operational excellence within wind-down entities

Operational Excellence within

Wind-Down Entities

Bulgaria

Germany

Dr. Julius Freiherr Grote

12. Annual Back Office Forum

Amsterdam, 17th April 2015

2 Wind-Down-Entities | Amsterdam 17th April 2015

Introduction HETA Asset Resolution

HAA founded in 1896; expansion into the Alps-Adriatic region started in 1995; further

expansion towards Bosnia and Herzegovina, Serbia and Montenegro, and Germany 2000 onwards

Nationalization in 2009 (from Bayerische Landesbank) to avert insolvency and prevent a regional

banking crisis from happening; carve-out of good bank in 2014, resolution of bad bank in 2015

HAA present in 11 countries in SEE region with focus on loans and leasing (less securities);

‘bad bank’ (HETA) taken over by the Republic of Austria, ‘good bank’ (SEE-network) about to be

sold to Advent/EBRD

Introduction Julius Grote

Chief Executive Officer (CEO) at HETA Asset Resolution Bulgaria and Macedonia; overall

responsibility for the professional wind-down in these countries

Banking & Consulting, strategic and operative know-how. Wide experience in the management of

wind-down entities, corporate development, organisational development and process optimisation

Headed several strategic transformation initiatives as e.g. execute spin-off, implement carve-

out, draft operating models, set up new legal entities, design wind-down portfolio sales process

Published several articles in area of bank transformation and bank restructuring; doctorate in

banking and Master in Business Administration

HETA Asset Resolution is the wind-down part of the

former Austrian bank Hypo Alpe Adria (HAA)


Focus of today’s presentation is operational excellence

of setting up Target Operating Model (TOM) for Wind-Down entities

Main considerations

set-up wind-down structures

Wind-Down Strategy

Legal Structure

Asset Scope

Target Operating Model

Today’s

focus

When setting up wind-down structres,

four main aspects have to be considered


I. Wind-Down Strategy

II. Target Operating Model and Processes

III. People and Incentives/Steering

IV. Questions and Answers


Aggregated volume of assets in European Wind-Down units (in EUR bn)

0

500

1000

1500

2000

Source: internal analyses

Wind-Down business is a growing business


Bad banks keep bad assets from con-

taminating good ones, thus increase

trustworthiness

Trust

(Re-)Building trust

towards externals

3

skill-sets needed for asset resolution

strongly differ from conventional

bankers‘ capabilities

Skills

Focused and dedicated

asset resolution

1

Reduced capital requirements as bad

banks are not subject to standard

regulation

Capital

Reduced

capital requirements

2

Segregating assets in Wind-Down entities

can be derived from three main reasons


Overall goal „Where to go?“

Strategy „How to compete?“

Processes „How to operate?“

Structure „How to manage?“

Aspiration level

Value creation

and delivery

Operational

Excellence

Steering and

Leadership

Wind-Down-

sales approach

Steering/IT systems Organization

Vision,

mission,

values

Core processes

Support processes

Set-up of wind-down entities in Bulgaria and Macedo-

nia covers strategic and operational drivers

Str

ate

gy

O

pe

rati

on

s

Dimension Focus


Ongoing optimization of the corporate culture

Processes

Organization

IT/systems

Management Key Employees

Steering / Key Performance Indicators

Definition

as-is situation

Definition

to-be situation

Execution

implementation

Definition imple-

mentation planning

1 2 3 4

The design of an effective Target Operating Model

(TOM) followed a highly-structured approach


The value chain of a wind-down entity with focus loans1

is the foundation for the procedural landscape

Supportive functions

(Accounting & Reporting, Orga/IT, Procurement, etc.)

Restructuring Collection Repossession Remarketing Phasing out

Movable assets (loans, leasing)

Real estates (loans, leasing)

Performing

portfolio

Non-Performing

portfolio

Portfolio transactions (portfolio sales)

Processes

NB: (Toxic) securities out of scope


Legal &

Compliance/AML CE

O

CO

O

CR

O

CF

O

HR &

Communications Audit

Collection &

Repossession

Remarketing

(Movables, RE) Organization/IT

Support

(Procurement, etc.)

Credit

Processing Restructuring Work-out Risk Controlling

Accounting Financial

Controlling

Treasury &

BS Mgmt.

The organisational structure is to be tailored to

particular needs of the wind-down value chain

Organization


As an outcome, additional modules have been integrated into

an optimized core system

Core system optimized,

additional modules integrated

Set-up of new solution ensured within

a period of 9 months

Core system with several ‚silos‘, partly

improper databases/data quality

approach didn‘t facilitate state-of-the-art

steering and reporting

Cost-benefit analysis executed to

ensure defined goals

Implementation accompanied by standard

project management

Establishment of advanced IT-systems to

steer both our portfolio and performance

Use of systems that are well proven,

allow for swift implementation though

overall goals initial situation

outcome initiated actions

IT/systems

As for IT, a compromise between proper steering

basis and a pragmatic approach is to be defined

IT/systems


Three pillars corporate culture

Communication

Distinct communication where we are heading for and what we expect

Besides contents, also the way of communication is crucial (“how”)

1

Monitoring

Strict monitoring re degree of target achievement

Clear rules for performance stan-dards, rewards and sanctions

2

Support

High-performance is requested, no one is “left out in the rain” though

Additionally, key employees have to be identified and developed

3

The implementation of struc-

tured efforts helps to…

…activate and retain (key) em-

ployees and optimize results

Activation and loyalty of (key) employees requires

strict emphasis on the corporate culture

People


The cockpit structures are accompanied by structured feedback sessions

that consider ‘soft facts’ as well

In addition, structured feedback

sessions consider ‚soft facts‘

Therefore, both the quantitative and

qualitative view are being steered

Defined Key Performance Indicators

reflect the respective key drivers

database within HAA established, case-

by-case approach applied

position:

description grading

functional know-howfeatures required functional know-how (e.g., strategy, processes,

organization)

industrial know-how features required industrial know-how (industry)

methodical know-howfeatures required methodical know-how and related tools (e.g., process

analyses)

governing IT-applications features required IT-skill-set (e.g., Internet, MS Office)

data collectionorganizes both the selection and composition of (internal and external) data

efficiently and goal-oriented

analysis and evaluation datadevelops (and executes) creative and critical analyses based on collected

data; is able to deal with comprehensive and complex tasks

overall problem understandingdisplays comprehensive understanding for existing problems in

consideration of possible solutions

development hypotheses and

execution analyses

structures analyses in a proper manner and deduces well-grounded (well-

grounded) analyses

conclusions and

recommendations

defines core messages logically considering Pros and Cons; develops

recommendations and phrases them persuasively; defends the derived

opinion

work organization and

compliance deadlines

develops and supervises plannings and meets defined deadlines

(milestones)

efficiency and commitmentexecutes comprehensive and complex tasks efficiently; features strong

commitment during work

quality and reliability of

analyses

features strict accuracy and intellectual integrity when analyzing; ensures

proper format and quality of extracted results

quality prepared documents

(PPTs, WORD, etc.)

prepares documents in "Top-Management quality" and ensures highest

standard in all communication efforts (structure, verbalism, grammar,

spelling)

ability to cope with stressfeatures consistent working quality given even big workload; remains cool-

headed and commited under pressure and in critical situations

documentation efforts keeps record in a structured, comprehensive and efficient way

verbalism

expresses relevant ideas and recommendations always in convincing and

appropriate manner; communicates precisely and focuses on core

message

interview skills develops independent interview-guideline, asks "right" questions

moderationprepares and executes meetings target-oriented and resolves arising

conflicts professionally and constructively

communication and

presentation style

manages the communication (also in difficult situations) clearly and seld-

confidently, structures the presentation-flow (story-line) properly

overall behaviourbehaves professionally in association with customers and honors their

employees

target group orientationconsiders the problems and framework of the customers when conducting

analyses and defining recommendations

positioningachieves full acceptance and trust and tries to establish sustainable

relationships; considered as being "on top of the topic"

guidance and instruction

employees

defines the goals and steers the employees clearly and precisely (towards

common goal); acts as a role-model and supports the learning of team-

mates

moderationprepares and executes meetings target-oriented and resolves arising

conflicts professionally and constructively

communication and

presentation style

manages the communication (also in difficult situations) clearly and seld-

confidently, structures the presentation-flow (story-line) properly

team co-operationenables a positive atmosphere and efficient information-flow; motivates

team-mates and supports them with their tasks

team organisation organizes formal, punctual and efficient teamwork

team acceptance and

positioning

acts as strong personality, is open towards internal criticism and respected

due to professional behaviour; considered as being "on top of the topic"

self-identification re room for

improvement

improves existing weaknesses actively and supports colleagues in both

identification and improvements of their critical areas

utilization various sourcesutilizes existing know-how sources (e.g., internal and external datbases,

networks)

protection know-how initiates and supervises learning (project) documentation

extension know-howtransfers and records the experience gaining from the ongoing project

(e.g., papers, publications)

6. kno

w-how

-

manag

ement

5. com

munic

ation t

o and

accep

tance

by

(inter

nal) em

ployee

s

remarks

Performance Review

1. expe

rt kno

w-how

skills

3. work

ing qu

ality a

nd or

ganiza

tion

employee:

2. prob

lem so

lving-c

ompet

ence

4. com

munic

ation t

o and

accep

tance

by

(exter

nal) cu

stome

rs

The quantitative steering for organizational units

is based upon a ‘cockpit structure’ with a few KPIs

Incentives

Germany

Contact Dr. Julius Freiherr Grote

Chief Executive Officer

HETA Asset Resolution Bulgaria OOD

[email protected]

Web www.heta-asset-resolution.bg

www.aaaplatform.com

Thank you very much



Disclaimer

HETA Asset Resolution Bulgaria OOD (the “Company”) does not make any

representation or warranty, expressly or implicitly, as to the validity, accuracy,

reliability, suitability or completeness of any of the information contained in

the presentation.

The Company accept no liability or responsibility to any person with respect

to, or arising directly or indirectly out of the contents of or any omissions

from this presentation.

This presentation is being provided to the recipient and may not be

reproduced, distributed, passed on or published, in whole or in part, to any

person without the prior written consent of the Company.

The content of the presentation is not to be construed as legal, business,

investment or tax advice. Each recipient should consult with its own

professional advisers for any such matters and advice.

By viewing this presentation, the recipient acknowledges, and agrees to

abide by, the aforementioned.

Operational Excellence within

Wind-Down Entities

Bulgaria

Germany

Dr. Julius Freiherr Grote

12. Annual Back Office Forum

Amsterdam, 17. April 2015

Bulgaria