

could not just keep on rolling – and

what we have seen quite clearly since

we had the economic downturn, which

meant effectively from the second quarter

of 2008, is an increasing requirement

to manage cashflow within the business.

And also to manage debtor days.”

Mr Mullins explains that, thinking

about the fact that there are fairly

defined creditor days in commodities,

whether you are buying electricity or

gas, you need to try and keep your

billing and collection cycle in line with

such commitments from a cashflow

point of view, so it is a critical part of

what he has to do.

“Certainly I think over the last year

and a half we have had to become

more sophisticated in addressing the

issues that have arisen,” he says. “And

as a result, we certainly have, I would

say, intensified our resources in that

area and we will continue to do so over

the next number of years.

“In 2008 we invested in a new billing

and collections system from Oracle, and

are committed to best-in-class technology

and investing in people to bring not

only the company, but also our credit

and collections department, forward to

be fit for purpose in our expanding

marketplace.”

We asked Mr Mullins – with reference

to the change in the economic climate

that he referred to – to talk a bit about

the politics of utilities and when it is

suitable to de-energise, or disconnect

the supply, from a premises?

“I think in many ways being a state-

owned utility gives us a different sort of

socio-economic definition. As somebody

who worked in the UK and elsewhere

with utilities, there would be a very

different attitude. It is much more about

the fact that you are a private-sector

entity delivering a private sector service.

“We provide a service which is state-

sponsored, and as a result our approach

should represent effectively the sort of

socio-view of the day. Clearly in times

like now, when we have negative growth

in the economy and over 400,000

people unemployed, we are facing real

tough decisions about how to maintain

supply while still securing payment.”

He says that at least half of those

unemployed citizens would be in their

catchment in gas and all of them in the

catchment area in terms of electricity,

and there is an expectation that maybe,

just like the banks in the context of

mortgage payments, with the Irish

government’s National Asset Management

Agency, that a utility would be more

sympathetic to non-payment of bills.

“At the end of the day, what has to be

very clearly communicated by a company

like Bord Gais, is that we are a commercial

CCRworld

Over the last year and a half we have had tobecome more sophisticated in addressing theissues that have arisen

As chief executive of one of the leading Irish energyproviders, Bord Gáis, John Mullins has seen recent eventsaffect his customer base, and adaptation has been vitalBy Roisín Gilroy

12-13 14/5/10 20:28 Page 24


CCRworld

semi-state company.” he says. “This

gives us effectively an independence to

run a company, to offer a service and to

make sure we assure cashflow into the

company so that we do not operate at

a loss. We have a mandate to operate

at a profit.

“As a company, we have been at the

fore of looking at things like fuel poverty,

looking at mitigations in that regard,

looking at putting in revenue protection

mechanisms from the point of view of

pre-payment meters. I have lobbied

heavily to introduce free installation of

pre-payment meters for those who are

finding it difficult.”

So in terms of his view of credit

management, are they seen as passive

collectors, gate keepers or a dynamic

profit centre?

“I think I see them as a dynamic profit

centre, or effectively where I see profit

assurance – that is probably a better

description of it,” says Mr Mullins.

“Ideally, you are dealing with cashflow

and if my debtor days are well in excess

of my creditor days, I have a problem, I

have a financing cost. As a result that

financing cost is going to impact on my

bottom line. It is a very simple formula.

“If you are sitting at my desk, that is

the prime driver: to assure ourselves

that we are as close as possible – we

all have little differentials between our

creditor days and our debtor days.”

He also thinks it is important to

emphasise that, whilst it is a profit

centre, that they are running a business

and are there to make a profit. “We are

actually quite sympathetic to payment

plans, budget plans and pre-payment

meters, so of course we are sympathetic

with certain segments, particularly in

the antics of where we are at now.

“But also, the technological change in

terms of how payments are made, all of

these are issues that we have to embrace

in terms of using technology going

forward, so there is also an envisioning

that needs to take place. What we must

ensure is that we offer as many channels

as possible to the use of technology

and emerging technologies for people

to use, in terms of ease of payment.”

Mr Mullins explains that the company

has strategic partnerships with its credit

scoring partners and works closely with

its third-party collections call centre

provider, a piece of work currently up

for tender, along with suppliers for third-

party debt collection for both residential

and commercial customers.

“In terms of our own internal scoring,

our billing system is now armed with an

internal credit rating. For the future, under

the home services division, we are

looking at financial support and payment

of bills. This something that we are

reintroducing after many years of not

having it.

“Certainly the times that we are living

in today – what people are looking for

in terms of finance, there is a lot to

contend with. We are looking at partner-

ing with banks for larger pieces of BER

rating-type work, say as an example,

cavity installations, and all of those

kinds of energy saving measures – but

for anything less that €2,500 we are

looking to give customers the chance to

pay for these extra services on the bill.

“These are certainly developments

which will be very attractive to people,

in the absence of personal finance

arrangements in the open market.”

CCRW

Roisín Gilroy is credit manager at

Bord Gáis Energy


PROFILE

12-13 14/5/10 20:28 Page 25

SPECIAL FEATURE

14 June 2010

In the first of this two part article

(“Great expectations – but what

happens now?”, pp14-15, March

2010), I challenged the assumption

that it was solely up to the world’s

politicians to control global warming

and to ensure the sustainability of

scarce resources to benefit future

generations.

And I also indicated that

sustainability is not just a matter of

social conscience or philanthropy, but

can also be the source of additional

profitability for those businesses that

take sustainability seriously, and not as

a side issue.

In part two, I want to illustrate this

potential for profitability, by citing

examples of those businesses who

have made sustainability a central

pillar of their strategy and profited as a

result – through their bottom line results

and also through the perception of their

brand: and those two often go hand-

in-hand.

But I will also criticise those who

treat ‘sustainability’ as a marketing

ploy, rather than a genuine corporate

philosophy – as a way to present

themselves in a favourable light that

they really do not deserve.

True regard for the environment

First, then, some examples of businesses

that have taken the bull by the horns,

so to speak, and aggressively sought to

combine a regard for the environment

with accruing real commercial benefits.

You may recall from part one of this

article that I referred to Atradius’ white

paper Is sustainability incompatible with

business growth?. Walmart, whose

case study features in the white paper,

works with its suppliers to ensure

that they maintain high sustainability

standards, and has found that this has

allowed it to reduce the costs of its

own goods and pass on cost benefits to

its customers.

3M, another company researched for

the white paper, has regularly topped

the Dow Jones Sustainability Indexes –

which measure the financial performance

of sustainability-driven companies across

the world. And how is this for foresight:

in 1975 – yes, 1975 – 3M introduced

its 3P programme, “Pollution Prevention

CCRworld

www.CCRWorld.net

It is common sense, and it makes good business sense: by managing energy andreducing waste you increase profits

14-15 feature 14/5/10 20:32 Page 30

www.CCRWorld.net 15June 2010

SPECIAL FEATURE

CCRworld

Pays”. This was quite possibly the first

business initiative to link a regard for

the environment with company profit.

Since its inception, 3P has saved 3M

more than $1.2bn.

And, while it cannot yet claim to be a

green company, Atradius is active in the

reduction of pollution and waste as a

way to couple environmental protection

with cost savings. Our group headquarters

in Amsterdam and our main office in

the US, for instance, both benefit from

designs that minimise CO2 emissions.

We source from major suppliers who

can prove their sustainability credentials,

the organisation has a strict travel policy

which helps minimise emissions, and

recycling is common practice.

None of this is rocket science for any

of the many organisations which take

sustainability seriously. It is common

sense, and it makes good business

sense: by managing energy and reducing

waste you increase profits.

Let us not forget either that most

ethereal of assets – brand value. While

there are undoubted hard-nosed

commercial reasons to adopt a policy

of sustainability, there is no escaping

the fact that such a policy will establish

you as the good guy. And, in a world

where so much of commerce and

industry is viewed cynically, that is no

bad thing.

Greenwash

But be warned. There are always going

to be those, in business and in politics

too, who will attempt to enhance their

‘brand’ by adopting a veneer of

sustainability unsupported by their

actions – a practice that has come to

be known as “Greenwash”.

For instance, I’m always slightly

dubious about some supermarkets’

claims to ‘greenness’, when most of

their produce is still swathed in

cellophane and expanded polystyrene.

And ‘carbon trading’, an idea so often

extolled by politicians, leaves loopholes

you could drive an SUV through (more

on them later). Put simply, carbon

trading allows the purchase of credits

to continue emitting greenhouse gases.

So it essentially lets countries and their

industries keep on polluting if they

choose to – at a fee – without the vital

ingredient for a sustainable future: a

change in attitude or behaviour.

What about the businesses that still

lag behind the leaders in sustainability?

What can spur them to clean up their

act – and profit from the exercise?

It is a cliché, but to a large extent the

answer is ‘people power’.

Customers can vote with their feet

if they do not like the way a company

operates. And, if people choose to opt

for a fuel-efficient family car rather than

a gas guzzling SUV, it is down to the

manufacturers to respond accordingly –

change their offering or watch sales

figures fall. Take the example of General

Motors’ Hummer.

But ‘people power’ exists within

businesses as well. Educating and

inspiring staff to live by a sustainability

code, in work and in their private lives,

makes it that much easier to create a

sustainable work ethic that runs naturally

through the whole organisation.

Triple bottom line

A phrase that is gaining in currency –

and one that I think neatly encapsulates

the message to business – is the ‘triple

bottom line’. It means that a company’s

bottom line is not just a measure of

profit, but encompasses two other

elements – people and planet.

Let me explain. I said earlier that

sustainability is not about philanthropy

or charity, and that is what many

businesses fail to grasp. It is not a

distraction for the company’s directors,

to be addressed simply by writing the

odd cheque.

A truly sustainable business does

not need to donate anything to the

community, because the company’s

daily operations do not deprive the

community of anything. In fact, they are

constantly enriching their community,

their customers, and their employees.

As a result, a new set of ethical

values then sits comfortably alongside

the business’s economic values. And

that feels good – to

the business, its

employees, share-

holders, customers

and neighbours.

CCRW

All businesses need to embrace a sustainable way ofoperating, but it does not have to be to the detriment ofyour company’s profits – it may even be beneficialBy Simon Groves

INTEGRATE SUSTAINABILITYINTO YOUR DAILY BUSINESS

A truly sustainable business does not needto donate anything to the community,because the company’s daily operations donot deprive the community of anything

Simon Groves

is experiential

marketing manager at Atradius


The original white paper can be

downloaded at: http://global.atradius.com/

creditmanagementknowledge/publications/

studies-and-papers.html

14-15 feature 14/5/10 20:32 Page 31

16 June 2010

CCRworld

www.CCRWorld.net

Historically, organisations have

used segmentation in various

different departments, such as

marketing departments, where it is used

to try and define or locate new target

clients.

In the sales department, segmentation

is usually applied to differentiate large-

volume clients, who are treated differently

and receive different sales conditions

from the others, and to identify clients

that consume certain products or services

in order to ‘cross-sell’ or ‘up-sell’ to

increase sales.

In the financial department, based

on my years of experience dealing with

the managers of these departments,

segmentation is based on the level of

risk, the volume of risk, payment

schedules and so on, for each client, in

order to monitor, control and accept, or

not, commercial risks.

A client’s journey along the sales

‘pipeline’, from its identification by the

marketing or sales department, its

consideration as an asset of the

company, and its ongoing relations

with the company, its loyalty, is where in

the majority of cases, potential client

databases are required. In the early

stages these can be either internal or

purchased from independent companies

that specialise in supplying these types

of services.

What kind of database?

Companies need to grow on a yearly

basis, in terms of sales or client volume,

and they therefore usually resort to

obtaining a database to identify new

business opportunities.

In general, apart from the normal

segmentations by, for example,

activity, sales, geographic location or

employees, the two main requirements

for a database are, in no particular order:

� That the database is up to date – in

other words, that the company that

provides the database has the appropriate

mechanisms to permanently maintain all

the fields of each record as up to date

as possible, which is associated with

the following:

� That the information provided is

accurate, which depends on the

information sources from which the

data is obtained, in order to prevent

high average rates of returns, non-

productive calls and visits and to gain

maximum advantage from its use.

Once the database has been

requested, the first variable usually

used to measure its efficiency is the

returns rate. After this, the company

may measure the number of ‘hits’,

contracted clients, response method

indices, and so on.

However, what should really be

asked beforehand is ‘do they contain

information on potential clients that I

really want to approach?’ and ‘are they

clients that I want to have as an asset

on my balance sheet?’.

You have to remember that no client

transaction is signed today with

immediate payment. In reality, many

months may go by between the order

being placed and the payment being

collected, depending on the sector,

product or service.

Solvency can be established from

the perspective of a company’s

payments (ratios) through financial

and book analyses of its data as at

today, using investigated reports;

however, this data is usually 12 to 18

months old.

The goal has to be to establish their

future situation, months in advance, in

order to determine whether or not they

are suitable for your portfolio and the

level of commercial risk you wish to

assume, avoiding unpleasant surprises

due to default.

You must also take into account that

many companies that appear in the

Companies Registry are not active;

they are companies that, in the current

economic situation, have been forced to

close and, for various reasons, have not

been cancelled by the registrars.

In most cases, these inactive

companies continue to appear in these

databases, with the consequent wasted

resources from contacting them.

Saving finances and resources

If a client with a high risk of payment

default is not of interest to the

company, how much marketing and

sales efforts, both in terms of finance

and resources, could be saved if you

could make a prior segmentation

based on the levels of default risk

probability?

Clearly, you could make significant

savings in every department, as the

investment would be oriented towards

capturing only those potential clients

COMMERCIAL CREDIT

� Could segmentation

work for you?

� Spanish survey results

� Building an export trade

� A long association

CLIENT SEGMENTATION:HOW, WHEN AND WHY?

There may be a way to reduce wasted resources andfinances chasing undesirable clients, while also targetingthose customers that it may be worth investing inBy Gustavo Sousa

The goal has to be to establish their futuresituation, months in advance, in order todetermine whether or not they are suitablefor your portfolio

16-17 feature 14/5/10 20:32 Page 30


CCRworld

COMMERCIAL CREDIT

that are of financial interest as assets to

the company.

In the current economic and financial

climate, companies are operating in a

changeable and precarious environment,

given the high levels of delinquency

and its domino effect, and this problem

is one of the main reasons for the

disappearance of companies, and

especially self-employed individuals, in

Spain. It is therefore vital to take two

types of action:

� Ensure that all marketing and

commercial actions are directed towards

clients that do not have present or

future default risks, at least during the

next 12 months – you can leave the

rest for the competition!. This will

prevent adding potentially dangerous

clients to your portfolio.

� Carry out periodic and preventive

analyses of your client databases in

order to take preventive measures,

months in advance, against possible

future payment defaults.

Where to find information

Do these tools exist? Can this be done?

Reality or fiction? The answers is, yes,

they do exist. There are databases

drawn up from personal interviews with

the managers directly responsible for

companies in Spain, in which the

data provided is compared, updated

and verified.

These include tools such as Predictive

Delinquency Rating, which indicates the

company’s probability of default, 12

months in advance and with an

extremely high, empirical and truly

demonstrable level of reliability and

accuracy.

Moreover, they are affordable

instruments within reach of all types of

companies, due to their ease of access

and handling and their low cost.

If, in addition to using databases

segmented using the aforementioned

criteria, you use the suitable channels

and means to approach current or

potential clients, offering each of

them, in a personalised manner, the

product that suits their needs, this

will undoubtedly give you some very

powerful tools with which to ensure you

achieve your goals, regardless of the

department in which the activity is

carried out.

I could mention numerous success

case studies, from large utilities,

multinationals and financial institutions

to SMEs and self-employed individuals,

in all types of business sectors in which

these types of services are requested:

� For carrying out marketing and sales

actions aimed solely at truly profitable

targets.

� To establish periodic monitoring of

the credit quality of existing clients,

providing clear warning signs of default

months before the problem occurs,

thereby enabling action to prevent it

The results have been genuinely

successful and quantifiable. Reductions

and savings have been made in the

following areas:

� From investment in databases,

given the exceptionally low returns rate

– no hits are lost due to out-of-date

data.

� By only approaching profitable clients

you remove between 30% and 40%

of records with high levels of default

probability.

� By eliminating inactive companies.

� By reducing the number of

delinquent clients and the associated

costs.

� By reducing the percentage of the

portfolio with risk of delinquency.

� By reducing the usual tension

between the risks and sales areas

caused by the acceptance or rejection

of transactions.

Increases and benefits have been

found in the following areas:

� From the efficiency of hits resulting

from sales and marketing actions.

� Lower financial costs and increased

cashflows.

� In sales.

� From motivation of the sales network.

� From transactions accepted by the

risk department.

� In the client

portfolio.

Why not put it

into practice?

CCRW

Gustavo Sousa is

regional manager

for Iberinform Internacional, SAU


16-17 feature 14/5/10 20:32 Page 31

COMMERCIAL CREDIT


CCRworld

SPANISH SURVEY DEFINESRISK AND CREDIT TOOLS

A NEW online survey, through the

Spanish LinkedIn group Morosidad e

Impagos (Delinquency and Default)

recently concluded with some

interesting results.

The group, based in Spain and

comprising commercial credit managers

and third party service suppliers,

discovered that:

� A total of 23% of companies

control client risk mainly through

commercial or financial reports on their

clients, provided by specialised external

suppliers.

� Just over 12% of companies in Spain

use credit insurance as their first option,

which combines the possibility of a

default risk appraisal with compensation

and recovery.

� Some 60% of companies use an

external tool as the basis for their

commercial risk management. This is

one of the main conclusions reached by

the working group of more than 300

professionals related to delinquency

control and default risk in different sized

companies in different sectors.

Looking first at the reports supplied

by external credit reference agencies,

these provide information filed with

public registries, access to financial

data and information on the company’s

activity levels, their influence in their

geographical area, stock levels, client

portfolios, suppliers, and the banks

which they use or default appraisal

forecasts.

The second most valued external

service, used by 12.3% as their first

option, is credit insurance. Credit

insurers, particularly those integrated

in a global operator, have developed

significant capacity to appraise default

risk, since this is what they insure,

with constant communication about

extensions, delays and defaults – all

of which provides dynamic and real

time data on companies’ payment

performance. In the case of default,

their evaluations are covered by an

insurance that usually also includes

recovery services.

Confirming and factoring services,

and employing an external recovery

service, complete the external

strategies used by companies to fight

delinquency.

A total of 35.7% of companies use

internal tools for default risk control.

Another 22.8% analyse their clients

based on their own information, which

includes the history of their relationship

and its evolution.

Only 10.8% of companies have

developed forecasting models to

appraise the possibilities of default in

the coming months based on their own

information. Self-insurance, consisting

of making provisions for default, is the

first option for 2.1% of companies.

Finally, 3.9% of companies admit that

they do not have any clear strategy to

control delinquency.

There is a wide range of solutions to

deal with the problem of delinquency.

Although the study seeks to clarify the

main strategies used by companies, it

only shows their first option.

In practice, almost all companies

usually combine several of these, since

they are complementary tools. CCRW

A Spanish online networking group has investigated the

preferred methods of members to controlling client risk

By Freddie Dawkins

Freddie Dawkins is editor of CCR

World magazine


To join the group, go to:

www.linkedin.com/groups?gid=237781

6&trk=hb_side_g

External reports

23.4%

Credit insurance

12.3%

Credit insurance

12.3%Factoring

7.5%

External recovery

management

6.6%

Internal information

22.8%

Forecasting models

10.8%

Self-insurance

21.%

None

3.9%

Figure 1. Main commercial risk management tool

Credit insurers have developed significantcapacity to appraise default risk, with constantcommunication about delays and defaults

18 article 14/5/10 20:33 Page 24

COMMERCIAL CREDIT

June 2010 www.CCRWorld.net

BUILDING AN EXPORT TRADE

CUISINE de France (CDF) offers the

consumer traditional French breads,

pastries and a range of continental-style

breads, confectionery and hot savoury

items. The company offers a complete

bake-off solution primarily to the retail

industry, as well as staff training and

category management to enable the

timely delivery of ready-to-bake products.

The company has operations in

Ireland, France, and the US. The Dublin,

Ireland-based company is owned by

Swiss specialty bakery firm, ARYZTA.

I relocated back from Brighton to my

current role in 2000 – so my 10 year

anniversary is coming up. The initial role

was credit control manager for CDF

only. However over the years this has

expanded to cover business acquisitions

including Carroll Cuisine and Gallaghers.

My role also includes management of

the master file for all four businesses –

CDF ROI, NI, Carrolls & Gallaghers. I

won the credit manager of the year

award in November 2005.

The company was set up in Dublin in

1989, making and selling breads made

from French flour – a 100% Irish

company. They later sold the company

to IAWS in 1997 and the rest, as they

say, is history.

Around 80% of our business is in

the large retail chain stores, with the

rest being spread across the retail

convenience and food services sector.

We have a joint venture with Tim

Hortons for coffee also.

Weathering the storm

With the Irish economy and business

sector taking such hard knocks in the

past three years, how has the firm

fared? Suffice to say we have felt the

same clampdown that the rest of the

world has been feeling.

That said, I believe we have

weathered the storm well and did not

have much need to change our policies

or controls. We have always been a

credit savvy company and pride

ourselves on taking a sensible and fair

approach to extending credit.

We continue to be an innovative

company, always challenging ourselves

to come up with new and better ideas

to improve sales and the service given

to our existing and potentially new

customers.

Big brother effect

The recession has made it easier

to discuss finances and credit with

customers, as the world feels the big

brother effect of credit insurance and

payment performance.

It forced a lot of companies into

dealing with finance and credit issues

they may never have come across in the

past. Irish businesses had historically

been accustomed to filing their

accounts late, but felt the repercussions

of that last year when insurance

companies pulled cover across the

country for anyone who had not filed

on time.

It left a lot of companies fire fighting

and in panic mode while limits were

slashed across many sectors

The problems that many companies

experienced in 2010 from knee-jerk

reactions of the insurance companies

have certainly calmed in 2011.

I believe that 2011 – despite what

the papers say – is already looking

more positive, and it gives us a great

opportunity to work with businesses,

on a credit basis, as the country works

hard to get itself back on its feet.

CCRW

Jane Humphries is credit control

manager for Cuisine de France


CCRworld

19

IRELAND – A LONG ASSOCIATIONI HAVE been lucky to have been

associated with the Republic and

Northern Ireland for approximately 15

years. So many flights and even more

pints of Guinness!

When we started the EMEA Credit

Forum (ECF) back in the 1990s you

could not ignore the Republic of Ireland,

as this was where the main IT companies

had their EMEA shared service centres.

The Irish Development Agency at

the time made it very attractive for

companies to set up shop, and it is

good to see today that a few new

businesses are making the same steps

back. Recently, I have seen a resurgence

in business activity in the North too,

and this is a very positive trend for the

whole of Ireland.

P&A co-sponsor two forums that

meet in Dublin: The ECF, as mentioned

above, is for the IT sector, and the

Senior Management Forum Europe

(SMFE) is a cross-industry group.

Both these forums have, over the

years, been the vehicle that gave me

an insight into the Irish people. I am

pleased to say I have made many

friends over the years.

Doing business in any part of Ireland,

while it can be a little slow at times, is

always done with a smile. From that

first handshake when you are asked

“how you doing?” to the farewell when

you are wished a good journey, you

are left with a good feeling and, in my

case, it leaves me looking forward to

my next trip.

The Irish members of my forums have

made a massive contribution to their

success, not just

at the meetings

but with their

input to the

ECF and SMFE

communities.

By Laurie Beagle,

divisional director,

P&A Receivables Services plc

[email protected]

The financial crisis has hit everyone hard, but Ireland is as good a place to recover as anywhere on the world

By Jane Humphries

19 briefing 14/5/10 20:34 Page 1

credit insurance | debt collection | business information

Wherever there is trade, there is Atradius, ensuring that customers the world over won’t fall prey to payment default and bad debt.

Supported by our expertise and market intelligence, business is free to look ahead with confidence – composed, flexible and resilient.

It’s the perfect balance of managing risk and enabling trade, of safety and freedom, of insurance and assurance.

Seize the opportunity to discover more.

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Opportunity and risk in perfect harmony

22 June 2010

CCRworld

www.CCRWorld.net

As competition gets harder, the

topic of customer retention

obtains a higher priority in retail

banking strategy meetings. Given that

acquiring competitors’ customers is

very costly, even non-profitable in some

cases, it is more beneficial to keep the

existing customers in hand.

In this effort, there are multiple tools

for keeping existing good customers,

which can be grouped into two:

� Long-term effective tools – high

quality banking services, non-banking

benefits.

� Short-term effective tools – cross-

selling and up-selling.

Retail loan top-up programmes and

campaigns are good examples of up-

sell tools that aim to close a customer’s

existing loan, replaced by a loan with

extra cash.

These programmes are quite well

known by the developed markets,

while countries with retail banking

markets that are still under development

have recently started to implement

such tools.

The process involves creating a

candidate list of customers to be

approached with a top-up offer, which

should be refined by applying risk

policy and scoring.

The offer says to the customer: “You

have a loan that has (almost) matured

with us, and since you are a creditworthy

customer, we have new loan ready for

you.” The offered loan amount can be a

function of the previous disbursement

amount or it can be calculated from

scratch at the moment of the offer.

Retail loan top-up programmes have

a cyclical nature, meaning that when a

programme starts, it should continue

as long as there is a maturing loan

portfolio, and be improved in every

cycle. For that reason, in every cycle

it goes through customer selection,

communication of the offer, monitoring

and redesign.

Selection/filtering

The first challenge involved in retail

top-up loans is deciding which

customers to make the offer to. A

special underwriting risk criteria should

be defined, depending on the data

available about the customer and risk

assessment needs of the market.

Existence of a behaviour score can

make the customer selection process

easier, since it gives clear picture about

the current default probabilities of the

customers.

All criteria should be applied on the

candidate customer list so that the offer

becomes pre-approved as much as

possible, in order to increase its

attractiveness. Preferably a top-up

programme should focus on behavioural

historical data of existing customers

coming from various sources such as:

� Credit bureau data.

� Credit card spending behaviour.

� Delinquency history.

� Business history of the customer

with the lending institution.

Target customers can be grouped

into two segments.

� Customers whose existing loan has

already matured – these people should

be expected to respond faster. On the

other hand, they are harder to retain

since they might have already started

shopping at other lending institutions.

� Customers who are close the final

payment in their existing loan – these

people will not take the offer immediately

since they still have some time. However,

their response rate should be expected

to be better in the long run.

CONSUMER CREDIT

� Offer top-up loans to

your best customers

� European leasing downturn

� Consumer market improves

22-23 feature 14/5/10 20:35 Page 30


CCRworld

CONSUMER CREDIT

MAKE RETAIL LOAN TOP-UPPROGRAMMES PROFITABLE

Offer

Communication of the retail loan

top-up offer should be clear in explaining

the benefits of the programme. If the

existing loan is a mortgage, it can be

mentioned that the balanced paid so far

can be used for the maintenance of the

house or college tuition of the children,

to help the customer visualise the real

value.

If the existing loan is a consumer

loan, it is better to approach the

customer towards the maturity of the

loan by reminding him of the purposes

that he can use the loan for, depending

on his spending behaviour and

demographics.

A formal means of communication is

recommended, preferably by either

telephone or mail. If it is a pre-approved

offer with a pre-defined disbursement

amount, tenor and terms, having it in

writing will give the customer a better

understanding.

On the other hand, if the offer is not

pre-approved and the customer must

pass through additional risk policy,

inviting the customer to the closest

office, with a personal touch on the

telephone – will produce better results.

Monitoring

Understanding the success of the

programme will help when it comes

to progressing and improving the

programme in each iteration.

The first key performance indicator

(KPI) to look at is how many people

are interested in getting a top-up loan

and actually showed up to one of the

lending institution’s offices. This KPI –

called offer acceptance rate – shows

the success of the filtering criteria and

marketing communication.

Secondly, how many people among

those who applied for a new loan really

took the money? The ratio of disbursed

loans indicates the competitiveness of

the offer and underwriting criteria.

In order to understand why some of

our existing customers are rejected, we

need to see the breakdown of risk

criteria and what percentage of the

initial customer list is eliminated by

each criteria.

The results that will be derived from

this experience can lead to a revision

of the risk policy for either walk-in or

top-up customers. In other words, the

analysis will answer the question:

“Are we making a mistake selecting

the walk-in customers, so that we do

not want to give them a second loan,

or are we making a mistake while

evaluating our customers for the

second loan?”

Performance of the loans given

through top-up programmes should

be followed separately by keeping

non-performing loan (NPL) vintage

analysis for each iteration – assuming

there will be some slight changes in

each iteration.

Redesign

After getting all the KPIs and reports

at the end of each iteration – some

described above – weaknesses of the

programme should be identified and

addressed.

What actions should be taken to

improve the approval and disbursement

rates? What kind of fine tunings can

be done on risk policy, given the

breakdown of rejection reasons and

the long-term performance of the

top-up customers? Which is the

iteration with the lowest NPL ratio,

and what have we done differently in

that iteration?

Things to avoid

Avoid getting into a price war while

making a top-up offer to your customer.

Real value of top-up offers come from

their pro-active nature and knowing the

customer, thereby the communication

should emphasise the speed and ease

of the offer.

Stay away from getting too strict

while selecting the target customers

to whom you offer a top-up loan. The

most profitable segment of retail loans

is the moderate risk segment, meaning

customers who get into delinquency

buckets but do not default, that pay

higher interest due to delinquency

and are less likely to make early

payment.

If only the very lowest risk portion

of the portfolio

is targeted,

acceptance rate

of the offer and

interest income

get lower. CCRW

Ahmet Kocamaz

is a member of

National Bank of Greece International

Business Development Department


At a time when increasing your revenue for the minimum possible expenditure isencouraged, it may be a good idea to keep your existing customers, and offer themmore products – but you must target only the most appropriateBy Ahmet Kocamaz

Existence of a behaviour score can make thecustomer selection process easier, since itgives clear picture about the current defaultprobabilities of the customers

22-23 feature 14/5/10 20:35 Page 31

CONSUMER CREDIT

24 June 2010

CCRworld

www.CCRWorld.net

EUROPEAN CONSUMER MARKET IMPROVESEUROFINAS, the European Federation of

Finance House Associations for consumer

credit providers, recently launched

quarterly surveys of its members’ new

lending business to track developments

on the European consumer credit

markets.

The results of the survey for the

fourth quarter of 2009 reveal that the

market, represented by members

reporting in the survey, underwent some

moderation in the rate of contraction of

new credit granted in the last quarter of

the year.

Eurofinas members’ new consumer

credit in 2009 was down by 9.5%

compared with 2008, whereas the

decrease over the first three quarters of

the year was 12.4% when compared

with the same period of the previous

year.

The statistics include reports from

members in Belgium, the Czech

Republic, Germany, Denmark, Spain,

Finland, France, UK, Italy, Norway,

Portugal and Sweden

Consumer credit products for personal

consumption suffered the most in 2009,

and there is no doubt that consumer car

finance was also affected, but to a lesser

extent.

This is mostly due to the successful

implementation of vehicle scrapping

schemes in some countries.

Recent figures from official European

sources indicate that consumer confidence

in the EU, although still low, is improving.

This is expected to have a favourable

impact on consumer lending levels over

the coming year. Nevertheless, now that

many car scrapping

schemes have

expired, recovery

in the consumer

car lending sector

may be more

difficult.

LEASEUROPE, the trade association

representing the European leasing and

automotive rental industries, has

released preliminary figures on the

European leasing market in 2009.

Leaseurope’s latest estimates show

that total new leasing volumes granted

in Europe are expected to have

reached about €216bn in 2009,

while the portfolio of leased assets in

Europe will be worth in the region of

€683bn.

The preliminary data indicate that

new leasing volumes were 28.4% lower

than in 2008, representing the most

significant downturn since Leaseurope

began collecting data in 1994.

Positive signs

However, the second half of 2009

did see some positive signs, with new

volumes growing by 5.0% compared

with the first half of the year.

In terms of asset types, new

equipment leasing volumes experienced

the sharpest drop, decreasing by

35.3%, while new leasing production

for vehicles fell by 24.4%.

Real estate leasing followed a similar

pattern, with a slightly lower decline of

23.4%.

While the performance of the

European leasing market worsened

across the board, the picture in the

CEE region and Mediterranean countries

was somewhat cloudier than in the rest

of Europe, with new leasing volumes

falling by 44.2% and 43.7%, in these

markets respectively.

Step back in time

Leasing, like many other European

businesses, has been severely affected

by the crisis. In terms of new production,

we have returned to the level of business

that was granted in Europe seven or

eight years ago.

Leaseurope chairman Professor

Rüdiger von Fölkersamb, of Deutsche

Leasing, Germany, explains that: “The

lack of investment by European

businesses in 2009 has led to a

significant downturn in the leasing

market.

“Looking forward, investment levels

are expected to be somewhat less

negative in 2010; however, it could be

2011 before we see some real

improvement in business investment

and, consequently, the European leasing

market.

“Stimulating demand from businesses

to increase capital expenditure is vital if

the European economy is to experience

more than a tentative recovery in 2010,

and will be necessary if leasing is to

continue to fulfill its investment-enabling

role”. CCRW

Piero Biagi is chairman of

Leaseurope’s Statistics & Marketing

Committee


EUROPEAN LEASING MARKET– DOWNTURN IN 2009Latest figures from Leaseurope show that while volumes

have dropped in recent times, there are positive signs

By Piero Biagi

By Pedro Guijarro,

chairman of Eurofinas


Leasing, like many other European businesses,

has been severely affected by the crisis

24 briefing 14/5/10 20:36 Page 2

ROI – NI

25June 2010

AN ECONOMY STARTING TO GROW AGAINAT the time of writing, the Irish economy

had returned to a small growth of around

1% quarter on quarter, as reported by

leading Irish stockbrokers Davy. This

growth is export-led, as we had hoped

for. We are a very open economy that

can take benefit from global growth. For

the first time service exports are set to

exceed goods exports.

Consumer spending has been low, of

course, but stable for some time. Like

elsewhere physical stocks were run lower

than ‘normal’. These will be replaced as

the economy picks up, helping our GNP.

Increasing direct and indirect taxes may

stifle an increase in consumer spending,

but the government is conscious of that.

As a nation our debts are high. The

safest thing to do when making a

comment about national debt is not to

give a figure – it changes by the minute.

We will continue ourselves to argue

over this debt but it is our debt and

collectively we feel embarrassed about

it and want it sorted now. We will take

care of it. For our own sake. We are

ahead in Europe in taking the pain, but

others will have to follow us.

Unemployment is still high and will be

for some time. It is expected to peak

soon at about 13.5%. Increasing

exports do not immediately lead to

large increases in employment – it was

industries such as construction that

gave great employment. But exports, be

they services or goods, are seen here

as one catalyst that will help us get

back to where we want to be.

As a nation we are resourceful and

hungry to return to our previous success.

We are a young country and in a hurry.

We have entrepreneurs in plenty, they

just need a few ‘angels’ with venture

capital.

Banks let us and themselves down.

These banks will continue to increase

their charges. Businesses are turning to

other sources of funds; they are moving

on. They are resourceful. They are finding

their feet again.

There will be a few tears but we have

seen how good the times can be and

we will work very hard to get close to

that again.

IRELAND – THE CAPITAL OFCREDIT MANAGEMENT

www.CCRWorld.net

CCRworld

WHAT ingredients do you add to the

successful credit team recipe to make it

world class?

Like all successful credit department

you might add the 4 Ps: people,

processes, purpose and productivity.

And IT solutions to blend in slowly to

make the base, with a sprinkling of

desire, charm and hard work, before

slowly placing in the oven.

Leave in the oven and after 20 years

you have the perfect cake, served with a

cup of low corporation tax breaks. And it

gets better – you will receive incentives

to bake more cakes to a point where

you incur no labour costs for years.

Amazing to think that one small country

with no platform to launch such a recipe

for success, except forward-thinking and

a bit of Irish blarney, is now the leading

light in international operations centres

in Europe.

Ireland has always had a highly-qualified

and skilled workforce with a hard working

and ambitious ethos. In the 1970s and

1980s there was no major presence of

international companies in Ireland to

keep these people in the country and

they left to seek their fame and fortune.

Then slowly we saw players in the IT

sector centralise in Ireland. They brought

fast-moving products to the market,

needing a fast-moving, highly-productive

and flexible workforce. The perfect

recipe for success was born.

People leaving university found jobs,

others returned. Since those days many

Fortune 500 companies have located

here in Ireland and brought a wave of

investment in people and technology

and best-in-class operational results. And

there is the final ingredient for the recipe

to make it last longer: ‘investment’.

Investment not just in fixed assets like

buildings and IT platforms but in people.

Training, secondments to other countries,

fully-paid educational degree courses,

six sigma training, personal career

development programmes, team building

exercises. An already well-educated

workforce was been given the soft skills

they do not teach you in school to

advance as a person in work and in life.

Twenty years ago in Ireland credit was

so lowly rated I was once described as

“a necessary evil in terms of cost”.

Now credit status in Ireland is rated only

below the chief financial officer’s

department for that region. And these

credit departments still exist, the people

are still here and the companies have

not left despite popular belief.

So, is Ireland still the best location for

Credit Internationally. Absolutely! We

have a highly skilled trained workforce

with years of experience, ready to take

on your role at a

rate lower than five

years ago with a

desire to grow.

Sounds like a win-

win to me. CCRW

What makes a good credit and collections team, and how

do you go about making it world class?

By John Kelly

By Seán Mac Mahon, president, IICM


John Kelly is senior

credit manager for

Doosan Infracore International


25 ireland briefing 14/5/10 20:37 Page 1

ROI – NI

26 June 2010

CCRworld

www.CCRWorld.net

PROFESSIONAL TEAMS ENSURE CASHFLOWIN business the only constant is change,

and the pace of change at the current

time is greater than anything we have

ever experienced before.

Three years ago in Ireland, the people

who were making the most money were

the bankers and the developers. We

now know that the people we perceived

as the wealthiest were simply the

people who could borrow the most.

I warned at that time that banks were

lending money on the basis of the value

of the assets instead of taking into

account their ability to repay. No one

listened then. I hope they will listen now,

and learn the lessons brought about by

poor credit management that has

plunged our country deeply into debt.

Most businesses have switched into

survival mode, and here is where large

companies can learn most from SMEs.

Most companies have used up some of

their reserves in riding out the recession,

unprecedented numbers are failing on a

daily basis, with all the human suffering

this is causing through unemployment,

wage cuts and mounting personal debt.

Added to these worries is the survival

of the business they are working for

and their own place within the business.

Honesty is the best policy; senior

managers should keep staff up to date

with all developments and explain the

targets that have to be achieved and why.

Now, more than ever, we have to

create a united team dedicated to

rebuilding the business on a truly

profitable basis, and for this to happen

cash has to be at the front and centre

of everyone’s mind.

We need to get away from the

platitude that ‘cash is king’ and start

living it. We need properly trained and

educated credit professionals, and when

I say educated I do not mean random

degree holders or part-qualified

accountants.

Now is the time for a proper

commercial credit management team to

stand up and take the lead, with senior

management support, to ensure every

opportunity is seized, every sale is

profitable and

paid for and

every item of

expenditure is

questioned and

justified.

CUSTOMER identity, status and credit

worthiness evaluations are an essential

part of any new account set up, however

these fundamental checks do not happen

in all cases, and the fallout of taking

short cuts when setting up new debtor

accounts can very often lead to ineffective

credit control, defaulting debtor accounts

and bad debts.

Every credit manager has experienced

the disruption of dealing with delinquent

accounts, and understands the real and

hidden costs and drain on valuable credit

control resources caused by pursuing

payment of these accounts in-house.

In my experience, working previously

as a credit manager and now as a third-

party debt collection services provider

to both the Irish and international B2B

markets, it is always best to act early

when accounts are turning delinquent.

I recommend that creditors should look

for full settlement of overdue accounts

because, apart from reducing bad debt

exposure, this approach also creates a

stronger supplier/customer relationship,

built on a proper foundation of mutual

benefit and respect.

In these difficult times payment plans

have become common place, and while

they can be a useful end-tool they are

very often ineffective in restoring an

account to its intended trading terms

and, more often than not, payment

plans end in debtor default within a

short space of time – resulting in

further damage to the relationship and

customer attrition. Their place is at the

end of the process of negotiation.

We pursue full settlement of accounts

and the directors of the debtor company,

where they are not respecting the rights

of their creditors or trading in an insolvent

state. Quite frankly these directors are

in breach of their obligations and

responsibilities to their creditors, and

this should have consequences for them

in their capacity as directors. When told

that they have behaved recklessly, it

often jolts them into facing reality.

Professional third-party debt collection

and debtor litigation services have a role

in managing overdue accounts, and can

be a very productive way of controlling

defaulting debtors. The escalation of

seriously overdue accounts to a third

party can also be a more cost-effective

alternative to in-house management,

reduce bad debt exposure and, if

handled professionally, can restore a

positive commercial relationship between

the supplier and customer.

When looking to outsource collections

it is a good idea to check, via personal

recommendation, the third party’s history

and commitment to achieving the best

results for their clients’ businesses. As a

creditor, you should look for the shortest

possible lead time to recovery of the

outstanding account and a fee structure

that is directly related to payments

obtained. The service provider should

promote good customer relations while

delivering positive cashflow, reduced

bad debts and increased profitability to

the creditor’s business. CCRW

Pascal Walsh is the CEO of CMO

Cash Flow Fulfillment, Dublin


KEEPING CHECK ON DEBTORSWhen chasing a debt, you need a strong relationship with

your debtor, and to remind them of their responsibilities

By Pascal Walsh

By Declan Flood,

Irish Credit

Management Training


26 ireland briefing 14/5/10 20:37 Page 2

ROI – NI


Redmond Johnson is a leading provider of credit management services throughout Ireland, and internationally.

We offer debt recovery, credit reporting and cash flow help services, including:

P No collection – no fees P No tied contract P Experienced collectors

P No hidden or annual costs P Telephone collections and litigation

We are the sole Irish representative of the European Collectors Association, a network of professional debt recovery agents covering all European countries and other regions of the world. We can get action immediately on debts from France to Poland.

For more details visit www.redmondjohnson.comTel: +44 (0)28 9055 9999 Centre HouseFax: +44 (0)28 9055 0078 79 Chichester StreetE-mail: [email protected] Belfast, BT1 4JE

Redmond Johnson Irish Debt CollectionEstablished 1984

27 ireland ads 14/5/10 20:48 Page 1

28 June 2010

CCRworld

www.CCRWorld.net

There would appear to be three

words that take the blame for

most business problems: ‘current

economic climate’. However, as a law

firm that specialises in debt recovery,

we know that one word is the cause

of, and solution to, those business

problems: ‘cashflow’.

The recovery of bad debts is now

the main driver in business. This allows

reinvigoration of slowing cashflow.

Increasing bad debt requires a more

aggressive approach to recoveries.

Businesses are starting to appreciate

and understand that they have to:

� Resolve the disputes that are

preventing invoices from being paid.

� Become sterner with their debtors or

obtain a security in a situation where a

debtor cannot pay.

These are the main reasons why

businesses are turning to debt recovery

firms to reinvigorate their cashflow. The

bottom line of companies is being hit

by bad debt in an environment where

profits are down as a result of declining

sales. This is essentially making a bad

situation worse.

However, the recovery of bad debts

will boost an ailing bottom line and

restore cashflow in a situation where

credit cannot be obtained to solve the

problem. This is why the provision of

debt recovery services has to be built

into business models. It is as simple as

saying if you do not take the steps

required to recover the debts then the

debts will not be recovered.

Can a company afford not to have a

debt recovery process?

The debtors’ ledger is where the

problem starts but is also where the

solution lies. It is recommended that

businesses reduce resources spent

on debtor days and outsource the

collection of the past due invoices at an

earlier stage.

Debt collection should be viewed as

a process which starts with the issue of

the invoice, all the way through to legal

enforcement of the debt if necessary.

It is important to note that if a debtor

owes money to one business the

chances are they owe money to another

business also. Thus, the creditor who

acts quickest is most likely to recover.

This is a strategy that must be in the

debtor ledger process if profitability is

to be increased.

� The legal process begins with a

demand letter. This letter is a demand

for the sums due. Debt recovery firms

send a demand letter before commencing

legal proceedings.

This is for a number of reasons. It

establishes, in the mind of the debtor,

that the matter has left the creditor and

is now with a solicitor. The solicitor has

a starting point to which they can refer

in any subsequent legal proceedings

and, in most situations it gives the

debtor an opportunity to pay the debt

without incurring legal costs.

An interesting statistic is that 40%

of recoverable debt is recoverable at

demand letter stage.

� After the demand letter, the legal

process can begin if required. The legal

process will begin in the District Court,

The Circuit Court or The High Court

depending on the value of the claim.

The District Court deals with debts

up to €6,348.69, the Circuit Court has

jurisdiction in debt related cases up to

€38,092.14, and the High Court deals

with all cases not dealt with by the

District or Circuit Court.

All too often the legal process can

seem complex and daunting to many

business people.

� The legal proceedings commence

with an official document drafted by

the solicitor and issued from the court

services. That document is a civil

summons in the District Court, a Civil

Bill in the Circuit Court and a Summary

Summons in the High Court.

Debt recovery proceedings before the

courts are different from proceedings

for personal injuries or defamation.

Debt collection is different because the

ROI – NI

The debt collection process in Ireland may sometimesseem complex and daunting, but if you approach it in the right way, it can definitely be worthwhile By Eddie Barron

IS THE LEGAL RECOVERYPROCESS WORTH IT?

28-29 ireland feature 14/5/10 20:40 Page 30


CCRworld

ROI – NI

sum sought in the proceedings is a

quantified sum.

Therefore, a creditor can obtain

judgment in the court office as opposed

to before a judge if the matter is

undisputed. This is because the level

of damages does not have to be

determined by the court as it is known

at the outset, that is the sum due.

It is also possible to claim interest on

late payments, and compensation can

also be sought for the non payment of

invoices.

After the official document has issued

from the court and has been served on

the debtor, the creditor can proceed to

judgment by way of affidavit that the

solicitor will draft. A large majority of

debt collections cases obtain judgments

against debtors without the creditor

ever having to leave their office.

� When a matter is undisputed, a

creditor applies for a default judgment.

Creditors can send default judgments

to the sheriff, have them published,

registered as charges against property,

used for instalment applications or in

bankruptcy or liquidation applications.

� When a debtor defaults on an

instalment order made by the court

there is a provision in law to have that

debtor sent to prison. The government

acted quickly to rectify the situation

after the High Court highlighted a

problem with this provision.

The High Court recognised the need

to enforce court orders, as did the

government. This is a positive sign from

both the courts and the government

that the collection of bad debts will be

supported by the state.

The option of the sheriff may

sometimes be beneficial even in a

situation where the debtor has no

tangible assets, the benefit being the

inconvenience and embarrassment

caused by the sheriff calling to the

house or business of the debtor.

Debtors may attempt to claim a

set-off in many debt collection matters.

However, set-off is a specific remedy in

law and therefore does not apply in the

majority of debt collection matters. This

is an important point for creditors to

note so that they do not apply a set-off

in situations where they are not

required to apply a set-off.

Charges and fees

Debt recovery firms normally charge a

fixed fee to obtain a default judgment,

as the process generally can be

straightforward.

This allows businesses to budget

for legal services in the collection of

bad debts, and therefore can be

integrated into the strategy of the

business model and process for

profitability. This brings a boost to the

bottom line of the business.

When a debtor has an issue with the

claim, they may defend the action. This

means that the matter is likely to end

up before the court. Creditors are

encouraged to try to settle those

disputed claims at an early stage rather

then go to court as, more often then

not, a judge who decides such an issue

will try to strike a balance between

the creditor and the debtor. It is more

beneficial to strike a balance at an early

stage so that going to court can be

avoided, and thus save costs.

The credit control functions in many

businesses are no longer equipped to

handle the current downturn, and debt

needs to be collected by specialists in

the area to avoid or minimise bad

debts.

Debt recovery firms view debt

collection from the client’s perspective,

and therefore act proactively in the

collection of debt as opposed to a

traditional position

of being reactive

to mitigate loss

or rectify damage

that has already

occurred. CCRW

Eddie Barron is

chief executive of

AB Wolfe & Co., the debt recovery

division of Matheson Ormsby Prentice


Information in this article is provided

subject to the legal terms and liability

disclaimer contained on the AB Wolfe &

Co. website. The article is not intended

to provide, and does not constitute, legal

or any other advice on any particular

matter, and is provided for general

information purposes only.

Can a company afford not to have a debtrecovery process? The creditor who actsquickest is most likely to recover. This strategymust be in the debtor ledger process

HOW IMPORTANT IS YOUR BUSINESS CASH FLOW?WE BELIEVE THAT POSITIVE CASH FLOW ACHIEVED THROUGH STRATEGIC OVERDUE DEBTORMANAGEMENT IS A CRITICAL COMPONENT OF YOUR BUSINESS SUCCESS / FAILURE!

CMO provides ‘cash flow fulfilment’ services to businesses that are experiencing difficulty in obtaining payment from their credit customers, these services include:

OUTSOURCED CREDIT CONTROL FOR BUSINESS TO BUSINESS ACCOUNTSIRISH AND INTERNATIONAL COMMERCIAL DEBT COLLECTIONTEMPORARY CONTRACT RESOURCES FOR MATERNITY AND SEASONAL PEAKS COVERCOMMERCIAL RENT-FLOW MANAGEMENTCUSTOMER TRACING SERVICESDEBTOR LITIGATION

EUROPEAN LANGUAGE SKILLS IN-HOUSE

For our full service details contact Pascal Walsh at +353 (0)1 8853 952 or +353 (0)87 7711 821 or visit www.cmo.ie

28-29 ireland feature 14/5/10 20:40 Page 31

ROI – NI

30 June 2010

CCRworld

www.CCRWorld.net

I HAVE been in credit management in

Ireland, both North and South, since

1977, initially with Dun & Bradstreet

and from 1984 with my own company.

What has happened in the past three

years has been the most notable and

dramatic upheaval in Ireland that I have

witnessed in credit and collections in

my career.

The problems in the Republic of

Ireland have been well documented,

and principally brought about by the

implosion of the property bubble and

compounded by the worst economic

crisis to hit the Western economies in a

generation.

Northern Ireland caught the property

disease from its near neighbour and

what is played out by the National

Asset Management Agency – an

organisation set up by the Republic’s

government to take over toxic loans

from the banks – will eventually impact

there, as there are common lenders: the

most infamous being Anglo Irish Bank.

Incidentally our associate company,

with 40% of the company formation

market in Northern Ireland, could hardly

keep up with the demand for property

development companies between 2005

and 2007.

Credit reports can be suspect, as in

many cases they are based on accounts

relating to periods before January 2009.

There have been dramatic changes in a

lot of companies’ circumstances since

then.

A challenging market

Collecting debt in Ireland at the moment

is very challenging, with the building

and allied trades being the most

exposed to default.

However the problems have spread

into other areas. Most notably the

hospitality and retail fashion sectors.

Currently there is

believed to be an

over-supply of at least

20% in hotel rooms,

with the average room

price falling by the

similar amount. Some

good bargains to be

obtained if you

are visiting Dublin!

As highlighted, the

high-risk sectors are

building and allied

trades, hospitality

and fashions –

principally the

higher end and

also especially those

formed between

2003 and 2007 at

the height of the ‘Celtic Tiger’ boom.

Payment plans

At the moment it is very rare to get a

debt paid in one amount, and generally

you need to negotiate a payment plan,

trusting that the company does not go

out of business before it is completed

or you have obtained a major portion of

your debt.

This, naturally, is adding to the cost

of collection. Banks have been steadily

cutting overdrafts as in the UK, but the

effect has had more impact in Ireland

and has added to the problem of

payment by instalments.

Legal action

Obtaining successful enforcement is

another story. Defended actions are

generally slow and expensive, and

particularly frustrating for UK companies

if they do not have employee or agent

representation in the Republic of

Ireland, as attendance will be required

at court to give evidence.

Obtaining a judgment for an

undefended action in the Republic of

Ireland is relatively straight forward,

however really only viable for debts

over £/€1,000.

It is always best to seek a ‘worth

suing’ report first to avoid unnecessary

expense. Unlike UK plaintiffs – note that

in Ireland, both North and South, they

are still called plaintiffs as opposed to

claimants – name and address are

published.

One interesting point that should

be noted is that substantially more

businesses in the Republic of Ireland

incorporate when

starting than in

the UK, so always

double check if you

are given a trading

style as the trading

entity. CCRW

Ken Redpath MICM,

FACP, is the founder of Redmond

Johnson and BusinessCHECK, Belfast


CREDIT GRANTING ANDCOLLECTION IN IRELANDBoth North and South Ireland have witnessed dramaticupheaval in the past three years, so be sure to know yourcustomer thoroughly before starting to collect debts By Ken Redpath

30 ireland article 14/5/10 20:43 Page 2

CCRworld


Everyone doing business knows

that a sale is not a sale until the

cash is in your bank account.

Getting it there when you need it,

however, can be a real challenge.

Most companies wait until an invoice

is past due before taking action. But

why not be proactive?

Here are some strategies you can use

before the account is due, that can help

you speed up your collections.

The latest software

Update your A/R management software.

Ineffective systems not only slow the

process down but fail to provide the

intelligence required to improve your

credit to cash results.

Re-evaluate lockboxes

Re-evaluate your lockbox placement. If

you use one or more lockboxes, do a

study to determine if they are placed in

the optimum location for collections.

Lockbox studies should be done

periodically, and lockbox business

should not be automatically given to a

local bank. Depending on the amount

of business going through your lockbox,

more than one location may be

desirable.

Review billing policy

Review your policy regarding billing

dates and procedures. Make sure

invoices are mailed on a regularly-

scheduled basis and that they include

all necessary information. Include

details of your payment terms

and any past-due interest

charged on the invoice itself.

Some companies have

speeded up collections simply

by changing their billing cycle

from twice-a-month to once-a-

week. Another idea is to invoice

early in the month.

Many companies do a once-a-month

cheque run and, if your invoice

happens to miss their monthly run,

you will have to wait another 30 days

to get paid.

Review contact technology

Review the technology your

company is utilising

to interact with

customers. Are

you using e-mail,

imaging, EDI, faxes,

voice mail, electronic bill

presentment and payment?

While all of these might not be

appropriate for your particular

organisation, using one or more

might speed things up.

In today’s competitive economy, it is no good just waitingfor payment, often you must go out and chase it – beingproactive can help to boost the money in your bankBy Robert Tharnish

STRATEGIES TO SPEED UP COLLECTIONS

COLLECTIONS

Speed up collections, �before money is due

Outsourcing to Malaysia �EU data protection views �

>>

31-32 feature 14/5/10 20:49 Page 29

32 June 2010

CCRworld

www.CCRWorld.net

COLLECTIONS

Terms and conditions

Discuss your terms with your

buyer at the time of sale. Make sure

they are agreeable.

Also, discuss the best way of getting

paid before you ship or begin work. Will

it speed up payment if you send the

invoice to the actual buyer rather than

the accounts payable department? Who

has to authorise it?

Easy payment

Make it easy for the customer to pay

you. This may seem like common

sense, but it is an element that is often

overlooked.

Offer all standard payment options.

Ensure that your invoices have the

correct contact information and postal

address for remittance. Include a

payment envelope with the correct

remittance address.

Use invoices that make it easy for

the customer to remit, as well as easy

for them to keep a record of the invoice

and payment.

Late payers

Review your experience with the late

paying customer. Has this customer

been a consistently late payer? Does

he wait until you call, or even place with

a collection agency, before paying you?

Has anything changed with the

customer? Knowing how your customer

responds and what he needs to get him

into payment mode can give you the

edge in keeping his account current.

If you are not already a member, join

a credit group. This will provide you

with the relevant, current information

you need to stay on top of your

accounts.

Assess overall procedures

Review your company’s overall

procedures to see if you can determine

why payments are late. Are there any

procedures that you can tighten up to

in order to speed up payments? For

instance:

� Are shipments accurate? Were

delivery and quality promises kept by

your firm?

� Are your salespeople making promises

your company is not able to keep?

� Are invoices being sent timely? Are

they accurate? Do they include all

necessary information, including a

phone number for billing inquiries?

Were they sent to the correct address

and attention?

� Are follow-up contacts being made

on a regularly-scheduled basis?

� Are you placing with collection

professionals on a timely basis?

Set a collection plan

Develop a specific collection plan and

stick to it. For instance:

� Call seven to 10 days prior to

the due date to ensure that the

products or services were received

on time, that there are no disputes,

and that the customer plans to pay –

and when.

� Call within a week after payment is

due to find out what is delaying the

payment, and to get a payment

commitment from the customer.

� If the customer reneges on their

payment promise, contact them again

until payment is received. If it is not

received within 90 days after the due

date, hand off the account to the

professionals.

� If possible, and especially for larger

past due balances, do not rely on

letters, faxes or e-mails, which can be

easily ignored or ‘lost’ in transit. Make a

phone call.

� Very importantly – record any

promises made by the customer,

including the date they were made and

the date payment was promised. Saying

to a customer, “when we spoke on

Monday, May 25th, you promised

payment by Friday, May 29th” puts the

debtor on the spot – much more so

than a vague recollection of the

conversation.

� If you cannot manage to stay with a

collection schedule in-house, consider

outsourcing to a first-party collections

outsourcing firm.

Create specialists

Create ‘collection specialists’ within your

credit department and provide some

collector training.

If everyone in the department has

multiple responsibilities, you can be

sure that collecting will be the last

thing they do. Why? Because it is

uncomfortable asking for money from

customers.

Recruit other departments

Recruit branch managers and sales

people to help in the collection effort.

In many cases, these are the people

closest to the customer with the

greatest ability to impact the collection

cycle.

Direct contact

After a reasonable period of time – say,

30 days – contact the person that

directly purchased from or hired you.

Send them a copy of the invoice.

If you are supplying to a medium to

large business, it is likely the person

who bought your product or service has

nothing to do with accounts payable.

However, they are usually happy to

help, especially if the product or service

was ‘as promised’.

Personal relationships

Develop a personal relationship with

the accounts payable managers at

your largest customers. If more than

one person handles your account,

always ask for the same person and

attempt to develop rapport with that

individual.

By taking some steps to improve

your billing and collections process,

you can go a long way toward getting

your sales finalised sooner and more

efficiently. Going

proactive

on this is like

money in the

bank. CCRW

Robert Tharnish

is vice president,

international and

corporate quality, ABC-Amega


If everyone in the department has multipleresponsibilities, collecting will be the lastthing they do, because it is uncomfortableasking for money from customers

>>

31-32 feature 14/5/10 20:49 Page 30

33June 2010

CCRworld

www.CCRWorld.net

COLLECTIONS

HSBC Bank, BASF, Hewlett-Packard

(HP), and Dell have all outsourced their

finance or collection centres to

Malaysia. Other multinationals, such as

EDS, DHL and Nokia, among others,

have outsourced service functions to

Malaysia. Why?

I would like to highlight the positives

and the negatives about outsourcing

receivables here. The positives have to

do with cost, infrastructure, business

climate, and human resources.

Cost of living

Malaysia’s cost of living is low. Kuala

Lumpur consistently ranks as one of the

cheapest capital cities to live in.

According to The Economist’s Big

Mac Index, Malaysia has the world’s

fifth cheapest Big Mac at US$1.92

(4 February 2009). A collector starting

out here will earn about US$600 per

month.

Infrastructure

Malaysia’s IT infrastructure is good. The

government has launched an ambitious

project to roll-out broadband throughout

the country.

There is no problem calling the local

phone company to get voice or data

lines installed quickly.

Business climate

The business climate is good. The

central bank is expecting 2010

economic growth to be between 4.5%

and 5.5%.

In addition, Malaysia has created

investment corridors throughout the

country, where foreign businesses

enjoy a ten-year tax holiday and easy

issuance of work permits.

The government acknowledges that

the days of Malaysia being a low-cost

manufacturing hub are over. Today the

thrust is in the service sector.

Human resources

Malaysians possess excellent foreign

language capabilities. They remind me

of the Luxembourg people. Malaysians

speak Malay, which is also understood

in Indonesia and Brunei. In addition,

English is widely spoken in the urban

and tourist centres.

Malaysians are multi-racial, so many

non-Malays speak Chinese, Tamil, or

Thai at home. My Malaysian wife speaks

English, Malay, and four Chinese

dialects.

One company taking advantage of

Malaysia’s multi-lingualism is HP, which

located its SE Asia-Pacific collection hub

here. Though based in Kuala Lumpur,

HP collects its corporate accounts

located in India, Singapore, Malaysia,

Australia, New Zealand, Thailand, and

Indo-China. The collection department is

divided into country teams. Each team

sits together and collects in their

respective language.

As an American collections trainer, I

find the Malaysian accent to be easy to

understand. I have seen them collect

both American and UK accounts without

problems. There is no need for them to

attend accent neutralisation courses.

Besides possessing great language

skills, the workforce is skillful and

educated. One drawback though is that

the demand for staff is outstripped by

the supply. The secret is out.

Multinationals are locating service

and collections centres here. They are

pinching each other’s staff. The

Malaysian government will need to

address this factor to encourage more

multinationals to locate here.

According to Accenture’s executive

partner Paul Prendergast, Malaysia is

the third best in the world for shared

services location after India and

China.

Higher cost, higher quality

I would recommend outsourcing your

higher-end receivables here. The cost

of workers here is higher than in other

developing countries, but then the

quality is higher here too.

Use collectors in cheaper developing

markets to call low balance accounts,

written-off accounts, near dead

accounts, and other low value accounts.

Use Malaysian collectors for your

corporate accounts and medium-high

value accounts.

For those who are considering

outsourcing receivables to contact

centres already here, several of the

biggest are Scicom, SRG Asia Pacific,

and VADS – but note that these

companies’ core competency is

customer service and telesales, not

collections.

Overall, Malaysia is a nice safe,

English-speaking country with good

infrastructure and workforce. Many

multinationals are already enjoying its

benefits. Others are sure to follow.

Provided you outsource the right type

of accounts, Malaysia could be viable

option for more and more collection

centres. CCRW

WHY SHOULD YOU OUTSOURCE TO MALAYSIA?

Steven Coyle, CCE is a collections

trainer based in Malaysia and the

author of Debt Collections: Stir-Fried

or Deep-Fried?, available on Amazon

E-mail [email protected]

In the second part of our focus on Malaysia, we ask what

are the real benefits of basing collections in the Far East?

By Steve Coyle

I would recommend outsourcing your higher-end receivables here. The cost ofworkers is higher than in other developingcountries, but then the quality is higher too

33 article 14/5/10 20:58 Page 31

COLLECTIONS

34 June 2010

CCRworld

www.CCRWorld.net

ADDITIONAL CASH WITH NEW SOFTWARE

THE EU consultation on ‘Personal data –

more use, more protection?’ is being

managed by the Directorate-General for

Justice, Freedom and Security, Unit D5 –

data protection.

Despite being published just a few

weeks ago, the consultation has so far

generated 168 responses.

The newly confirmed commissioner

Mrs Reding, earlier this year, in the

course of the EU’s ‘Data Protection Day’

made the following statement: “We have

a solid set of principles established by

our General Data Protection Directive of

1995. However, we cannot rest on our

laurels! The world has changed and

keeps changing since 1995.

“The EU has to lead the world when

it comes to protecting personal data.

As such the EU will have to provide a

robust legal instrument to respond to

the challenges posed by the rapid

development of new technologies and

by evolving security threats. The demand

for personal data continues to grow, and

so should our determination to reinforce

the rights of individuals over the use of

their personal data.”

The European Commission is

currently analysing responses to the

public consultation. Most responses call

for stronger and more consistent data

protection legislation across the EU.

The Federation of European National

Collection Associations (FENCA) legal

and lobbying team in Brussels will

carefully assess all responses and

prepare a future proposal in line with

the Lisbon Treaty and the Charter of

Fundamental Rights.

In our external relations we should

firmly promote fundamental rights,

including the right to privacy and

protection of personal data.

Be aware of trends

The interested stakeholders in Brussels

should look very carefully at trends

going beyond the direct reach of the

EU’s legislation.

To start with the issue of ‘data cloud’,

it is evident that an initiative limited to

the EU boundaries cannot suffice, to

effectively address the ambitions

previously highlighted.

According to commissioner Reding’s

staff, a first draft proposal will not be

available for further public discussion

before November 2010. However the

team in Brussels believes that earlier

political activities and discussions

should be started with the relevant

members of the European Parliament.

Public hearing

The European Commission is organising

a public hearing on improving the

enforcement of judgments through

the attachment of bank accounts on

1 June 2010, in Brussels.

The purpose of this hearing is to

offer stakeholders an opportunity to

express their opinion on existing

problems in these areas and to discuss

the possible solutions to these

problems.

The hearing, which is open to all

interested parties, is part of an on-going

consultation process. It follows the

publication of two green papers on the

attachment of bank accounts and on

the transparency of assets, issued in

2006 and 2008.

The Brussels

team has registered

and will attend the

public hearing.

CCRW

A new consultation on data privacy could have a profoundimpact on the collections industry

By Stefan Zickgraf

EU DATA PROTECTION VIEWS

PARIS-based and a listed family company,

Manutan generates a turnover of

€515.6m from the sale of product

solutions for materials handling, lifting,

storage, manufacturing supplies,

packaging products, office and

workshop equipment, supplies and

consumables.

In 2008, we had to manage around

150,000 separate invoices and were

finding the workload increasingly

challenging and time-consuming, so we

decided to investigate how we could

better control client risk.

The objective was to provide greater

responsiveness and a business value to

operational support for our customers

and our financial relationships.

We decided to investigate solutions

based on the Software as a Service

(SaaS) model. One of the key reasons

was so that we would be less IT staff-

dependent. This would mean we would

be relatively free of IT worries and

instead be able to concentrate on what

we are best at. It would also mean that

we would automatically have daily

reports from our agents and be able to

prioritise actions. So we would be free

of many of the administrative operations

and be more effective with sales and

delivery of products.

“SaaS was a relevant choice that

has given us productivity gains, a

performance analysis and unparalleled

visibility into our cash,” says Odile

Schmutz, Manutan’s director of

administration and finance. “We had to

ensure on-time payment days.”

France served as a pilot-case before

deploying the solution to Spain, Italy,

Portugal and Belgium.

The results so far? Well, we managed

to cut eight days from the DSO in eight

months, generating over £5.3m of

additional cash: “Which exceeded our

expectations,” adds Mrs Schmutz.

Stefan Zickgraf

is the managing

director of InterRecherche SPRL and

leads the FENCA legal and lobbying

team to the European Commission.

[email protected]

By Arnaud Lebert, head of

collections, Manutan


34 briefing 14/5/10 20:58 Page 2

35www.CCRWorld.netJune 2010

RISK

How do risk managers �feel about the future?

Debt sale doldrums �Trends in risk management �

Despite signs that the recovery is on its way, a recent surveyhas shown that risk managers still see shortcomings thatneed addressing, with compliance still a major worry

By Freddie Dawkins

CONFIDENCE RETURNING TO RISK MANAGERS

CCRworld

Banks and insurers are increasingly

optimistic and have come far in

strengthening risk management,

according to a new industry survey. Yet

regulatory compliance may distract

attention from emerging risks, while the

prevalence of a silo-based approach at

several organisations hampers risk

management at an enterprise-wide level.

The survey of 346 senior risk

management executives in the financial

services industry conducted in February

2010 by the Economist Intelligence Unit

(EIU) for SAS, found that:

� 75% of respondents are confident

about revenue growth and 68% are

positive on the prospects for profitability,

with confidence levels doubled since

the survey for last year’s report. But

complacency is still a risk. Respondents

cite uncertainty over future regulation as

the main barrier to effective risk.

� Although 60% of respondents in the

survey have a clear risk strategy, many

see gaps in risk expertise, which claimed

three of the top four focus areas for

addressing shortcomings. This is

especially true for board members, who

need sufficient information on risk to

question executive management in setting

overall risk appetite. Stress testing is

the area where there is the greatest

need for expertise, after compliance and

governance.

� Silo-based approaches to risk

management still plague financial

institutions. Fewer than half of

respondents believe they understand

how risks interact across business lines,

and poor department communication

hampers effective risk management.

A failure of governance

The global financial crisis had many

causes, but failures in risk management

were clearly a contributory factor, the

survey found. Although there were

technical shortcomings, especially related

to the use of risk models and metrics, a

more widespread problem was a failure

of governance, which meant that the

legitimate warnings of risk managers

went either unheeded or unnoticed.

“In the euphoria of the credit bubble,”

says the survey, “preceding the crash, a

culture in banking and insurance that

prioritised short-term gains over pru-

dence, all too often rode roughshod

over the concerns of risk managers.”

Many senior executives were more

concerned with outperforming revenue

and profit targets than paying heed to

growing risk concentrations. The crisis

has changed that. Across the financial

services industry, risk management

has moved to the centre of strategic

decision-making, and many institutions

are revamping their entire approach to

understanding and mitigating the risks

that they face.

Certainly, based on the survey’s

findings, many banks and insurers have

come a long way in their efforts to

strengthen risk capabilities. Discussions

about risk have become a key part of

the boardroom agenda, chief risk officers

have a prominent seat at the top

table and there is a renewed zeal >>

35-36 feature 14/5/10 21:03 Page 29

RISK


for instilling a greater awareness

of risk principles in the front

office – the so-called first line of

defence.

Despite this progress, however,

weaknesses remain. The enthusiasm

for a large-scale overhaul of risk

management in the industry has created

human capital shortages, as companies

and regulators scramble to acquire

suitable expertise.

Data and information management

systems remain significant impediments

to an overall understanding of risk

exposures, while regulatory uncertainty

makes it difficult for organisations to

plan for the long term.

Regulatory uncertainty

The focus on regulatory compliance

could distract attention from emerging

risks. Around the world, regulators have

stepped up their scrutiny of financial

institutions. While few people would

argue against a tougher regulatory

regime in financial services, respondents

to the survey highlight uncertainty

regarding regulation as the main barrier

to effective risk management.

There is a danger that the focus on

compliance could be ‘crowding out’

day-to-day risk management, at a time

when formerly low probability risks, such

as sovereign debt crises, are becoming

more commonplace.

A clearly-defined risk strategy is in

place at most institutions, but significant

areas of weakness remain. Investment in

risk management is increasing almost

across the board, with risk processes,

data, information systems and training

being key areas of focus for the majority

of institutions. Six out of 10 respondents

now say that they have a clearly-defined

risk strategy in place that is updated on

a regular basis. However, this still leaves

40% whose companies do not conduct

regular updates or do not have a clear

risk strategy in place.

Acknowledged shortcomings

The survey found that banks and

insurers are filling gaps in risk expertise

with investment in training and

recruitment. Respondents recognised

that shortfalls in the quality and quantity

of risk experts have been an important

part of the problem in risk management.

Asked about key areas in which

shortcomings need to be addressed,

respondents listed issues related to

expertise as three of their top four

priorities. More than 50% of respon-

dents said that they are increasing their

investment in training, both of risk

professionals and across the broader

business, and a similar proportion

say that they are spending more on

recruitment.

The silo-based approach to risk

management continues to pose problems.

In the days leading up to the financial

crisis, the separation of risk management

into separate departments led many

financial institutions to underestimate

risk concentrations and correlations.

The survey found that financial

institutions need to further improve data

quality and availability. An over-reliance

on risk models, and problems with the

data used to populate those models,

have been widely seen as a key failure

in financial risk management. Financial

services firms recognise that data quality

and availability need to improve further.

Collecting, storing and aggregating

data is an area of weakness for many

institutions, with only 39% of respondents

believing that they are effective at all

these activities.

In last year’s survey, just 34% saw

the prospects for revenue growth, and

33% for profitability, as being positive.

Optimism is particularly high within the

Asia-Pacific region, where financial

institutions have been less affected by

the crisis and where economic growth

remains relatively robust. Within the

region, 86% of respondents see

prospects for revenue as positive, and

77% think similarly on the outlook for

profit.

Although the outlook has undoubtedly

improved significantly across the whole

industry, it would be wrong to be

complacent, conclude the survey

authors. Sluggish economic growth in

developed countries, combined with

stubbornly high unemployment, are

likely to lead to further difficulties in

mature markets. New regulations and

the imposition of more conservative

capital and liquidity buffers will drive

down corporate profitability, while

new macroeconomic risks, such as the

sovereign debt crisis in Greece, could

derail any recovery.

In the medium term, policymakers will

be looking to withdraw fiscal stimulus

packages and return debt and equity

capital holdings to private investors.

Over the same period, a more stringent

regulatory environment will emerge.

Banks, for example, face the prospect of

tighter restrictions on capital reserves

under proposals dubbed as the “Basel

3 rules”.

The emphasis in regulation is shifting

from issues related to individual

institutions towards macroprudential ones

associated with systemic risk. CCRW

Many executives were more concerned withoutperforming revenue and profit targets thanpaying heed to growing risk concentrations

>>

0 10 20 30 40 50 60

2%

9%

16%

21%

25%

30%

32%

38%

46%

48%

Others

Real-time (or intra-day) risk

Data availability

Risk reporting

Defining responsibility for risk management

Data quality

Risk function expertise

Board-level expertise

Business risk expertise

Risk management processes and systems

Figure 1. From the survey: In which of the following areas do you think the most

significant focus should be to address current shortcomings in risk management?

(% respondents)

CCRworld

35-36 feature 14/5/10 21:03 Page 30

RISK

37June 2010

TRENDS IN CREDIT RISK MANAGEMENTTHERE are several trends I am seeing at

progressive banks presently, some of

which I have listed below.

� An increase interest in throwing more

research into the correlation impact to

portfolio defaults.

� An interest in measuring wrong way

risk and creating a charge for this

exposure.

� Building incremental models for cash

value added when restructuring trades.

� The construction of a framework for

pricing contingent counterparty and

credit risk.

� The chase for risk weighted asset

data still appears to be on, and is often

not sufficient to confirm decision making

or carry out effective analytics.

� A move and an increase in the

analytical approaches for dimensioning

netted estimated position error rather

than mark to market models.

� The creation of models that can infer

the effects of negative gamma on a

portfolio and how credit risk might be

able to be hedged given this position.

� Creating option type position models

for non-option instruments to allow

streamlining of analytics.

� Introduction of policies to break trades

and to pass on liability to other financial

institutions if the portfolio exposure has

high concentration and projected returns

are not in line with a degenerated risk

profile.

� Increase emphasis on default

ownership and post-recovery policy.

� Less emphasis on rating agencies

and an increase in credit exposure

assessment by improving models that

utilise credit spreads and the market

price of default protection.

� A move back to break away from a

single system for credit risk reporting.

� A centralisation of fragmented

and inconsistent counterparty risk

measurement systems.

� A move for automatic and rapid just

in time assessment of counterparty

trades for all products by connecting

the credit analytical and deal clearance

systems to front office brokerage and

trading platforms.

THE DEBT SALE DOLDRUMS

www.CCRWorld.net

CCRworld

THE light in the tunnel of recovering

economic and market conditions across

the globe has, at this moment, no direct

effect on the debt purchase market,

yet there have been positive signs of

portfolios coming up for pre-indicative

bidding – but the real eruption is to

come.

The market across Europe generally

seems to be showing that more

portfolios for sale will begin appearing

in approximately four to five months’

time – though interestingly, Aktiv Kapital

just picked up a fairly large book of

credit card accounts in the UK. Finance

is the key to the lack of market activity.

By the end of 2010 – and the fact

that investments have to be made before

year end closing, and bear in mind the

lead time for making off-balance sheet

transactions, current year achievements

and estimated end year balances before

they are off-loaded – we should see a

lot more activity.

Some debt purchasers undoubtedly

have, in the last few years, bought

portfolios at a too high price and have

suffered substantial losses, having both

high borrowings and at the same time

low collection results, and, in addition,

in some cases not having the financial

strength to make new investments.

Some debt purchasers will most likely

merge or be acquired in the coming

three to six months – we have seen a

few transactions in Europe, and mainly

the UK, these past months. However,

the US is still the playground for

professional debt purchase as an

alternative investment within the

investment management world.

I do believe that some sectors will

increase their sales appetite quite soon

and primarily that will be the consumer

credit area, with credit cards and small

consumer loans, as well the extremely

fast-growing sector in e-commerce.

The traditional selling segments of

telecoms and mortgages are having

forward flow agreements across, so

it is unlikely there will be more

transactions made in this sector, unless

heavy off-balance actions are made

and accounted for. And how much can

the market write-off? I cannot tell!

We are also seeing the trend of the

listed debt-buying companies across

Europe having restricted ammunition to

buy, as they are held back by shareholders

and strict compliance, even though they

are at the same time forced to make

certain investment levels. Having said

that, the transactions do not yet show

good results where there have been

some deals.

What we are clearly seeing is that,

when the European economy does

stabilise – Greece notwithstanding –

and things improve, there will be more

interest from strategic and financial

buyers.

The market will be driven by both

investors’ easier access to debt financing

and the growing economies, as well as

higher consumer

spending and so

increased financial

performance –

this will get us

out of the

doldrums! CCRW

While the debt purchase market has stalled over recent

years, there are signs that it may be about to recover

By Peter Crafoord

By Martin Davies, CEO, Causal Capital,

Australia


Peter Crafoord is

an advisor and Benelux partner of

ExpertoCredite, The Hague


37 briefing 14/5/10 21:03 Page 1

38 June 2010

CCRworld

www.CCRWorld.net

Recently I decided to use the

research ability of the world

wide web, to ask: “How do you

define the ‘hit rate’ of a credit manager?”

I was unsure what kind of answers or

reaction I would receive, but I was

amazed by just how many fellow credit

professionals wanted to share their view

with me!

The story began when I posted a

discussion in the ‘Credit and Collections

Professionals Group’ discussion board

on Linkedin, and collected completely

different points of view.

My topic was to define a set of

key performance indicators (KPIs) to

measure the credit manager. It appears

that there are two different ‘schools’ on

the subject.

The first group thinks in terms of

KPIs and seeks a connection between

the credit manager’s decisions and the

results after a given period – let us say

a year. Belonging to that group, I

presented the way I thought credit

managers should be rated. I am using

a combination of two KPIs:

� How many approved business-to-

business (B2B) customers become

delinquent – be it out of business,

bankrupt, or placed with a third party –

within one year and two years?

� How many rejected B2B customers

did not close after one year, and two

years? In this case we lost good

potential customers.

The combination of both criteria gives

us an appreciation of what we call the

credit manager ‘hit rate’.

The second group’s opinions were

that we should grade a credit manager’s

performance on the completeness of

the credit application procedure, and if

he or she performed correctly any loss

should be considered the cost of doing

business (Philip P. Philbin CCE).

I think that second opinion is very

interesting because, in a way, it protects

the credit manager who took ‘a bad

decision’ based on a set of parameters

that brought him to approve the deal.

And I think that credit managers need

to be protected, as long as they perform

by the book.

My concern is that ‘performing by

the book’ requires a very mature credit

department, with well developed

procedures that have been tested and

approved over time. That kind of

procedure does not exist in a lot of new

small and medium-sized enterprises or

in emerging market countries.

The credit manager’s responsibility

Another point that rose from that

discussion is the limit of the credit

manager’s responsibility and involvement

with a non-performing collections

department.

Below are some of the view which

my colleagues were prepared to share.

Kevin Landry, credit manager at

Outdoor Research, asked me to define

‘delinquent’. He asked me: “You mean

the customer account was opened –

and then went out of business after it

was opened?”

My response was that I imagined a

client not only out of business, but at

least transferred to legal collections.

James Beato, regional credit control

manager at Misys Banking Systems,

made a very valuable contribution:

“Typically, you would track a poor credit

decision to any customer that defaults

on you – that is, out of business,

bankrupt, placed with a third party – if

it occurs in the first 12 months. After

that, the account responsibility transfers

to customer management and retention.

“I would give you credit for tracking

those that you ‘pass on’ as well, because

a low number of defaults there present

missed opportunities for you.

“Of the metrics I have used, the more

relevant would be your approval or

submission percentage relative to your

losses assumed for a particular business

segment, as well as the percentage of

losses of overall business for business

unit – that is, vendor, branch, product

line, and so on – you support.”

Philip P Philbin CCE, managing director

and senior consultant at Commercial

Credit Management Associates in the

USA, took a strong position against my

view. He believes that: “If the economy

had not taken such a fall two years ago,

I would think that perhaps your metric

might have some value. But things

being as they are, how are your metrics

falling out?”

While Fred Dempster, chief operating

officer at Group BDO LLC, felt that: “I

would probably want to see something

on credit risk as well: Taking a simple

A,B,C,D, with D being high risk, that

should filter in my mind.

“In a business expansion once we

were taking on a lot of C and D profile

risk where the potential for loss went up.

In my B2B days we never tracked that

deep, but today business information

and analytics can capture everything.

Finally, a question would be: what is the

overall purpose of the hit rate KPI?”

INTERNATIONAL TRADE

� Constructing metrics for

measuring credit managers

� Indian stimuli withdrawn

� Insurers recover from crisis

Is it possible to set KPIs for how well a credit manager isperforming? Should it be based on the number of baddecisions made, or the good ones that are not made?By Morisso Taieb

I think that credit managers need to be protected, as long as they perform by the book

DEFINING THE ‘HIT RATE’ OF A CREDIT MANAGER

38-39 feature 14/5/10 21:04 Page 30


CCRworld

INTERNATIONAL TRADE

Measuring decision making

The overall purpose of my research and

the ‘hit rate’ is to measure the credit

manager in both ways:

� How many ‘bad’ customers were

accepted

� How many good customers were

rejected, to prevent from a too-

conservative credit manager rejecting

good deals.

Concerning Mr Dempster’s first point,

we are collecting Coface ratings in our

customer relationship management

system, and it could be possible to go

further and check the rating evolution of

new B2B customers. But for the size of

our company, it might be more a case

that we need to measure the credit

manager.

Mr Philpin developed our discussion

ever further, when he said: “May I

assume that the ‘hit rate’ on applications

is not the only parameter that is being

used to gauge the performance of a

credit manager? The way I look at it,

the whole credit process starts from the

day that credit is approved to the date

it stops, which is most often due to a

collection problem.

“As a credit manager for 36 years, I

have determined that if you make the

best decision you can from the start,

and fully document how you arrived at

your risk decision, and then be diligent

on your collection efforts, any loss

should be considered the cost of doing

business.

“In fact, so much changes with

today’s customers – mostly without

your knowledge – that by the time the

account becomes an issue, the credit

manager is caught unawares but has

little to do with the original credit

decision.

“I have also found, at least here in the

US, that well in excess of 95% of all

applicants that request open account

credit are either worthy of the credit or

I have found a way to get them credit,

perhaps with security.

“Grade a credit manager’s performance

on the completeness of the credit

application procedure – ok. Grade them

on what happended to the customer

some time later – I do not know about

that.”

Brian Flynn, CEO at Receivable

Consultants International, commented:

“Mr Dempster and Mr Philpin make

great points. To be meaningful, the

metrics must include both internal and

external forces; including, but certainly

not limited to, economic cycles, overall

company policies,

sales and

marketing,

expansion and

contraction, and

so on.” CCRW

Morisso Taieb is

risk, revenue

assurance & carrier relations manager

for Bezeq International, Israel


38-39 feature 14/5/10 21:04 Page 31

INTERNATIONAL TRADE

40 June 2010

CCRworld

www.CCRWorld.net

INSURERS RECOVER FROM FINANCIAL CRISISCREDIT insurers have generally lived up

to their obligations during the financial

crisis by insuring trade credit risks (20

million credit limits) and paying out

claims at a ratio of around 84% in

2009 (pre-crisis this was 40%).

This is the evidence from our report

Trade Credit Insurance’s role in a fragile

recovery from the financial-economic

crisis.

Both the International Credit

Insurance & Surety Association (ICISA)

president Clemens von Weichs and

executive director Robert Nijhout have

emphasised that trade credit insurers

demonstrated their ability to respond

to the difficult economic situation.

The cost of capital and a tightened

risk environment in the crisis still

challenges the industry, leading to

higher premium rates and stricter

conditions – a development that the

experts expect to continue. Therefore,

greater transparency about credit

limit decisions and enhanced services

in risk management consultancy for

clients will be a strong focus in the

future.

Mr Von Weichs has highlighted how

trade credit insurers continued to

support their customers during the

crisis: “The industry’s involvement is

illustrated by some 20 million running

credit limits. Insured exposures are at

€1.8tr.

“These dropped by some 10% in

2009, in line with lower trade volumes.

Claims shot up in 2008 and 2009,

which resulted in a claims ratio before

costs for the sector of around 84% for

2009, compared with pre-crisis loss

ratio levels of around 40% to 60%.”

Robert Nijhout believes that: “With a

high but stabilised claims ratio trade our

business has confirmed our ability to

manage risk and their role in a difficult

financial environment.”

High policy renewal rates of around

80 to 90% confirm customer satisfaction

with their insurance partners.

Continued availability of insurance

cover gives confidence and security

during a fragile economic recovery,

which is progressing faster than

expected. Global GDP – following major

economic forecasts – could rise in the

range of 3% to 4%, mainly driven by

emerging markets.

India

In April, the Reserve Bank of India (RBI)

raised its interest rates for the second

consecutive month, and the reserve

requirement, in an attempt to ease

growing inflation pressures.

During the global economic crisis of

2008 and 2009, the RBI severely eased

its monetary conditions to boost domestic

demand, and the Indian economy grew

by 5.7% in 2009. Prospects for 2010

are bright as domestic demand is strong

and exports are expected to rebound.

In the wake of a strong recovery, the

government decided to withdraw its

monetary and fiscal stimuli. It is a

welcome move after two years of fiscal

slippage. The 2010 budget is the first

step of a needed fiscal adjustment.

Tanzania

After a heated discussion the Tanzanian

Parliament has approved the new draft

mining law which will become effective

as President Kikwete signs the law. The

legislation only applies to new mining

contracts.

The aim is to raise the sector’s

contribution to Tanzania’s economy. If

the enacted without amendments, a

revision of mining contracts will be

required every five years. The royalty

system has been modified, which implies

a royalty rise for gold of 3% to 4%.

Argentina

The Minister of Economy has unveiled a

debt swap offer – without giving full

details at time of going to press – for

bondholders who did not participate in

the sovereign debt restructuring in 2005.

Regulators have approved the deal.

The subscription period opened on 3

May and closes on 7 June. Amid the

worsening fiscal outlook before the

presidential election, Argentina is seeking

to restore access to international markets

and therefore needs to close the

chapter of its 2001 default of

€77.77bn (US$100bn).

The country concluded a first debt

swap in 2005 with more than 75% of

owners of defaulted bonds. The holders

of the remaining bonds refused the

terms proposed as they did not meet

their expectations. Now, the lawsuit won

by the bondholders prevents Argentina

from tapping into the capital market as

any money raised might be seized by

creditors. In order to straighten out the

situation, Argentina is offering a second

debt swap which varies for large- and

small-scale investors.

Kyrgyzstan

A bloody popular revolt in the capital

Bishkek left at least 83 dead and

hundreds injured. President Kurmanbek

Bakiyev was forced to flee as the

opposition seized power and installed a

provisional government led by former

Foreign Minister Roza Otunbayeva.

Her regime swiftly gained support from

both the US and Russian administrations,

who are eager to safeguard their military

interests in the country.

ONDD – The Belgian Export

Credit Agency


FISCAL STIMULI WITHDRAWNIndia acts to ease growing inflation pressures, while newlegislation is proposed in Tanzania

By ONDD – The Belgian Export Credit Agency

By Edward Verhey, head of advocacy,

International Credit Insurance &

Surety Association


40 briefing 14/5/10 22:59 Page 2

EVENTS & WEB LINKS


CCRworld

Top Ranking Performers Conference

9-12 June, 2010

Rozen Plaza Hotel, Orlando, Florida, USA

www.contactcenterworld.com/conferences

PRMIA Complete Course in Risk Management

14-18 June, 2010

University College, London, UK

www.prmia.org/ucl2010

CCR-interactive, in association with Philips’ Homecoll service

5 October, 2010

The Guoman Tower Hotel, London, UK

Incorporating the Credit Excellence Awards

www.ccr-interactive.com

www.creditexcellenceawards.com

FCIB 130th International Credit & Risk Management

Conference

17-19 October, 2010

The Ritz Carlton, Berlin, Germany

www.fcibglobal.com

EVENTS

TO LIST YOUR EVENT PLEASE CALL ALISON LUCAS ON

+44 (0)1702 341948 OR E-MAIL [email protected]

Asociace inkasních agentur, CzechRepublicwww.aiacz.cz

Association of Credit and CollectionProfessionals, USAwww.collector.com

Association of Credit Professionals, UKwww.aocp.org.uk

Association of Executives in Finance,Credit and International Business,Internationalwww.fcibglobal.com

Associaçâo Portuguesa de Gestâo eRecuperaçâo de Créditos, Portugalwww.aperc.pt

Association of Debt Recovery Agents,South Africawww.adraonline.co.za

Australian Institute of CreditManagement, Australiawww.aicm.com.au

Bundesverband Deutscher Inkasso-Unternehmen, Germanywww.inkasso.de

Credit Services Association, UKwww.csa-uk.com

Eurofinas, Europewww.eurofinas.org

European Association of ConsumerCredit Information Suppliers, Europewww.accis.org

European Banking Federation, Europewww.fbe.be

European Mortgage Federation, Europewww.hypo.org

Federation of Business InformationServices, Globalwww.febis.org

Federation of European CreditManagement Associations, Europewww.fecma.com

Fenca, Europewww.fenca.com

Institute of Credit Management, UKwww.icm.org.uk

International Association ofCommercial Collectorswww.commercialcollector.com

International Energy Credit Associationwww.ieca.net

Leaseurope, Europewww.leaseurope.org

National Association of CreditManagement, USAwww.nacm.org

Nederlandse Vereniging van Incasso-Ondernemingen, The Netherlandswww.nvio.nl

New Zealand Collectors Association,New Zealandwww.nzcollectors.org.nz

Norske Inkassobyråers Forening, Norwaywww.inkasso.no

Professional Risk Managers’International Associationwww.prmia.org

South African Insititute of CreditManagementwww.icmorg.co.za

Spanish Association of CollectionEntities, Spainwww.angeco.com

Svenska Inkassoföreningen, Swedenwww.svenska-inkassoforeningen.se

Syndicat National des Cabinets deRecouvrement de Creances et deRenseignements Commerciaux, Francewww.ancr.fr

Unione Nazionale Imprese Recuperocrediti E informazioni Commerciali, Italywww.unirec.it

Verband SchweizerischerInkassotreuhandinstitute, Switzerlandwww.vsi1941.ch

WEB LINKS

news, events, jobs, magazineone click away...

For more details contact Gary Lucas on:

tel: +44 (0)7785 268404

e-mail: [email protected]

ccrworld net

41 events 14/5/10 23:00 Page 5

APPOINTMENTS & UPDATES

42 June 2010

CCRworld

www.CCRWorld.net

SOUTH AFRICA

Ian Read has been appointed to the

board of directors of PIC Solutions.

Mr Read joined PIC Solutions in

December 2006 as executive vice

president – general manager, charged

with the responsibility of developing the

Middle East Africa region.

Mr Read has an exceptional

background in the credit risk and

management industry, spanning more

than 25 years. For the initial decade of

his career, he gained experience in both

retail and commercial lending practices

at numerous British and international

financial service organisations, including

National Westminster Bank plc and JCB

Credit and Associates Capital

Corporation (Citicards).

Prior to joining PIC Solutions, Mr

Read worked extensively within the

international credit risk consulting and

ICT marketplace for various companies

including Experian, Jaywing and FICO

(formerly Fair Isaac). He has shared this

extensive knowledge and expertise with

clients in over 20 different countries,

offering them advice on best practice

consumer and SME risk management

and credit marketing methodologies.

BELGIUM

Frank Vanwingh was appointed deputy

chief executive officer of ONDD by

Royal Decree published in the Moniteur

Belge on 7 April 2010.

Mr Vanwingh has more than 20 years

of operational experience as a legal

counsel at ONDD and strategic

experience as head of the strategy,

legal affairs and risk management

department.

Mr Vanwingh will assist ONDD CEO

Dirk Terweduwe in the daily management

of the company and in making necessary

strategic choices.

INDIA

Experian has announced that its Indian

Joint Venture is the first company to be

awarded a full licence by the Reserve

Bank of India (RBI) to operate a credit

bureau in India under new regulations.

Experian has appointed global bureau

specialist Phil Nolan as managing

director of the Indian credit bureau –

based in Mumbai.

Experian is the first credit information

company to be granted a Certificate of

Registration by the RBI under the CICRA

Act of 2005.

EUROPE

Atradius has reported a loss after tax of

€113.3m. Extensive risk mitigation

actions and effective assessment of the

creditworthiness of buyers contributed

to significant improvement in 2009

second half results.

� Insurance revenues of €1,589.3m

in 2009 compared with €1,774.0m in

2008.

� Service result increased 14.5% to

€15.0m (€13.1m in 2008).

� Net investment income grew 42.9%

to €68.3m (€47.8m in 2008).

� Net loss improved 41.4% to

€113.3m (loss of €193.4m in 2008).

The improvement in the claims result

was most notable in the second half of

2009 and was the driver behind the

reduction in the net claims ratio.

Expenses and investment income

were better than budget 2009,

contributing to the positive results

Atradius achieved over the last six

months of 2009, excluding restructuring

costs.

“Anticipating the economic crisis we

took decisive actions in the second half

of 2008 to minimise the impact of the

global recession on the risks we share

with our customers,” said Atradius CEO

Isidoro Unda. “I recognise that the

depth of the crisis resulted in some

actions that were not always well

communicated to our customers. We are

committed to improving the information

flow between Atradius, our customers

and brokers.”

Mr Unda added, “Our risk acceptance

is now higher than that of a number of

our competitors, providing customers

with the right assessment of risks and

the right tools to manage exposure

through the crisis.”

BELGIUM

Bruno Verhofstede took up the position

of chief executive officer of the Belgian

subsidiary of global credit insurance

leader Euler Hermes on 1 May 2010.

Mr Verhofstede has spent his career

with the ING group, where he lately

held the position of CEO of ING

Commercial Finance Belux, a factoring

company operating in Belgium and

Luxembourg. Backed by the experience

EUROPE

On 29 April 2010 Aktiv Kapital signed a contract with a major financial institution

in the UK acquiring a non-performing loans portfolio. The portfolio consists of

around 16,000 credit card and loan accounts. The major part of the portfolio

will be serviced from Aktiv Kapital’s operation in Bromley, outside London.

“We have recently been selective in our acquisitions when buying non-

performing loans,” said Erik Øyno, president and CEO of Aktiv Kapital.

“We appreciate that price expectations now are more in line with the underlying

value of the portfolio. Previously we have stated that portfolio prices have been

at unrealistic levels, and this transaction confirms for us that the market has

reached sustainable levels. This acquisition is in line with our strategic focus and

we look forward making this portfolio a success for both Aktiv Kapital and for

our customers.”Erik Øyno, president and CEO,

Aktiv Kapital


42-44 A&U 14/5/10 23:01 Page 2


43www.CCRWorld.netJune 2010

in sales, product management and risk

management functions acquired within

the ING group, he helped structure and

build up this new activity.

He replaces Etienne Defraigne, who

had been acting as temporary CEO of

Euler Hermes Belgium since June 2009.

Mr Defraigne will take up the position

of finance director for Euler Hermes

Northern Europe Region.

SWITZERLAND

Jules Kappeler has been appointed

managing director of Euler Hermes

Switzerland.

Mr Kappeler joined Euler Hermes in

Switzerland in 1998. In 2001 he took

over the management of marketing &

contracts. In 2005 he was appointed a

member of the board of management

and deputy managing director.

He succeeds Jörn Volk, who will take

up new responsibilities in the Euler

Hermes group.

Mr Kappeler, a Swiss citizen, graduated

in business management and holds an

MBA in marketing. Before joining Euler

Hermes, he held various positions in the

wholesale banking division of the Credit

Suisse group.

EUROPE

Coface has announced good turnover

resistance, a turnaround in its profits

and a new credit insurance approach.

According to the company, the years

2008 and 2009 will remain those of

the fifth global credit crisis, the most

serious since the Second World War.

World growth went from 4.2% in 2007

to 2.1% in 2008 and then to -1.9% in

2009, for an unprecedented growth

drop of six points.

In this context, Coface’s business in

2009 was marked by:

� An increase in turnover of 3.8%.

� Profits that followed the three phases

of the crisis: positive in the first three

quarters of 2008, then posting losses

in the next three quarters, finally

showing solid improvement in the

second half of 2009 with a positive

profit in the fourth quarter of 2009.

� Strong support from its shareholder

(Natixis): two capital increases that

strengthened Coface’s financial solidity

and a solid turnover. After growing by

5.6% in 2008, turnover continued to

grow by +3.8% in 2009 and by +3.2%

at constant structure and exchange

rates, still driven by strong growth from

non-European countries.

Coface estimates world growth in

2010 will be 2.7%, after -1.9% in

2009, including 5.3% in emerging

countries, 1.8% in the United States

and only 0.9% in the Euro zone. This

signals the end of the global credit

crisis, in the sense of a widespread

increase in business failures, far beyond

their normal level.

However, there will still be zones of

weakness (sectoral or geographical);

some countries, for example Spain,

Portugal, Ireland, Hungary and the Baltic

countries, should once again experience

negative growth and therefore more

bankruptcies in 2010 than in 2009.

NORDIC REGION

Economic signals are generally positive,

according to the latest research by SEB.

World trade now seems poised to take

off in earnest. This will especially

benefit export- and manufacturing-

dependent countries, such as Sweden.

Central banks are continuing to prop

up the economic recovery with highly

expansionary policies, and fiscal belt-

tightening is being postponed in most

places.

In the OECD countries, economic

growth will be about 2.5% annually

during 2010-2011, or somewhat above

trend. The upturn in unemployment has

been smaller than expected, but growth

is insufficient to push down the jobless

rate quickly.

Euro zone growth is being hampered

by the crisis in southern Europe, which

is making huge austerity programmes

necessary, and not only in Greece.

Sweden has good potential to take

advantage of the global recovery.

Because of strong balance sheets, the

country will be well prepared to deal

with economic and financial reversals in

Europe and elsewhere.

Exports are about to bounce back

after the disappointing winter months.

GDP growth will be 3.0% in 2010

(2.7% in calendar-adjusted terms) and

2.7% in 2011: in line with previous

forecasts. Expansionary economic

policies have contributed to an

unusually fast labour market turnaround,

but unemployment is falling only slowly

and will remain at 8.5% late in 2011.

This will contribute to continued low

inflation pressure in Sweden as

well.

Hans-Werner Scherer, chairman,

board of directors, EOS Group

>>

USA

As of 30 April 2010, the international EOS Group, an Otto Group company,

acquired 100% of the US-American company True North AR, LLC. Established in

1968, True North provides healthcare revenue cycle solutions and debt collection

services to county and municipal courts, government and other businesses.

Hans-Werner Scherer, chairman of the board of directors of the EOS Group,

said: “With this investment, the EOS Group strengthens its market position as an

arrears and receivables management company in the US even further.” The

acquisition fulfills a component of the company’s geographic strategy which

included the expansion to the US west coast (California).

Mr Scherer added: “The company is a highly-profitable business. With the

transaction we enhance our revenue. In addition to that we improve our service

level and the relationships with our clients in EOS’s existing lines of business

in the US” Additionally, the company’s specialist know how in the healthcare

industry fits in with the one of the existing EOS subsidiuary in the US, EOS CCA.

EOS takes on the 120 people True North AR employs – most work at the

California offices in Novato and Sacramento.

Manoj Sharma, CEO of True North AR, will continue to run the business.

CCRworld

42-44 A&U 14/5/10 23:01 Page 3


44 June 2010

“The world’s economic and

financial systems are still moving

in a complex post-crisis environment,

where the economic policy choices

ahead for many countries will not be

voluntary,” says Robert Bergqvist, SEB’s

chief economist.

“Greece is a clear example of this.

Credible economic plans for the future

must be presented. The shape of fiscal

policy will have a major impact on

economic performance.”

BELGIUM/AUSTRIA

On 11 May 2010, ONDD, the Belgian

official export credit agency, acquired

from Russian insurance market leader

OJSC Ingosstrakh an additional 33%

stake in Austrian credit insurer Garant,

bringing its participation to 83%.

Ingosstrakh established Garant as

early as 1958 and expanded its activities

by means of a branch in Switzerland. In

2006 ONDD took a 50% stake in

Garant’s capital with the aim to combine

insurance capacities and meet client

demand better.

This change in participation is part of

a more extensive arrangement between

Ingosstrakh and ONDD, by which the

two partners have strengthened their

links with the creation of a joint venture

in Russia, INGO-ONDD, specialised in

credit insurance in the Russian domestic

and export markets.

Garant’s CEO Louis Habib-Deloncle

said “We greatly appreciate the continuing

support of our shareholders. Thanks to

this new capital structure, Garant will

pursue its strategy as a private market

operator with recognition in the market

for its reliability and long-lasting expertise

in tailoring commercial and political risk

insurance solutions worldwide.”

CCRworld

www.CCRWorld.net

Nick Evans, head of customer

management, Experian, UK & Ireland

UK and Ireland

Nick Evans has been appointed head of customer management for Experian in

the UK and Ireland. Mr Evans joins Experian from HSBC, where he was head of

credit risk at its M&S Money business.

Mr Evans will be responsible for leading the development of Experian’s

customer management business across its credit risk and marketing propositions.

His primary focus will be on driving the use of the company’s single customer

view, customer retention and portfolio valuation propositions in the financial

services, utilities and telecommunications sectors.

ONLINE!

Did you know you can read every edition of CCR World online?

Just go to

www.ccrworld.netregister, and you can then read the current edition, search the complete

archive with Google, retrieve articles, photos and summaries

all from your own computer.

CCR World Onlinethe best credit and risk

management information on the web

>>

42-44 A&U 14/5/10 23:01 Page 4

STATISTICS

45June 2010

CCRworld

www.CCRWorld.net

STATISTICSOECD COMPOSITE LEADING INDICATORS

The above graphs show each country’s growth cycle outlook based on the CLI which attempts to indicate turning points in

economic activity approximately six months in advance. Shaded areas represent observed growth cycle downswings

(measured from peak to trough) in the reference series (economic activity).

The latest figures point to a slowdown in the pace of expansion.

Expansion in the OECD area Possible halt in expansion in China

Expansion in the United States Expansion in the Euro area

Expansion in Japan Expansion in France Expansion in Germany

Expansion in Italy Expansion in the UK Possible halt in recovery in Brazil

Expansion in Canada Expansion in India Expansion in Russia

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45 stats 14/5/10 23:02 Page 3

ASSOCIATION NEWS


CCRworld

MACM

The Malta Association of Credit

Management (MACM) recently held a

seminar in collaboration with HSBC

Malta, with the discussion focussed on

how to do business outside Malta with

maximum return on investment, while

managing risk.

The seminar was opened by Richard

Cottell, head of commercial banking at

HSBC and Dr Louis Bianchi, president

of MACM.

“The MACM strives to introduce and

update the business community in Malta

about good trading practices, which

very often include credit,” said Josef

Busuttil, director general of MACM.

“The objective of the seminar was to

inform businesses about the services

HSBC Malta offers in order to mitigate

international business risk and ensure

sound cashflow.”

www.macm.org.mt

ICMSA

The South African Institute of Credit

Management has circulated an update

on the new Companies Act to all

members. The Companies Act 71

of 2008, also known as The New

Companies Act, was signed into law in

April 2009. However, it has not yet

been put into force.

It has been nearly a year since the

Act was signed in as law, and there

have been some developments. The

minister of trade and industry

published draft regulations as well as

“rectifications” in December 2009,

which seek to correct some of the

numerous errors in the Act, as well

as give some content to some of its

provisions.

The closing date for comments on

these regulations was 1 March 2010.

The final regulations were meant to

come out on 31 March 2010, but as

yet they have not been published. This

may be due to a number of criticisms

that the regulations have received.

There has also been negative

feedback on the publication of the

so called “rectifications”, which mainly

deal with correcting spelling and

grammatical errors.

Some commentators point out that

South Africa has never used

rectifications to correct an act. They

argue that the correct procedure would

be to either include the changes as

part of the regulations or to have an

amendment to the Act. Whether this will

lead to further delays of the release of

the final regulations is unknown.

The minister has confirmed that the

Companies Act will come into force in

ASSOCIATION NEWS

AICM

The Australian Institute of Credit Management (AICM) has

published its submission in response to the draft for

consultation on updating ‘Australian Consumer Law – A guide

to unfair contract terms’.

Generally, the AICM welcomes and supports the proposed

guide. AICM believes the guide will assist with the

understanding and application of the Trade Practices

Amendment (Australian Consumer Law) Act (No 1).

However AICM would recommend some refinements to

the proposed publication which would, in its view, enhance

understanding.

With regards the interrelationship between the new

legislation and ‘sole traders’ – as at June 2007, there

were 641,538 (32%) companies in Australia, followed

by 620,037 (31%) sole proprietors, 385,801 (19%)

partnerships and 364,075 (18%) trusts.

The value of the provision of credit to the Australian

economy is significant. Whilst the Australian Bureau of

Statistics (ABS) does not collect official figures for the value

of commercial business to business credit, using the most

recent ABS Input Output Tables together with the annual

AICM National Credit Industry Survey it is conservatively

estimated that commercial credit is provided to an annual

value of $600bn. This figure does not reflect consumer

credit or loans to business.

AICM highlighted these statistics to draw the authors of the

consultation’s attention to the potential confusion which may

arise in relation to unfair contract terms and the provision of

commercial credit to sole traders.

Commercial credit is usually focussed on the supply of

goods or services and embraces a myriad of sole trader

customers as documented above. In the guide it is stated on

p5: “A contract between businesses is excluded from the

scope of the provisions, except potentially in respect of a

‘sole trader’ who may have common business and personal

interests, but only to the extent that the contract relates to

goods and services acquired wholly or predominantly for the

consumer’s personal, domestic or household use.”

This is the only reference to the interaction between the

new legislation and sole traders throughout the entire

document. As AICM members deal with sole traders on a

daily basis using standard form contracts, it will be difficult

for them to glean any additional insight as to how the new

law is proposed to apply.

It is of concern that prior to entering into a standard

contract the credit provider will have to ascertain the intended

use of the goods and/or services.

www.aicm.com.au

Josef Busuttil, director general, Malta

Association of Credit Management

46-47 assoc news 14/5/10 23:03 Page 6

ASSOCIATION NEWS


CCRworld

the third-quarter of 2010, but no fixed

date has been given.

However, given the amount of

criticism the Act and the regulations

have received, not to mention that final

regulations have yet to be released, it

is unlikely that that the Act will be

ready by this time.

www.icmorg.co.za

IICM

The Irish Institute of Credit

Management will be holding its annual

Credit Expo event in Dublin on

September 24.

More information can be requested

from the Institute’s headquarters, which

has moved to new offices. The new

address is: 17 Kildare Street, Dublin 2.

Telephone: +353 1 6099444.

www.iicm.ie

PRMIA

The Professional Risk Managers

International Association (PRMIA) is

staging a special five-day ‘Complete

Course in Risk Management’ in London

this month, from June 14-18.

The joint programme will be

presented by PRMIA and three

leading global universities and market

practitioners: University College London

(UCL), London Business School and

Said Business School.

Along with the day-time activities,

there will be evening events, including

a debate on algorithmic and hi-speed

trading, chaired by Jeremy Grant, editor,

Financial Times and attended by global

experts from the cash and derivatives

world.

The participant group of professionals

with international post-graduate

credentials will be coming from Asia,

Europe, Middle East and Africa.

This recognised global programme

offers continuing professional

development hours to BSB, CFA,

CISI, NASBA accounting and SRA

disciplines.

The programme is also being offered

in partnership with the Kellogg

Business School in Chicago, Illinois on

19-23 July.

Post-crisis – new paper

A new paper, Post-crisis financial risk

management: Some suggestions by

Riccardo Rebonato, has been published

by PRMIA. This paper argues the case

that, when it comes to the management

of financial risk, it is essential to provide

interpretative models of reality – as

data do not ‘speak by themselves’; that

these interpretative models are not

unique; that too little attention has been

devoted to explaining rather than

describing; and that the existence of a

number of competing views of the

world can give rise to co-ordination

among traders.

The implications of this for the

distribution of returns are highlighted.

The limits of purely statistical descriptions

of risk in terms of marginal or joint

distributions of risk factors are also

discussed.

New regional director

PRMIA has announced the appointment

of Craig Stapleton as the new regional

director of the Minneapolis Chapter. In

his role as the associate portfolio

manager with Advantus Capital

Management he is responsible for

agency MBS, government and municipal

bonds, derivatives hedging programmes,

asset allocation, portfolio analytics, and

reviewing new asset classes.

Mr Stapleton has been part of the

Minnesota Life General Account

investment process for five years,

during which he has been hedging

insurance product risk with derivatives.

In addition, he has provided analytical

support for the general account

including attribution, risk analysis, and

an asset liability-based strategic asset

allocation process.

www.prmia.org

David Millar, COO, PRMIA

The publication for senior credit professionals worldwide

� International readership

� Articles by the leading worldwide credit experts

� Experienced editorial team

� Working in association with international trade bodies

� Credit-specific features of a worldwide interest

� Credit management news from around the globe

Visit www.CCRWorld.net for more details

Editorial: Freddie Dawkins

+44 1702 441790 [email protected]

Advertising: Gary Lucas


Subscriptions: Alison Lucas


46-47 assoc news 14/5/10 23:03 Page 7

ECF INTERNATIONAL ADVICE


CCRworld

HOW VITAL IS TRADE CREDIT?

NEW results from academic research

were presented to EMEA Credit Forum

(ECF) members recently at their

meeting in London.

The research has looked at

benchmarking within the credit

management function, and the initial

results were presented by speakers from

the University of the West of England’s

Business School, summarised by Dr

Salima Paul and Dr Eleimon Gonis, who

have been supported in their work by

ECF members across Europe.

The new research, “An Investigation

of Late Payment and Credit Ratings in

the UK”, has lead to a benchmarking

exercise, where ECF member companies

can check their own performance

against peers within the same industry

or sector.

Dr Paul told CCRW: “I cannot stress

the importance of trade credit enough.

In previous research, I discovered, with

colleagues, that at least 80% of

corporate-sector transactions take place

on credit and, on average, trade credit

exceeds the primary short-term money

supply by a factor of two.

“We have also previously found that

accounts receivable (AR) to current

liability ratio exceeds 75%. So, AR

figures vary between 30% and 40% of

total assets.” See Table 1.

Looking at trade credit outside the

UK, the researchers found that:

� In the US, the size of trade credit

exceeds the credit supplied by the

entire banking system (Lee and Stowe,

1993) and “remains the single largest

source of short-term business credit”

(Berlin, 2003:21).

� In France and Italy, AR amounts to

29% of firms’ total assets (Berlin, 2003).

� In Eastern Europe, AR to total liabilities

vary between 21% (Hungary) and 49%

(Bulgaria) (Delannay & Weill, 2004).

� Private-sector firms in China rely

heavily on trade credit (Ge and Qiu,

2006).

CCRW asked Drs Paul and Gonis why

they felt late payment is such a problem,

and Dr Elonis replied: “There are several

key points to consider. First, of course,

there is the feeling the debtor has of

being in a power position by not paying

on time. You also have to consider the

competitiveness of markets – which

supplier is brave enough to insist on

adherence to terms, in a tough market,

when another may be tempted for a

short-term competitive advantage, in

terms of sales, to let terms be exceeded.”

Battling late payment

How would Dr Paul battle late payment

practices? “Well, groups such as ECF

can help members, by the free

exchange of information and discussing

general practice within industries and

trends in late payment. Some might

argue that there should be a mechanism

to ‘name and shame’ consistently bad

payers – that is, companies who quite

deliberately agree normal terms, then

never abide by them.”

“Let us look at the facts,” said Dr

Paul. “Many firms that did not survive

the 1980s or 1990s recessions had

real liquidity problems related to late

payment and bad debts. These become

a major factor behind the UK Business

failure rate (Peel et al., 2000) and quite

often, even today, we find that ‘the late

payment problem’ is mainly due to poor

terms and conditions management

practices (Summers & Wilson, 2002).

“In 1998, 2% of UK trade invoices

were paid on time (Trade Indemnity,

2000) and in 2004, 12% of UK invoices

were paid on time (Paul, 2004).”

Dr Elonis pointed out that only 10%

of large companies always pay on time

(Dun and Bradstreet, 2003) and late

payment legislation is used by only 7%

of UK firms (CMRC, 2004).

Credit strategy

So the research has led to the

development of a credit strategy, which

was suggested to all ECF members:

Objectives must be:

� Maximum sales.

� Prompt payment.

� Minimum bad debt.

And the ‘weapons’ to be deployed to

secure any trading company must be:

� Procedures.

� Systems.

� Documentation.

And then credit management teams

need to ensure:

� Pro-active credit management .

� Clear credit terms.

� Consistent credit decisions.

� That trade credit management

becomes an intrinsic part of the

strategic decision making.

� Prediction of customers’ future

payment behaviour.

� That they find out exactly why

customers are not paying on time –

the so-called five Cs: capital, capacity,

collateral, character and condition.

The full results of the initial research

findings are available to ECF members.

� The first comprehensive study of

credit management within the high-

technology industries is about to start.

Drs Paul and Gonis have just circulated

a first-part questionnaire to ECF

members. CCRW

New research shows just how important trade credit is tothe global economy, and has helped to set up a universalcredit policy, which any company can use to its advantage By Freddie Dawkins

In association with

Dr Eleimon Gonis and Dr Salima Paul

Table 1. Percentage of purchases on

credit

% credit purchase % firms

<81 7.5

81-91 6.2

91-100 86.3

48-49 ECF 14/5/10 23:05 Page 6


CCRworld

TWINNED with the ECF Forum is the

Senior Management Forum Europe

(SMFE), also chaired by Laurie Beagle

from P&A Receivables.

SMFE meets three times a year,

normally in Dublin, and has a range

of cross-industry Irish-based companies.

While many of the member companies

are commercial entities, some are

semi-state owned by the Irish

government, such as Bord Na Mona

and Bord Gais.

At the latest SMFE meeting, held near

to Dublin airport, the opening speaker

was Matthew Sherwood, senior global

economic adviser and head of production

for the business strategies division of

Experian.

A Texan by birth, Mr Sherwood had

a spell working at The Economist after

graduation and is now one of Experian’s

highest-profile in-house team of

economists.

His presentation was titled “Various

roads to recovery: Europe and the

‘new normal’”. In an almost uncanny

prediction of the monetary trouble

which Greece would soon face, Mr

Sherwood gave the assembled group

of about 30 SMFE members a foretaste

of the likely stress which Greece and

other southern European economies

might suffer.

Turning specifically to Ireland and

economic performance, Mr Sherwood

discussed the various regions of

Ireland. The predictions for growth were

summed up Table 1 below.

Looking at the current wider

international economic picture, Mr

Sherwood illustrated Experian’s country

forecasts (see Table 2).

RECOVERY IN EUROPE

OUR THANKS TO ECF MEMBERS AND P&A

RECEIVABLES FOR ALLOWING US TO PUBLISH

THE INFORMATION SHOWN HERE.

THE ECF CAN BE CONTACTED VIA LYNN

CHRISTON, ECF CO-ORDINATOR, AT

[email protected]

IF YOU WOULD LIKE TO COMMENT ON

ANYTHING PLEASE E-MAIL FREDDIE DAWKINS

AT [email protected].

Senior Management Forum Europe hears how Europe

looks set to fare in the economic recovery

In association with

Table 1. Average annual growth (%), 2010-2020

Output Employment

Mid-West 2.7 0.9

Dublin 2.2 0.3

West 2.2 0.4

South-West 1.9 0.2

South-East 1.9 0.2

Border 1.9 0.3

Midland 1.6 0.1

Mid-East 1.4 0.2

All 2.5 0.2

Table 2. Likelihood of deleveraging as of Q2 2009

(H - high; M - moderate; L - low)

Corporate Financial

Country Household Non-CRE* CRE* Government Institutions

Spain H H/L H L H/M

Britain H L H L M

US H L H L M

South Korea H L M L M

Canada H L M L M

Italy L M M M M

Japan L L M M M

Switzerland M L L L M

Germany L M L L M

France L L M L M

India L L L M M

China L L L L M

Brazil L L L L M

Russia L L L L M

Source: McKinsey Global Institute *Commercial Real Estate

ECF INTERNATIONAL ADVICE

Matthew Sherwood, senior global

economic advisor, business strategies

division, Experian

48-49 ECF 14/5/10 23:05 Page 7

LETTERS


I recently read an interesting article

about credit rating agencies on

cnn.com. It is well known that some

European countries have some serious

financial problems, though credit rating

agencies like S&P, Moody’s and Fitch

certainly played a significant role in this

by downgrading those countries.

The problem is that investors respond

to those ratings, which can make a

situation worse. So what is the power

of those agencies and are their

claims legitimate? Who controls the

rating agencies?

To a same level this is applicable

for credit reference agencies like

D&B or Graydon, for example. They

give a company rating, but never

tell you the formula behind it –

because it is a trade secret.

People rely on information, but if

information from perceived credible

sources is not transparent, this

may lead to wrong judgement and

maybe even manipulation, be it of

markets or even countries.

Nowadays the (negative) focus

is on Europe, but we are in this

together. Economic and social

sustainability and stability in

my humble opinion requires

unilateral cooperation,

transparency, honesty, trust and

integrity.

That would be an achievement for

humankind!

Marcel Wiedenbrugge, principal,

WCMConsult, The Netherlands

The article can be found at http://edition.

cnn.com/2010/BUSINESS/05/04/credit.

ratings.agencies/index.html?hpt=C1

Marcel Wiedenbrugge, principal,

WCMConsult

MARCEL Wiedenbrugge makes some

interesting points above. I only have

one comment to add: Please be

reminded that just a few days before

Lehman Brothers went bust, it was

rated AAA!

Indeed, before retail group Woolworths

went bust, just the day before in fact,

some credit reference agencies in

Europe were not flagging up the risks!

Now we have the very derogatory

term PIGS (Portugal, Ireland, Greece

and Spain) thrown to hell, as investors

are moving away from these countries –

to the detriment of the the countries

themselves, the other EU States that

have to bail out for their economic and

financial survival, and the euro as a

major world currency. This is affecting

billions of commercial international

transactions, having a negative effect on

businesses and the world economy at

large.

I will give you an unbelievable

example of what is happening in

Europe at the moment.

Did you know that Malta, a small and

vulnerable country with very limited

resources, has to borrow money to lend

it to Greece in order to adhere to the

agreed EU protocol? The solace given

to us Maltese by our government was

that Malta will be doing a slight profit

out of this transaction! Very smart

indeed!

In my opinion, it is becoming

ridiculous and I wonder where the

economists are and what they are

doing? Apologies for being somewhat

aggressive but the situation is getting

out of hand and we have to be

careful.

It is our responsibility, as international

credit and risk managers to create the

awareness of what is happening and try

to persuade our governments and our

EU representatives to wake up and be

more serious, because what we

are doing today will affect us and our

children tomorrow.

One other thing to remind these

people: we are humans and we have

brains – please do not treat us as

puppets.

Josef Busuttil, director general, Malta

Association of Credit Management

WHAT ARE THE ECONOMISTS DOING?

SEND YOUR LETTERS TO THE

EDITOR, FREDDIE DAWKINS, ON

[email protected]

RATING AND REFERENCEAGENCIES’ MYSTERIOUS WAYS

CCRworld

50 letters 14/5/10 23:05 Page 50

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CREDIT MANAGEMENT KEY TO IRISH RECOVERY · Salima Paul and Dr Eleimon Gonis for sharing their work with us. You can read more on page 48, where there is also exclusive news on new