How did Recoveries Department come about?
Originally, the monitoring of relationships that required special attention were handled by the relative business unit.
The handling of such relationships require specific skills, and this resulted in the setting up of a specialised Department to deal with these cases. Throughout the years, as the financial needs of the debtor and financial products became more sophisticated, the functions, processes and structure of the Department evolved to meet the exigencies of the Bank, the Regulator and the Debtor.
In my opinion, the objectives of the Department may be summarised as:
"To monitor the Bank’s arrears and seek equitable debt restructure solutions for our customers, whilst also preserving the economic value of the debtor. In an endeavour to protect the Bank’s profitability by limiting losses through ensuring a fast recovery of the debt in the most cost effective manner."
Direct debtor contact and a two way cooperation are crucial for reaching these objectives. If these crucial elements are present throughout the process, then the expertise which my team can offer will result in giving our customer value added support at a time when he needs the bank most.
Why is a case escalated to Recoveries Department?
A relationship is transferred to Recoveries Department, when the customer is in default of his or her credit agreement with the Bank. The types of facilities range from the simple credit card debt that is not being repaid as agreed to the significantly more complex business facilities.
While personal customers may find themselves in financial constraints for reasons ranging from economical to social circumstances, such as becoming suddenly unemployed or going through a marital separation, business customers may be negatively impacted by both internal and external factors. The most common reasons which may cause financial difficulties for a business customer include poor management, tougher competition, insufficient capital invested in the business and inadequate cash flows.
In all cases, it is of utmost importance to us to take a step back and evaluate the situation at hand in the most objective manner. Recoveries Department is distinct from the credit function of the bank,
providing the detached impartial assessment required in such circumstances. We try to avoid throwing good money after bad, however we do not shy away from making available nominal amount of funds to bridge cash flow gaps, especially if we are comfortable with the customer’s primary source of repayment. The two-way cooperation I referred to earlier is particularly crucial at such instances.
Once a case is transferred to Recoveries Department, what is the role of the Branch or Centre that used to monitor that customer?
When a customer is referred to Recoveries, the Debtor’s relationship moves to our department in its entirety and the relationship which the originating business unit had with the customer ceases at this point. While prima facie, this may seem odd, experience has shown that results are better when the business side is not involved in the recovery process. In fact, the Bank views Recoveries separate from the credit function of the Bank and different reporting lines are in place.
How is Recoveries Department managed?
Recoveries Department comprise two main customer facing sections, namely Remediation and Litigation. We also have the Technical Support unit, the Property Management unit and Legal Services. These three units provide the support required by the customer facing units. Our Department also liaises on a regular basis with other units and departments across the Bank, especially our Legal Office.
The Remediation is the entry point of any new relationship. The main objective of this section is to understand the customer’s current situation and identify the root of the problem. Mutual trust and cooperation are the key elements of this section. The Litigation section comes in as the last resort and is necessary either in those cases when the Debtor decides not to cooperate or when legal action is deemed to be the only option left to safeguard the Bank’s interests.
How do you manage to turnaround a customer’s financial position, and what is your success rate?
There is no magic formula. Every case needs to be evaluated on its own merits and in accordance with the situation particular to the customer at that point in time. Normally, a plan is drawn up for the mutual benefit of both the customer and the Bank. The success or otherwise of the remedial action often hinges upon the ability to take timely and informed decisions based on both our experience and customer’s cooperation, which is key at this stage of the relationship.
The Debtor here plays a very important part, both in terms of the quality of information and cooperation. Our challenge is to gain his or her trust to work towards a mutually acceptable solution.
Ongoing training coupled with on the job experience means that in the majority of cases our relationship officers earn the Debtor’s trust.
Businesses are more vulnerable when exposed to adverse changes in their normal operating environment. Most times, the provision of timely support and advice is all that is required to help them get back on track.
Most often, the fact that the relationship has started to be monitored more closely by the Bank instils in the management of the business the necessary sense of urgency. This enables them to take the decisions they might have been avoiding for some time. Such decisive course of action may in a number of cases be the determining factor in whether the account is turned around or not. This is why personally, I would rank "timely" decisions, both on part of the Bank and the Debtor, as one of the most important factors which might determine success from failure. Problems tend to escalate when decisions that need to be taken are not addressed in a timely manner. If I had to analyse our success rate, I would state that timeliness on both parts is key.
Unfortunately, at times we do encounter persons who for different reasons tend to be uncooperative and in such instances the level of trust required to turn around the situation is not achieved.
What about the team? Who are the people that work at Recoveries Department?
It takes time and patience to get a customer back on track. Mutual trust is an important element. It is a time-consuming and laborious process, which can many times become emotionally intense. Our team is well-trained and they tend to be chosen for their diverse skills such as monitoring, communication and negotiating. While each case has its own story and the resolution of the majority of our cases is complex, especially when signs of a social case emerge. While our people need to be good at empathising with the Debtor and sensitive to his or her situation they have to retain their focus on the primary objective of their job. Striking the right balance is challenging. This is why we do focus our training on identifying, interpreting and defusing situations.
This is definitely not an easy environment to work in but every team member may boast of instances when they made a positive impact on people’s lives that makes them proud. The human interaction aspect of the relationship is very important as it differentiates between people and numbers. We look at the people and the families involved, respect their circumstances while retaining a professional approach towards our objectives.
How do you see Recoveries Department evolving in the near future?
Going forward, Recoveries Department will need to continue to evolve to meet changes in the regulatory requirements of the Bank and also the changing fabric of our society. The debt management process within the Bank will consolidate further.
We also have a vital role to play to enable the Bank to grow and take on good business. We need to continuously work close with our business and decision making units by providing useful information based on cases in hand and lessons learnt.
In my opinion, the macro objectives of the Department will in essence remain the same. The ongoing regulatory changes in the financial services industry will necessitate changes to our processes, procedures and policies. I consider this as our main challenge in the short-term. This in turn will form the foundations of a more effective operation that enables us to identify potential Debtor issues at the earliest stage possible as this offers the best opportunity to take the remedial action at a very early stage for the mutual benefit of the customer, the Bank and ultimately its stake holders. Published on Shareholders' Link Issue 41 November 2016 To download the publication, please click here