The document discusses opportunities in the non-performing loan (NPL) market and developing a software solution. It proposes creating an NPL management module for the open-source ERP software OpenERP to be used by banks and financial partners. The module would integrate NPL processes like due diligence, property management, sales and purchases. It would provide reporting, user roles and interact with other systems. The software could then be offered to banks with an NPL division, providing a wider solution while initially offering the NPL module for free to gain customers.

1. Business Vision at glance
Non Profit Loans & OpenERP & RE asset market repositioning
ver 1.0
Marinelli Nicola

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Good Business includes stronghold element with resiliency capability
 Current global market is very dynamic and under several events
changing the wind, so the resiliency of a business is important, unless
the business is just very short time oriented.
 A business must have a stronghold element and flexibilityA business must have a stronghold element and flexibility.
 A stronghold business domain is the Real Estate market
 It’s a primary need
 It’s tangible
 It can have a market repositioning
 Real Estate has several market branches:
 Building a RE physical unit
 Maintenance and administration of a RE physical unit
 Traditional trading: sell/buy a RE unit
 Financing a RE trade operation.
 Mortgage/Loan
 Credit Management
 Profitable or Performing Loan
 Sub Profitable or Sub Performing Loan
 Not Profitable or Not Performing Loan  the NPL domainthe NPL domain

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A definition of NPL
 As simple definition: a Non Performing Loans are loans that the borrowers have stopped
making payments on.
 Since 2003, there is a market that is constantly growing and giving proof of high
revenue: the NPL abbreviation for Non Profit Loan also known as Non Performing Loan.
 Mostly it's dedicated to the Real Estate even if it is applied also in other markets
wherever distressed loans are present.
 The crisis has seen an tremendous increment of this financial phenomenon of NPL
having as consequence a huge number of real estate units coming in the bank assets
volumes.

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NPL, from an issue to an opportunity
 These huge amount of RE assets is not an advantage for banks, not being able to sell these
properties in profitable way in short term of time. This also for the financial crisis.
 In this context, Banks have a very expensive and very severe constraint: the TIME.
 These Real Estate units bring high additional costs fo banks:
 fiscal weight
 maintenance costs
 administration and legal costs in order and especially to be compliant with the IAS and Basel2.
 So often, Banks are available to sell even with great discount these Real Estate assets, from 20% to
80% cut of price.
Financial Market Crisis = Real Estate Opportunities
1st
2nd
3rd
4th
5th
Eur
nominal Credit
waiting time
legal action
Time
The market
value of
collateral *
The center of
the area of a
potential
agreement
Expected
recovery value
through a legal
actions **
Auction
* Market value increasing over time according to a revaluation rate
** Expected recovery value growing over time when decreasing the
discount factor
offers
NPL time frame

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NPL growing volumes in Italy, in billion of Eurobillion of Euro

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Major owners of NPL portfolio in Italy, in billion of Eurobillion of Euro

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NPL Bank management
 The traditional NPL management approach:
 external legal and consulting studios  costs and not full control
 judicial procedures  costs, lot of time and not full control
 The modern NPL management approach:
 Mostly Internal servicing  less expensive and full control
 Private agreements  less expensive, less time and full control
 For Banks the NPLs cost is one of the most negative item in the
economic accounting with an impact near the 20% of revenue
associated to the Real Estate intermediation revenues.
Source: A.T. Kearney analysis on Bilbank data
 The IT is fundamental and with the utmost priority in order toThe IT is fundamental and with the utmost priority in order to :
 Time to market factor
 Repository of documentation and information
 Control of process workflow per each involved role
 Reports, plan, statistics and forecasts (collection scoring)
 Ubiquity of access (internet)
 Not so expensive if open software oriented
 IT represents the injector of flexibility in the RE stronghold domainIT represents the injector of flexibility in the RE stronghold domain.

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Possible Business opportunities
 This picture can bring at least 3 possible business opportunities:
A.A. Creating a software for the management of the NPL to be used by banksCreating a software for the management of the NPL to be used by banks
and their financial partners.and their financial partners.
B.B. Negotiating with a bank an interesting price for some interesting real estateNegotiating with a bank an interesting price for some interesting real estate
units in order to purchase them as investment.units in order to purchase them as investment.
C.C. Real Estate asset Market Repositioning.Real Estate asset Market Repositioning.
 As further resiliency capability, these possible business opportunities,
depending by the chosen strategy, can be detached or connected,
partially or totally.

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A) NPL Software package to be used by banks and their financial partners
 Currently there are some and few vertical dedicated software solution for the NLP domain
but it's still missing a solution integrated an in an ERP (Enterprise Resource Planning)
product.
 What is an ERP ?
 One database for whole the company having all company processes integrated.
 Keeping also a vertical view per company department
 Automatic notification and communication between departments
 Automatic actions log history
 Why an ERP ?
 The key answer can come from another question: even if there is a missing module associated to
business domain, why reinventing the wheel for other associated and correlated business ?
 Because it gives more market capability penetration, being wide and vertical at the same time
depending by the needs.
 Easier centralized hw/sw infrastructure, so easier maintenance and less expensive.

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A) NPL Software package to be used by banks and their financial partners
 In the ERP world, the point of reference usually considered is SAP.
 Currently SAP has the module RE-FX (Real Estate Flexible) covering the standard Real Estate management
operation with the added value of an integration with other modules FI/CO/TR/PM/PS/FA, but there is not
module covering the Risk and Credit and Property management associated to the NPL domain.
 Producing a dedicated module in SAP would be very expensive for license, for customization costs considering
also an not easy and not friendly key programming language used into it: ABAP.
 More sophisticated architecture and maintenance
Here below a list of the ERP leader products for the Open source and Licensed market
 Not entering in deep details, more info about the products comparison for the key parameters can be
found at these addresses:
 www.evaluation-matrix.com/comparison
 www.evaluation-matrix.com/graph/
In all key comparison, OpenERP is on good position even with the main competitor SAPIn all key comparison, OpenERP is on good position even with the main competitor SAP

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A) NPL Software package to be used by banks and their financial partners
 Preamble about Open ERP
 OpenERP is a modern Suite of Business Applications, released under the AGPL license, and featuring CRM,
HR, Sales, Accounting, Manufacturing, Warehouse Management, Project Management and more.
 It is based on a modular, scalable, and intuitive Rapid Application Development (RAD) framework written in
Python. that is a high-level dynamic programming language, ideal for RAD, combining power with clear
syntax, and a core kept small by design.
The motto associated to these products gives the idea of the mentality distinction between the mature software and the agile softwareThe motto associated to these products gives the idea of the mentality distinction between the mature software and the agile software

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A) NPL Software package to be used by banks and their financial partners
What’s ready in Open ERP!
 One software package covers all your enterprise needs (Dpt functionalities)
 Accounting & Financial Mgt
 Manufacturing resource planning
 Inventory control
 Document Management System
 SMS and Mass mailing services
 No double encoding of information
 Automates tasks by integrating business processes
 Automate all administrative tasks
 User-friendly web and rich interface
 Evolution as needed with the huge modules list
Business
Management
Sales
MRP/Procurement
In this context is possible to create a Real Estate module focusing the NPL domain.In this context is possible to create a Real Estate module focusing the NPL domain.

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A) NPL Software package to be used by banks and their financial partners
Asset MngAsset Mng
SuiteSuite Legal / Tax AdvisorLegal / Tax Advisor
ServicerServicer
Draft CheckDraft Check
ImprovementImprovement
Asset ManagerAsset Manager
Due DilligenceDue Dilligence
Property ManagerProperty Manager
Sales / PurchaseSales / Purchase
existentexistent
 Includes reporting at all levels
 Every user has a role in the module
portal with a set of allowed actions
depending by the profile role.
 The module includes also an
Aplication Program Interface (API)
in order to interact with third part
products, for example Payment
Gateways or Legacy Data
migration, etc.
 All information among
entities having a common
interacting with the schema
of other OpenERP modules,
when /if needed.
 Every transaction is
recorded, so that it can be
reviewed in the future
 In case of error,it can be easily detected
Financial InstitutionFinancial Institution
Product Model: Asset Management SuiteProduct Model: Asset Management Suite

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A) NPL Software package to be used by banks and their financial partners
Sales / PurchaseSales / Purchase
When Ready, this module could be proposed, As OpenERP module to the banks having NLP
division.
An added value would be that even other existing modules might be part of the Bank
information system, so giving a wider panorama not only associated to the Asset Mng Suite
module.
A possible attractive approach for potential customers to consider initially this module could
be: the executable module is be given for free, with just a short cost for initial setup and
training. After, the profit would come as percentage of the Real Estate assets administered
and sold by means the usage of this module. (anyway discussions about this point are open)
Product Model: Asset Management SuiteProduct Model: Asset Management Suite
CRMCRM
Asset Mng SuiteAsset Mng Suite
...Other Modules...Other Modules

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A) NPL Software package to be used by banks and their financial partners
 OpenERP architecture and technology allow to perform quickly and
easily a number of activities such as:
 Creating reports;
 Workflow adaptation;
 New process creation;
 Uploading batch files for data migration;
 Adding fields;
 Customizing screens;
 Defining interface;
 Implementing authorizations;
 Configuring.
Asset Management Suite : the implementation costAsset Management Suite : the implementation cost

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A) NPL Software package to be used by banks and their financial partners
 At glance, the implementation cost of an OpenERP project is composed of
 10% for the hw purchase and setup
 10% for the Project Management
 60% for the new module product and integration in OpenErp,
including:
 Recruiting
 Training/Coaching
 Analysis
 Development
 Integration
 Configuration
 Validation
 20% for the change management
Asset Management Suite : the implementation costAsset Management Suite : the implementation cost

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A) NPL Software package to be used by banks and their financial partners
Asset Management Suite : module production planAsset Management Suite : module production plan
 After a formal agreement, from the very beginning to the end, included the
Industrialization of the module as Ready for the Open Market, at most 40
weeks.
 Workforce:
 1 PM with tech background covering also some analysis
 1 Analyst covering also some Tech Architecture
 2 Sw Developers
 2 Testers with 1 capable to care also the “cosmetic” of Web GUI
 1 System and Network Eng

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B) Negotiating with a bank an interesting price for some interesting real estate
units in order to purchase them as investment.
 Having a strategy associating it to the point A, so having the point B1:
 the bank using the new module Asset Mng Suite, could also give a mandate
to care the servicing of the real estate units in the NPL. So, it could be
possible to have the added task, and associated added revenue, to care all
the selling process of these RE units in the NPL.
 Having a strategy totally detached by the point A, so having the point B2:
 it could be possible to create a servicing NPL company to care these huge
RE assets or having a partnership with an already existing servicing
management company dedicated to the NPL.
 In this last point, I already have a competent and reliable person to considerIn this last point, I already have a competent and reliable person to consider

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C) Real Estate asset Market Repositioning
 In Italy there is the greatest artistic patrimony, the most appreciated gastronomic
tradition, good weather, all kind of natural landscapes from high mountains to
the sea. In general, very attractive from the tourist point of view.
 Depending by the the type of the RE unit, it could be possible to manage the
Market repositioning with several kind of option: hotel, spa, b&b, house, depots,
offices, shops, etc
 Even in this case, IT can give a great support. In this context it would be better
some vertical web oriented solution.
 as example, for the B&B business, it could be possible to create a site
similar to
www.bed-and-breakfast-in-italy.com/
 In this last point, I already have a competent and reliable company to considerIn this last point, I already have a competent and reliable company to consider

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Thank You for the attention
Marinelli Nicola
Mobile: +39 3475180182
Email: nmarinelli2@gmail.com