1 october 2014 creditmanagement in change– next dimension classification: open/ public
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1
October 2014
Creditmanagement in change–
next dimension
Classification: open/ public
2
Walk through
● Where do we come from
● What is the topic about
● Why this question – do we need a next dimension
● Will it add value to our companies
● Are we prepared – can we achieve
● What will be needed
3
Investors Growth
Mentality/ Behavior
Information
What is around us.........
Catastrophies – natural – man-
made
KPI / Reporting
Communication
Structured Finance
Costs / E E S / Profitability
Ethics / Moral
LC/ CLC/ DC/LG/StbLG :
Tools
expectations
shares
Markets / Economy / Currency
TFCM challenges (to name
some drivers, list by far not
complete)Language
Trading Old/New
4 Classification: INTERNAL USE ONLY
Kommerzielles Risiko/ Kunden Risiko
Länderrisiko
Währungsrisiko
Transferrisiko
Manage the company’s commercial risk in the classic risk environment
5
The challenge
● Bad years follow good years
● Default ratio is increasing
● The economic crisis is not over yet
● Political tensions increase
● Even capital could be cheap, economies facing liquidity crunches
● Inflation – deflation
● Currencies get out of balance
● Demand of new solutions: but how will these solutions look like?
● What will it bring to us, to our role?
Global business complexity remains EES/ AOL/ KPIs/ GGP Growth pressure drives exposure/ risk Money is cheap but not available Volatility will increase
6
?
● show-of-hands
- Who is actually operating TFCM in Finance / in Business / in Treasury
- Anyone running an outsourced TFCM center
- I assume we all represent global international players is your provided credit term long or short
Classification: INTERNAL USE ONLY
7
Allow me some initial thoughts
● Efficiency
● effectiveness
● Scalability
● Costs – FTE – Temps – Education – Training – Quality - Experience
● SSC shared service centers
● Best-in-Class? Vs Fit-for-Purpose?
● Is your current default ratio acceptable, at industry index?
● KPI’s: how is our performance currently meassured?
● Do we have the right tools?
● Are we at the right place in our organization, with the right decision power – do we know our value
Classification: INTERNAL USE ONLY
8
Key questions:
Classification: INTERNAL USE ONLY
Are we aligned with the company’s strategy
How does our company balance growth vs risk
Are we involved in the decision process
9
A bit of history
Classification: INTERNAL USE ONLY
10
1990’s - 2000
● Credit Management was still called Credit Management
● An operational function, close to the business
● HQ’s were running export business to international markets (emerging markets)
● CM always was a team of specialists
● Time of mergers – change of strategies and philosopies
● Decentralization - responsibility moved in the markets, increase in group companies – at maintained quality?
● Moderate growth – moderate risk mitigation
● First crisis did start in 90’s: Mexico/ Argentina/ Asia/ East Europe (Russia)
Classification: INTERNAL USE ONLY
11
2000 – 2008…………… 2014
● Market responsibility remains IN the countries: more new country organizations are established
● A new business concepts – company culture is dynamic
● Crisis are going on, but overcome
● Years of ‘seemingly unlimited’ growth, in particular in EM’s
● Standard comment: Risk – what Risk?
● Default rate neglectable
● Financial Crisis 2008
● Eurocrisis 2011
● An old reaction comes back: Awareness!!!
● 2014 on hold? 45 world wide war zones affect world trade; in Europe the impose of sanctions level 3 slowly show results in trade flows
● The business weather is cloudy – the forecast uncertain
● Emerging markets shaking – Europe consolidating
Classification: INTERNAL USE ONLY
12
2014
● Working Capital Management and Risk Management are back in the focus
● The accumulated exposure becomes critical
● Growth ambitions are hit by potential losses
● New Solutions are on demand, at high quality
● Cost pressure remains unchanged or will increase
● EES – Standardization is the longer the more key
● Decentralization with new central guidelines
Classification: INTERNAL USE ONLY
13
Organization forms: pro’s & con’S
● A Group Treasury function?
● Finance?
● Business?
- What will drive the decision process, subject the org-structure
● Internal / external?
● Operational / non-operational?
● Process involvement/ decision involvement
- SYN insights
● Scope
● Mandate (DoA)
● Reporting lines
14
And TFCM……..
● From an operational function to a strategy group of experts with key-account focus
● Multinational solutions are welcome
● Traditional financing models, especially in a st-oriented industry segment are gone
● Various organization set-ups
- GroupTreasury, Corp Finance, in the business, outsourced, as CoE
● TFCM is back in the decision process
● Global standardization, system harmonization and system qualtiy remains a challenge
● An international risk code to be set
Classification: INTERNAL USE ONLY
15
What is needed to manage/outperform the challenge
● Strategies balancing Growths vs Risk
- Reset overstated growth expectations
● Empowered risk-mitigation tools
● Knowledge / experience / seniority / creativity
● Global standardized processes and systems
● Standardized reports: a global risk-code
● Mobile expert teams
● Integrated approaches – full cycle control (O2C)
● Integrate overlapping functions (Treasury/Riskmanagement/Insurance)
● Clear DoA matrix
● Structured escalation of the decision process
16
vision
● Integrated system solution available 1-3 years
● Focused Management Reporting at highest quality
● Strong segmented customer portfolio
● Standardization of processes will generate more time for KA-support
● Business decision based on solid TFCM competency
● Pro-active risk management
FOR INTERNAL USE ONLY
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