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Another Side of Client Management: Achieving Excellence in Debt Collections and Recovery
 

Another Side of Client Management: Achieving Excellence in Debt Collections and Recovery

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    Another Side of Client Management: Achieving Excellence in Debt Collections and Recovery Another Side of Client Management: Achieving Excellence in Debt Collections and Recovery Presentation Transcript

    • Another side of Client Management: Achieving Excellence in Debt Collections and Recovery Manos Margaritis Deputy CEO
    • The 2 sides of customer management Servicing the customer Managing the stressed customer
    • The stressed environment 10 Steps to best practice What is coming
    • The environment
    • European Banking Federation, 2012 report Cyprus 2013: 39% Spain 2013: 17% The European Landscape
    • The European Landscape Ring-Fencing bad assets remain in the bank Stand-alone Bad Banks option A: New Bank gets the Bad Debt option B: Bad Debt remains in the Original Bank ‘SAREB’ & NAMA’ model bad assets transferred to nationalized financial institutions
    • The European Landscape governments establish the extent to which they will assume the risk of the bad assets choices about the assets to be transferred, the structure, the business case, the portfolio strategy, and the operating model
    • Vertical Approach Special units in ‘Traditional’ Banks and new ‘Specialist’ Servicing ≠ Owning Debt Buying more visible as an opportunity at 3~10% of nominal value Asset Management / Real Estate
    • Vertical Approach Restructuring Accelerated Recovery Soft Hard Early Segmentation
    • Why should other areas care?
    • Why should other areas care? Date Title Presentation 11 GCC NPLs : 1,5 % - 10%
    • a. the approach can be transferred
    • a. the approach can be transferred Date Title Presentation 13
    • “Bank of China Is Selling Bad Loans to Investment-Bank Unit” The Wall Street Journal, March 27, 2014 Bank of China , one of the country's big four state-owned banks, has started a new strategy of unloading soured loans to its investment- banking unit, which then would try to restructure the debt with the hope of recovering more than it paid for the loans, according to bank officials.…, the problem loan would no longer stay on the bank's balance sheet after the sale under Chinese accounting rules,
    • b. every aspect of the Collection Process is optimized
    • Collection Assessment Framework CAF
    • Collection Assessment Framework CAF Area Area Single authority / organization Phased management, rule based progress Dedicated collection staff Capacity planning Account or Customer Level ? The right offer to the right customer at the right time Pool vs Ownership Centrally defined collection tools & communication scripts Measure & Motivate your collector
    • Collection Assessment Framework CAF Area Area Single authority / organization Phased management, rule based progress Dedicated collection staff Capacity planning Account or Customer Level ? The right offer to the right customer at the right time Pool vs Ownership Centrally defined collection tools & communication scripts Measure & Motivate your collector Best Practice
    • Collection Assessment Framework CAF Area Single authority / organization Phased management, rule based progress Dedicated collection staff Capacity planning Account or Customer Level ? The right offer to the right customer at the right time Pool vs Ownership Centrally defined collection tools & communication scripts Measure & Motivate your collector Best PracticeArea Clues
    • Collection Assessment Framework CAF Area Single authority / organization Phased management, rule based progress Dedicated collection staff Capacity planning Account or Customer Level ? The right offer to the right customer at the right time Pool vs Ownership Centrally defined collection tools & communication scripts Measure & Motivate your collector Best PracticeArea Clues GAPS
    • Collection Assessment Framework CAF Area Single authority / organization Phased management, rule based progress Dedicated collection staff Capacity planning Account or Customer Level ? The right offer to the right customer at the right time Pool vs Ownership Centrally defined collection tools & communication scripts Measure & Motivate your collector Best PracticeArea Clues GAPS System Support
    • Collection Assessment Framework CAF Area Single authority / organization Phased management, rule based progress Dedicated collection staff Capacity planning Account or Customer Level ? The right offer to the right customer at the right time Pool vs Ownership Centrally defined collection tools & communication scripts Measure & Motivate your collector Best PracticeArea Clues GAPS System Support ( Y/N/ Partial )
    • Collection Assessment Framework CAF Area Single authority / organization Phased management, rule based progress Dedicated collection staff Capacity planning Account or Customer Level ? The right offer to the right customer at the right time Pool vs Ownership Centrally defined collection tools & communication scripts Measure & Motivate your collector Best PracticeArea Clues GAPS System Support ( adapt fast )
    • Collection Assessment Framework CAF Area Single authority / organization Phased management, rule based progress Dedicated collection staff Capacity planning Account or Customer Level ? The right offer to the right customer at the right time Pool vs Ownership Centrally defined collection tools & communication scripts Measure & Motivate your collector Best PracticeArea Clues GAPS System Support Prioritize & Plan
    • Phased management, rule based progress Area Best Practice Clues GAP System Support (Y/N/Parti al) System Support (can you change the implementatio n fast?) Plan Phased management, rule based progress Clear Separation between Phases, consistent treatment Do you have a communication and action plan for customers in the early delinquency stage and litigation phase? Is pressure applied progressive? Do you divide management into phases? Do you have a defined consistent collection approach applied by a specialized unit within the bank’s organization for each phase?
    • Are the right communications and actions for customers in the early delinquency stage followed? Are they different from those required when litigation is involved?
    • Is pressure applied progressive? 1kg 3kg 5kg 10kg
    • Is treatment spilt into phases?
    • Management phases Soft Pre-litigation Litigation Recovery
    • Define a consistent collection approach applied by a specialised unit within the bank’s organization for each phase
    • During early phases, Is the focus on working out a solution in cooperation with the customer, giving high priority to the protection of the customer relationship? aim is to minimize the number of cases moving through to the later stages
    • During late phases, does focus shifts from protecting the customer relationship to protecting assets and minimizing losses?
    • Is moving from phase to phase predefined and clearly stated? Not based only on DPD but factor in risk information
    • Do you allow some space for ad-hoc management but with close monitor and control?
    • Dedicated collection staff Area Best Practice Clues GAP System Support (Y/N/Partial) System Support (can you change the implementatio n fast?) Plan Dedicated collection staff Employ dedicated, well trained staff. The internal organization of the collection department directly affects its performance Do you employ dedicated collection staff? Do you train them? roles and job descriptions (from collection manager to skip tracing agent)
    • The right offer to the right customer at the right time Area Best Practice Clues GAP System Support (Y/N/Parti al) System Support (can you change the implementation fast?) Plan The right offer to the right customer at the right time Segmentation, Collect by objectives Do you segment the portfolio using customer/accoun t analytics? Do you Use Static AND Behavioral metrics ? Do you increase self-cure? Do you avoid customer irritation?
    • The next wave of technology as a catalyst Machine learning & Data science
    • Challenge Current Status At each collection stage several actions are possible. Currently, the Collection Manager decides which actions to apply – and describes that in terms of a static strategy related to segments Goal Find which collection actions should be applied at each collection stage in order to optimize the revenue* of the collection process *revenue incorporates fees, interest, payments, collection cost
    • Even for simple modeling State in our solution are defined using three attributes Bucket Number of months Percentage of unpaid debt / total debt Discretized in ten categories: [0..10], [10..20], .. [90..100] Risk level {N/A, low, medium, high, very high}
    • We can achieve a Gain: 14,84%
    • MDP formulation S4 S1 S2 S5 S6 S3 S8 S7 S9 a1, 0.5 R=10 a4, 0.1 R=9 a2, 0.15 R=20 a3, 0.25 R=7 a7,0.5 R=-100 a6, 0.1 R=-10 a4, 0.5 R=-10 a5, 0.4 R=-14 a6, 0.1 R=-10 a4,0.1 R=-100 a7,0.5 R=10 a7,0.5 R=100 a1,0.3 R=10 a3,0.4 R=7 a7,0.5 R=10 a7,0.4 R=19 a7,0.1 R=-10 a3,0.1 R=-100 41 Goal is to find π: 𝑆 → 𝐴: max Eπ(s) = { 𝛾ℎ 𝑟ℎℎ 𝑖=1 } = 𝑇 𝑠, π 𝑠 , 𝑠′ (𝑟 𝑠, 𝑎, 𝑠′ + 𝛾 Ε𝜋 𝑠′ )𝑠′ 0 < 𝛾 ≤ 1 Model the system as the tuple: (S,A,T,R) where: S: states of the system A: actions list T: Transition probabilities R: rewards
    • Why this is not easy Non-trivial representation Shortage in know-how Paradigm shift
    • Collecting under stress 10 Steps to best practice What is coming
    • end-to-end solution embedding best practices fully parameterisable quick deployment A new generation of software