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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

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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

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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

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?

● 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

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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

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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

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A bit of history

Classification: INTERNAL USE ONLY

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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

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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

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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

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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

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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

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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

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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