Saving salva card intl

Saving
SalvaCard Intl.
F. You just participated in an important meeting with your boss. How do you ensure that every part of the
instructions you received adequately reach each subordinate, supplier and customer, which are located in
different parts of the world?
This presentation is fictitious and all its content has been prepared for the purpose of completing a
requirement for application to the Instituto de Empresas in Madrid, Spain.

Diego Rodríguez Avila
Instituto de Empresas Application
Diego Rodriguez Avila

The Company
SalvaCard Intl.
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Headquarters: San Salvador, El Salvador
Presence in 21 countries in Latin America
Employees: 12,000
Began operations in 1992
Target Market: Credit cards intended for a large retail market
Brands available: VISA, MasterCard, American Express and Diners Club
4MM active credit cards with a loan portfolio of $ 950MM distributed in this
way:
15% Platinum (People with an income of U.S. $4K+)
30% Gold (People with an income of U.S.$2K to U.S.$3K)
65% Classic (People with an income of U.S. $300 to U.S. $1,500)


Background
• SalvaCard Intl. positioned itself in Latin America as the
largest credit card issuer (and the most profitable) in the
90s due to:
– Rapid economic growth of the Latin American market
– Improved technology (the invention of the stripe reader and on-site
approval with POS devices)
– Competition slowly adapted to the new payment system
– Flexible credit/lending policies
– Aggressive growth goals
– Diversification of financial products with attractive benefits


Background
• The eventual decline of local economies affected the
loan portfolio significantly.
– 20% of the total portfolio (U.S. $ 190MM) were classified as
uncollectible (180 + days with payments overdue).
– This increased the cost of credit from 20% to 35%, reducing
profit margins significantly which led the company to incur in
higher financial reserves to cover for the losses.


Background
• The Company had to invest in additional resources like hiring more
debt collectors.
• 40% discounts on overdue portfolios were given to avoid as many
write-offs as possible.
• The largest concentration of its portfolio is the Classic segment (65%),
the most likely to go into default on a loan.
• Senior Management is very concerned because they have had to let
go over 2,500 employees across all countries to reduce costs and
improve efficiencies.
• If this trend continues, the Company will lose market share and
presence significantly.


Background
• José Luis, Vice President of the Consumer Division, has just
participated in a meeting with the Board to evaluate how to
drastically improve these indicators and maintain their
leadership.
• They formulated this action plan:
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–

Modify credit policies to become more strict
Improve efficiency in the recovery of overdue loans (180+ days)
Growth in Gold and Platinum segments
Outsource the Collections Staff

• Execution timeframe: 6 months
• José Luis must implement the Plan of Action with
subordinates to work perfectly.

In Action
First he summons the Regional Risk Manager.
Together they:
– Determine the new lending policy, creating proper
measurement indicators that allow them to better assess
client repayment capabilities.
– Elaborate a memo with the new risk indicators and prepare
an 'Addendum to the Credit Policy ” which they indicate to
distribute like this:


Regional
Risk
Manager

Sends to each Country Risk Manager via
email and holds a Regional teleconference
with all countries to explain the new
guidelines.

Credit Analysts

General Manager

Sales Manager

Internal Auditors / Process Control

Sales Supervisors


Sales Staff

Follow-Up
• Headquarters instructs for all countries to provide a
bimonthly report in which it details all rejected clients under
the new credit policy. This allows them to determine how
many “bad” credits have been avoided.
• Internal Auditors monthly revise the credit report to verify
that new credits issued have been approved adhering to
the new guidelines.


In Action
Second, José Luis summons the Regional Financial
Manager.
Together they:
– Identify customers who have payments which are more
than 180 days+ overdue and estimate how much they will
lose and how much is recoverable.
– Next they develop an Action Plan of the process to be
followed by each country to offer cash discounts for
repayment of overdue loans which they indicate it be
distributed like this:


Regional
Financial
and
Collections
Manager

Sends to each Country Financial Manager
via email and holds a Regional
teleconference with all countries to
explain the new guidelines.

Financial Manager

General Manager Collections Supervisor

Collectors
Finance Team


Follow-Up
• Instructions are given to send a weekly report of how many
credit portfolios are recovered so they are able to evaluate
the impact on each individual country revenues.
• Internal Auditors make monthly revisions of this report to
verify that they have made the best possible recovery
efforts.


In Action
Third, José Luis summons the Regional Marketing Manager.
Together they:
– Create new products and benefits that are attractive to the Gold and
Platinum segments (the market which is least probable to default on a
loan).
They conclude on:
– Launching a new credit card of the highest profile which provides unique
benefits to travelling customers.
• They include benefits such as preferential stays in hotels and automatic upgrades to
first class on international flights.

– Aim aggressive growth in the Gold segment with existing credit card
holders that focus on discounts in retail stores and supermarkets.
They make a summary of the Action Plan to be implemented by each
country for the launch of the new advertisement campaigns:


Regional
Marketing
Manager

Sends to each Country Marketing
Manager via email and holds a
Regional teleconference with all
countries to explain the new
guidelines.

Product Administrators

Advertisement Agency

General Manager

Logistics and
Distribution

Publicity Providers



Follow-Up
• Instructions are given for each country to send a monthly
report of the new credit cards that are issued and current
credit card holders usage.
• Internal Auditors make monthly revisions of this report to
verify that the launch of the new products and benefits
were done as indicated by the Regional Office.


In Action
Fourth, with the Regional Collections Manager and the Regional
Human Resources Manager they decide to:
– Evaluate companies which they can Outsource the Collections
Department
– An assessment is made of the impact the company will have by
reducing employees, including severance payments.
They make a summary of the Action Plan of the process to be
followed by each country:


Regional
Collections
Manager

Sends to each Country Collections
Manager via email and holds a Regional
teleconference with all countries to
explain the new guidelines.

New Outsourced Company

General Manager

Human Resources



Follow-Up
• Instructions are given for each country to send a bi-monthly
report of the progress of the letting go of the previous collection
staff including the compensation that had to be paid to all
employees.
• Internal Auditors make monthly revisions of this report with
Human Resources to verify that the process of letting go of the
staff was done in accordance to company guidelines.


Board of Directors Meeting
3 Months Later
After consolidating each country report on the status of each
initiative, the Board reviews the results:
1) Modifying credit policies:
 Satisfactory. The percentage of loans approved is lower
but they in turn perceive a healthier loan portfolio and a
growth in Platinum and Gold segments.


3 Months Later
2) Recovery of Overdue Loans (180 + days).
 Satisfactory: they succeed by reducing the bad debt
portfolio by 50%, decreasing financial reserves that had
initially increased the cost of credit.
 Intermediate: losses by uncollectible accounts were higher
than expected due to the Outsourcing of the Collection
Staff.


6 Months Later
3) Growth in Gold and Platinum segments
 Satisfactory: the new product for Platinum customers was highly
accepted.
 Gold Segment increased its turnover and increased loan
portfolio with the new benefits that were launched.

4) Outsourcing for Collections Staff
 Transition to the new staff was efficient but had a high impact on
the expense line, mainly due to severance payments.
 In the long run, this has significantly reduced operational costs


Conclusion
• The Board was very pleased with the execution of the plan as
SalvaCard Intl. is in a much better situation than it was six
months ago.
• José Luis is chosen to lead an initiative to enter untouched
markets in Mexico, the United States and Canada.

• He must now implement the Action Plan with his subordinates
and the plan must work perfectly…


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