◆ Work With
◆ Work Out
◆ Understanding the controlling factors-Regulators vs. Shareholders
Setting the stage with external constituencies
◆ Troubled borrowers
◆ Addressing other important “publics”
Setting the tone-Internal message
◆ Focus on risk management
◆ Emphasis on the basics, reinforce the message
◆ Marathon vs. sprint
Understanding the Task
◆ Identify impacted constituencies (including the not-so-obvious ones)
◆ Consider the components and variables in dealing with reputation risk
◆ Develop a communication plan to address principal components of risk by constituency
◆ Set realistic performance metrics including timetables. Consider scorecarding
Marshalling the resources
◆ Lending staff
◆ Support staff (credit administration et al)
◆ Legal and other professionals
◆ Tools facilitating internal discipline (credit policy, exception reporting, funding oversight, etc.)
◆ Training and retraining efforts
Questions & Answers
2. Setting the Expectations: Preparing the Organization
Challenges on two fronts—building/preserving market
share and dealing with frequently hostile and
uncooperative troubled customers—require focus and
energy. Expectations have to be carefully set.
Everyone needs to understand:
◆ Workouts are very labor intensive and time consuming
◆ Improvements come slowly, when local economy is distressed
◆ Market share is vulnerable (Don’t take your best customers for granted)
◆ Workouts are expensive
Board of Directors
◆ Review/establish board committees
◆ Review committee composition to assure alignment of skills and expertise
◆ Expectation setting
◆ Review compensation
◆ Civil money penalties and personal liability concerns
◆ Reputation risk review and awareness
Management
◆ Alignment and communication fl ows
◆ Distractions are enormous
Lenders
◆ Challenges-and opportunities-of a lifetime
◆ Defensive considerations, such as lender liability awareness
◆ Consider pay for performance incentives
Staff expectations
◆ Duration
◆ Financial sacrifi ce
◆ Customer frustration
Questions & Answers
3. Organize for the Process, Not Just the Event
Working out troubled assets takes time even if the
borrower is cooperative. Resources are strained and
scarcity is more normal than abundance. Expect the
unexpected and expect to be disappointed in human
behavior. Learn the lessons diffi cult times teach.
Create sense of organizational urgency
◆ Top down
◆ Number-one priority
◆ Ruthless focus on the objectives
Assign the best credit people to the biggest problems
Measure workloads for equity and balance
◆ Complexity
◆ Dollars of exposure
Vet the credit culture within the bank
(immediate implications)
◆ Review/rewrite loan policy as needed
◆ Assure independence and professionalism of loan review staff
◆ Review quality control procedures
◆ Separate credits into good bank/bad bank
◆ Consider separate approval channels
Be visible and accessible to the bank’s constituencies
Questions & Answers
4. Interactive Case Studies
In each of the following real cases (though disguised),
the workout credits were proposed for approval as
presented in these materials. Participants will vote up
or down on this question. The presenter will then
indicate what the bank actually did; why if different; and
the result.
◆ Three Counties Church
◆ Cooke Electrical Supply, Inc.
◆ David T. Lewis et al
5. Identifying the Building Blocks of a Successful Program
What you put in place has to fi t the character of your
bank and the severity of the problem. Workouts are not
suited to a “one-size-fi ts-all template”
Getting inside the troubled borrower’s head
◆ Kushner’s Five Steps: On Death and Dying-and why
it fits workouts too.
◆ Feeding the family vs. repaying the bank
◆ Honey attracts more fl ies than vinegar
Define in advance the elements of success
◆ Dollar terms
◆ Elimination of administrative agreement(s)
◆ Preservation of market share
◆ Reduction of elements of expense
What changes do you want to institutionalize either immediately or over time?
◆ Contributions budget
◆ Training formality
◆ Streamline authorities and committee structures
Understanding the examiners
◆ They want healthy banks and banking system
◆ They are political creatures and derive from the political process
◆ Consider their tool box and how they might use each component
Do you feel that you understand the drivers of the current fi nancial malaise?
◆ Failure of risk management on a systemic basis
◆ How much of your bank’s problems are due to:
◆ How likely is your bank to be adversely impacted by strategic developments (e.g., future of community banking, new forms of competition)?
6. Managing the Legal Process
Legal counsel will likely be a major expense. Here are some ways you can mitigate the cost.
Understand difference between legal decisions and credit or business decisions.
How to infuse counsel with a sensitivity to expense control
◆ Positive activities:
◆ Activities to be avoided:
Address the question of whether “house counsel” is cost effective
◆ Response times inside vs. outside
◆ Experience equal to the varied tasks?
Consider whether counsel should be a member of the bank’s board of directors
Enlist counsel’s help on being proactive with staff on various issues such as
◆ Lender liability
◆ Pitfalls in bankruptcy process
◆ Curing documentation defects
Understand the difference between a business decision and a legal decision (repeated for emphasis); consistently respect the differences
Questions & Answers
Register Today!
www.ababj.com/workoutsworkshop
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