Weekly Blog by Philip King, CEO of the ICM - 'Growing Responsibility'

It's the time of year - just pre-holiday season - when we normally expect to see a flurry of papers and consultations being issued by government to keep us occupied over the summer. This year is no exception and the last week has seen a bulging inbox.

To name but a few BIS has issued a call for views on its Corporate Responsibility paper, and produced a discussion paper entitled 'Transparency & Trust', and the Insolvency Service has published the report from Elaine Kempson's review into Insolvency Practitioner Fees, the terms of reference for the long-heralded review into Pre-pack Administrations, and its Annual Report for 2012-13.

The Institute will of course be considering these and submitting responses in due course but, having spent several hours over the last few days scanning the contents of papers, the longest of which is 89 pages, I do have a few initial thoughts.

The BIS Corporate Responsibility paper is looking primarily at what has more traditionally been called Corporate Social Responsibility (CSR). It seeks to define exactly what CSR is and how it can be encouraged, developed and reported on. One section looks at supply chain management
and I hope one of the issues identified is that of prompt payment and treating suppliers fairly. Given the impact of late payment on suppliers and, as a consequence, the wider economy this seems a very obvious way for businesses to be seen as acting responsibly. Conversely, making life difficult for suppliers and deliberately exploiting them is nothing short of irresponsible.

The BIS Transparency and Trust discussion paper (or perhaps tome is a better descriptor!)  covers a broad range of issues focusing on two primary themes: enhancing the transparency of UK company ownership, and increasing trust in UK business. The latter theme embraces a number of specific areas but includes insolvency through suggested changes to the disqualification of directors regime and the introduction of financial redress for creditors where directors have acted fraudulently or recklessly. I'm also encouraged by the suggestion of education for directors. I've had a long-held view that the ability for people to gain the privilege of limited liability without putting up any capital nor having to demonstrate any understanding of their responsibilities and obligations is unhelpful and leads to wide-ranging issues. The ICM's press release welcoming the discussion can be found here: http://www.icm.org.uk/statement-following-publication-of- transparency-and-trust/

The Transparency & Trust paper which can be found here also refers to the imminent review of pre-packs and the report from the Review into Insolvency Practitioner Fees and we'll await the Insolvency Service's response in due course with interest.

I'm encouraged that the government is looking at these areas. The provision of credit across all sectors always involves trust so the title of this paper, 'Transparency & Trust', puts it squarely in our space and I look forward to hearing the views of ICM members when we go out for their
input and views shortly.

Weekly Blog by Philip King, CEO of the ICM - 'Reading, writing and credit management'

Back in February the government announced a new draft National Curriculum for England that would see financial education embedded in both mathematics and in citizenship education, making financial capability a statutory part of the curriculum for the first time. The draft programme of study for citizenship would include the functions and uses of money, the importance of personal budgeting, money management and a range of financial products and services in Key Stage 3, and wages, taxes, credit, debt, financial risk and a range of more sophisticated financial products and services in Key Stage 4.

 

This week, following a period of consultation, Michael Gove published the revised Curriculum and the financial education has been further strengthened by the inclusion of 'risk management' into Key Stage 3 and 'income and expenditure, credit and debt, insurance, savings, pensions' at Key Stage 4. Recognition is due to pfeg for its work in pushing for this enhanced content.

 

Providing education that allows children to leave school with financial literacy can only bode well for the credit profession in the years ahead if it means consumers are more financially aware. None of us wants to see people in financial difficulty through ignorance because they weren't sufficiently aware or informed.

 

In my blog last week I called for the OFT to ensure that affordability tests were genuinely being carried out by payday lenders to avoid the vulnerable being caught in a vortex of indebtedness. An interesting discussion has unfolded in response on the ICM Credit Community LinkedIn group (you can find it here) I don't agree with all the comments - simply outlawing payday lending could carry serious unintended consequences involving a growth in back street loan sharks, for example - but action in the short term is needed and, for the longer term, education will also play its part. Now we need to make sure teachers are provided with adequate tools to deliver the proposed curriculum content.

Weekly Blog by Philip King, CEO of the ICM - 'Testament of Youth'

There was an interesting article in the Financial Times about youth unemployment on Monday. Hot on the heels of the recent revision by the Office for National Statistics (ONS) that has cast doubt on last year's UK double-dip recession, it served as a timely reminder of how dangerous it can be to rely on statistics or to accept them at face value.

 

Both the OECD and the United Nations have recently warned that the spiralling rates of youth unemployment across many advanced economies will have severe consequences following the latest reported figures showing that nearly a quarter of European under-25s are now unemployed. A truly terrifying statistic, particularly in Greece and Spain where the figure is over 50%, and Italy and Portugal where it is 40%, until we get beneath the headline, and let me quote the FT's Kate Allen in explaining.

 

"Youth unemployment figures are meaningless without understanding what proportion of a country's young people are economically active."  "Unemployment figures only reflect the proportion of the population who are economically active ­ i.e. looking for a job, but unable to find one."

 

'Youth' in this context is defined as young people aged 15-24 and inactivity rates can be expected to be very high with many in education or training.  Taking this into account the FT calculates the true youth unemployment rate in Spain to be marginally over 20%, Greece about 17%, Portugal 15%, and Italy 11%.  Indeed, on this basis the unemployment figure for European young people is fewer than 10% rather than the reported almost 25%.

 

There are conflicting opinions about who originally said "lies, damned lies and statistics" but, whoever it was, we should bear their words in mind when we read or hear numbers being quoted in support of a view or argument. Context can be all-important!

 

 

 

Guest blog by Debbie Tuckwood, Director of Operational Strategy, Institute of Credit Management – ‘Education that sticks’

In my view many miss opportunities because they overlook people.  It’s easy to focus on process improvement and new technology for dramatic savings.  After all people development takes time and investment - both in short supply.  It’s tempting to run token training though hardly surprising when there’s limited long-term benefits.  Deep down most know that without effective people change is difficult, however is people development really achievable given cut backs in training teams and budgets?

I believe it is, given the right strategy and support.  Look at the Institute’s corporate membership scheme for large teams which involves all.  It’s set up to help secure budgets and regular support from an education specialist (20 – 30% discounts help too).  If you focus then on moving 10% through qualification programmes, whether linked to own training or an external provider, you build skills and the appetite for learning.  After all, isn’t people development more about longer cultural change and ‘education that sticks’?

Weekly Blog by Philip King, CEO of the ICM - 'That was the week that was!'

Firstly, we had the ICM British Credit Awards at the Park Lane, London Hilton on Wednesday last and, from all the feedback I've received so far, it was our best awards event yet, and one of the best the industry has ever seen. Over and above the joy of celebrating with all those who were short-listed for awards, and particularly with the winners, the evening was a triumph with exceptional entertainment from The Three Waiters, and superb hosting by Martin Bayfield. It was great to spend a night in the company of colleagues from across the industry and a reminder of what organisations like the ICM do so well.

 

Secondly, on Thursday, Michael Gove - the Education Minister - announced that the new draft National Curriculum for England will see financial education embedded in both mathematics and in citizenship education, making financial capability a statutory part of the curriculum for the first time ever.

 

Specifically, the new programme of study for Citizenship includes the functions and uses of money, the importance of personal budgeting, money management and a range of financial products and services in Key Stage 3, and wages, taxes, credit, debt, financial risk and a range of more sophisticated financial products and services in Key Stage 4.

 

This announcement follows a prolonged pfeg (Personal Finance Education Group) campaign supported by the All Parliamentary Group on Financial Education (chaired by my local MP, Justin Tomlinson) and by hundreds of MPs, teachers, parents, and professional bodies including the ICM. It is a triumph for pfeg which coincidentally was the chosen charity for our Awards Dinner and will benefit from the many financial pledges made on the night in its mission to support education providers in giving children and young people the skills, knowledge and confidence to manage money.

 

As I write these words, more pledge cards are still being received so we do not have a final figure of commitments made but, from our work with pfeg in recent years, I am confident that it will all be put to good use and will help to ensure that the next generation is better equipped to deal with personal finance and debt than the current generation.

 

On that subject, the ICM Think Tank this week focused on the role of the advice sector, and particularly the work of StepChange Debt Charity that has been helping people break free from problem debt for 20 years. It was useful for the group of senior executives from across the credit industry to learn more about the charity's mission and work, and to discuss the role of the advice sector and its relationships with the creditor community.

 

Finally, it was good to see the publication by the Insolvency Service of its Debt Management Plan Protocol which aims to protect and promote the needs and best interests of consumers who take out DMPs. In particular, it should help to ensure there is a greater level of consistency and transparency and weed out some of the unscrupulous operators who are conspiring to give the sector a bad name.

 

All in all a good week then!

 

Weekly Blog by Philiip King, CEO of the ICM - 'Promoting the credit profession across government'

I spent most of yesterday in a room at HM Treasury for a workshop with representatives from a number of government departments. We were discussing and exploring debt management across government, and I was the non-governmental participant invited to bring a perspective from the private sector and the wider credit profession. It was an interesting and fascinating day where a wide range of issues and views were expressed.

It would naturally be wrong to detail our discussions but suffice to say I was pleased to be able to share my thinking – as so often expressed in these blogs – about the importance of professionalism in credit management, the importance of providing a career pathway to that professionalism, and the importance of recognising that professionalism when it is achieved and delivered.

We explored the core values, behaviours, and skills required in a credit professional and there were no surprises in the discussion output. The effective credit professional has attributes and characteristics that are common regardless of the sector or industry in which he or she works and, of course, the ICM plays its part in bringing these attributes to the fore. Whether it is through our learning and development short-courses and qualifications, our Continuing Professional Development scheme, or our networking activity made up of branch, regional and national events and online forums, the ultimate objective is the same: to promote and enhance professionalism in our credit community.

Many of our members work in the public sector and add real value to their organisations; it was good to explore how that value might be further enhanced.

Finally, the LIBOR scandal that has overwhelmed us in recent days makes me wonder if any of the participants were members of professional bodies and subject to ethical codes. If so, I hope those professional bodies will be opening files within their complaints and disciplinary regimes. Very occasionally we have to deal with complaints and take action against an ICM member under our Ethical Code and it is right that we do so. Integrity is a fundamental part of the professionalism we all promote and want to see.

To find out more about the Institute of Credit Management visit http://www.icm.org.uk/ or follow http://www.twitter.com/icmorg or http://www.twitter.com/philipkingicm

Weekly Blog by Philip King, CEO of the ICM - 'The power of collective action'

I blogged a couple of weeks ago about the impact we can have as individuals and the responsibility that carries with it. Developing that thinking, I've been reminded this week of the collective power of individuals coming together with a collective aim. Winston Churchill is oft quoted as saying: ‘Never doubt that small groups of people can change the world. In fact it’s the only thing that ever has.’

I attended my second board meeting of the Start-up Loans Company this week and James Caan has pulled together a formidable group of people, allocating responsibility for particular aspects of the programme to each director. In four weeks an amazing amount has been achieved both individually and collectively by a group of people who believe in the benefit of what is being delivered and are committed to making it happen. We are at the start of a really exciting journey and I believe the concept and reality of Start-up Loans is going to be a huge success about which I'll no doubt write more in the months ahead.

When I look around the membership of the ICM, I see similar stories every week. A group of people come together as a branch committee, for example, and deliver events for local credit professionals that educate, energise, and motivate them to deliver more as individuals and for their organisations. At ICM HQ, following our restructure in January, I see the team working together with members and other stakeholders to deliver quality events for the wider credit community; in the last couple of weeks alone, I've witnessed this at our Regional Roadshow in Cardiff, the QiCM Best Practice Event at Reading, the Fellows' Lunch and Graduate Reception in London, and the Education Conference in Birmingham.

To close with a further quotation, this time from Aristotle: ‘the whole is more than the sum of its parts’. Working individually and collectively, we can make a real contribution and make a real difference. That's what our credit community is all about.

Guest Blog by Josef Busuttil, Director General of Malta Association of Credit Management - 'A Credit Management View from Malta'

The small market economy of Malta has been strong enough to resist and manage the economic and financial turmoil that hit the World, in particular, Europe. Thanks to the Maltese regulators, the financial services sector has remained significantly strong and the banks are still enjoying growth and increase in their profits. 2011 was also a record year for tourism, a sector on which the Maltese economy greatly depends.

This does not mean that all is rosy and that the sun shines 365 days-a-year over this rock. It also rains in Malta! Malta does not live in a vacuum. It forms part of the European Union and the Euro-zone, and it exports its products and services worldwide like any other developed country. Hence, what happens offshore affect the Maltese economy to a certain or greater extent!

One of the factors that has hit the Maltese business community is surely the rationed credit facilities from the foreign principals/suppliers. However, from a local credit perspective, Malta has made stark improvement during the recent past. Since MACM - Malta Association of Credit Management - was established in 2001, it has worked and lobbied for a better credit environment and Maltese businesses have witnessed improvement in a number of pertinent credit areas. This includes the number of dishonoured cheques that has gone down remarkably, the credit-related legal framework which is now in place, the judicial system which is more efficient, and business organisations are today adopting more the credit management practices, tools and systems provided by MACM in order to protect their cash flow and secure their long-term profit.

Nevertheless, MACM is aware that late payment is still a major concern for the Maltese businesses. It believes that authorities should do more to enforce legislation that would help creditors in their cash flow management. MACM suggests that the enforcement of court judgments should not only be efficient but also effective. Besides, MACM still notes that some local firms may not be deploying the proper credit management practices when granting and managing credit. These are some of the challenges that MACM is currently addressing.

In fact, MACM advocates that in today's business, a credit practitioner should do more than crunching numbers. The role of the credit practitioner should focus on how to gain and sustain competitive advantage in the market, whilst protecting cash flow and securing long-term profit. This requires up-to-date credit information and skilled staff supported by their top management team and assisted by the appropriate tools and systems in their day-to-day duties.

To support its members, MACM provides credit information which is updated on a daily basis. This information assists Maltese businesses to identify the most significant 'warning signs', which include:

*history of dishonoured cheques and overdue accounts;

* history of court judgements and executive warrants;

* history of court orders and court notices;

* customer changing banker/auditor;

* companies' information and accounts;

* changes in payment pattern;

* lack of filing of accounts as required by the Registrar of Companies (in case of companies);

*other databases that help businesses to identify their prospective customers.

MACM has also invested to provide education to the people working in the field of credit management. Thanks to the ICM Accreditation, Maltese credit practitioners have the opportunity to read the ICM Diploma in Credit Management and to sit for the relative examinations in Malta.

Credit Management is a peoples' function and having skilled and educated credit practitioners would result in better cash flow management, enhanced long-term customer relationship and improved business perception in the market, which are all required to gain and sustain competitive advantage and market share - which is the name of the game in such a changing global environment.

Weekly Blog by Philip King, CEO of the ICM - 'Towards a better future'

This will be my last blog for 2011 so I'm pleased to focus on a couple of real positives.

First, congratulations to Martin Lewis for passing the 100,000 signatories threshold with his petition to make financial education a compulsory part of the school curriculum. The milestone is significant because it means the subject must now be discussed by Parliament, and it's an important subject well worth debating.

The report generated by the All Party Parliamentary Group on Financial Education for Young People says that "two-thirds of people in the UK feel too confused to make the right choices about their money and more than a third say they don't have the right skills to properly manage their cash". If we allow children to leave school without the necessary skills to manage their money we are going to reap the deserved harvest in years to come. As credit professionals we know only too well the impact of over-indebtedness and that is why the ICM has encouraged its members to engage in the DebtCred project delivering financial education to 14-19 year-olds.

DebtCred is just one initiative and there are numerous similar projects, materials and voluntary activities all with a similar aim and many accredited by pfeg (Personal Finance Education Group) that exists to help schools plan and teach financial capability. A huge amount of good work goes on but it is all ad-hoc and dependent upon the willingness and appetite of individual schools and indeed teachers to engage. When financial education is a compulsory part of the curriculum, all children will receive training in what is a vital skill. I've heard the argument that there is little point in addressing financial education until basic numeracy and literacy skills are adequately addressed. Of course that is true, but the two are not mutually exclusive; even someone who can't read or write has to manage their money, and both should have focus within the curriculum.

Secondly, the Forum of Private Business has been engaging many organisations in preparing a letter to Mark Prisk, the Business Minister urging government to have a clear and detailed plan to address the issue of late payment which can, and all too often does, cripple a small business. The Institute is a co-signatory to the letter and it suggests a number of specific actions that might be taken.

Government has done some good things with its Prompt Payment Code (hosted and administered by the ICM), and its current Finance Fitness campaign but more needs to be done and it needs to be done more cohesively. I'm writing these words shortly after being interviewed on BBC Radio 5Live Wake up to Money and my message is clear. Government needs to recognise late payment for the issue it is and formulate a plan to address it. The business culture needs to change such that paying on time is the norm rather than the exception. But businesses themselves have to be smarter at getting the basics of credit management right, and we credit professionals need to be willing to share our skill and expertise so that our customers can deliver cash for their businesses just as we deliver cash for ours.

The recently launched ICM Online Services (icmOS) SME Collection Toolkit is an attempt to provide a practical tool to achieve that aim.

The ICM press release can be found here, the FPB release here, our Managing Cashflow Guides here, and the icmOS SME Collection Toolkit here.

If you would like to listen to Philp's interview on BBC Radio 5Live click here.

I hope 2011 has been a good year for you and - after some relaxation time at Christmas - I hope 2012 will be even better. See you next year!

Weekly Blog by Philip King, CEO of the ICM - 'Wake up and smell the coffee'

When I stay in London, I often use a hotel near Swiss Cottage. It's on the Finchley Road, located in a typical suburb of the capital, its street lined with shops. Over the last few years, I've noticed something that was brought home to me on Monday.

Within about half a mile, there are a number of fast food establishments, some long established cafes and restaurants and a couple of Costa Coffee shops. There are also a couple of independent coffee shops with the usual comforts. One of these closed down a few months ago and was emptied; it has now been replaced by another one that - if you hadn't seen the empty shop in the interim - you could mistake for what was there before.

Further down towards Swiss Cottage Station, it happened again - a new shop replacing one that has closed down. Then more recently, I noticed that that too has now closed down, having been open for no more than a handful of weeks.

Now I know nothing about these businesses or their owners but, from using them, I get the impression there is an individual who has fulfilled a dream by opening the premises and is clearly intent on giving customers a good experience. They work hard and want their enterprise to succeed. But, in all but one case so far, they've failed.

The obvious question that occurs to me is why - when a coffee shop has failed on a particular site - you would think it a good idea to open another? It's not just about location, but also about the clientele, the volume of turnover that can be generated, and the business model of competing operations. And this is obviously not a problem unique to Finchley Road; how often do we see businesses opening where the owners clearly haven't given enough thought to whether they've chosen the right place for them?

I said at an event hosted by Vince Cable, Mark Prisk, and Francis Maude over a year ago that one of the issues arising from the rationalisation of the Civil Service (and, indeed the private sector) would be people receiving a large redundancy payment and using it to fulfil their lifetime dream of starting a business, only to see that dream turn into a nightmare. This is one of the reasons why I believe we have still to see the peak of insolvencies and why business education is so vital. Scenarios like this can be heart-wrenchingly sad and avoiding them would be good for all of us and for the economy.

We are pleased, therefore, to be actively engaged in the BIS Finance Fitness Event and Campaign being launched in London today with the aim of making new businesses and existing ones better equipped and able to survive. We will be continuing to provide advice through our Credit Management Helpline and Managing Cashflow Guides (www.creditmanagement.org.uk) and we're also launching an SME Collections Toolkit as part of ICM Online Services that will provide very practical advice and tools with templates, video role-plays and more.

Those of us supplying and talking to small and start-up businesses could do worse than point people to advice like this; after all, if they get paid, we're more likely to get paid too!

Weekly Blog by Philip King, CEO of the ICM - 'Export, cheques and kids'

Mark Prisk's Small Business Economic Forum at BIS discussed how SMEs can be encouraged to export, and through Lord Stephen Green the Minister outlined the recent steps the Government has taken to support international trade, and specifically the work of the Export Credit Guarantees Department (ECGD).

Consensus among all those present was clear: a strong consistent message needs to be communicated and support must be provided by the banks, business organisations and the Government to dispel the myth that exporting is somehow a 'dark art' that is almost invariably 'high risk'. International trade is fundamental to growing the economy, and helping SMEs to find new markets for their goods and services is therefore key.

Elsewhere, the Payment Council used its Large Corporate User Forum to update members as to the progress of the Cheque Replacement Programme. While it is clear that behind the scenes there is much going on, there are signs that many consumers have yet to be persuaded to use online alternatives. The next big decision may not be due until 2016 but a real change in mindset and practice is going to be needed by then.

The Personal Finance Education Group (pfeg) Forum, meanwhile provided an opportunity to hear news of recent programmes including 'My Money Week' that will be running from 27 June to 3 July and includes competitions for schools to enter as part of a concerted drive to promote financial education to children. If you have any connection with a school, please point them to http://www.mymoneyonline.org/. And don't forget you can get involved with the DebtCred initiative through the ICM so to express an interest and learn more please just email governance@icm.org.uk

Weekly Blog by Philip King, CEO of the ICM - 'Should you say yes?'

I recently started a discussion 'Teaching teenagers about personal financial management' on the LinkedIn ICM Credit Community http://linkd.in/dd1hHF. I was not quite sure what type of response, if any, I would receive. As it happens, the response was superb, and the comments made were useful, insightful and most thought provoking. The clear consensus is that there is plenty to teach and much practical advice to be shared.

This is a subject that we, as credit professionals, feel very strongly about. If children leave school with an understanding of how to manage money and finance, budget expenditure, and be discriminatory in their use of credit, then there will be less need for the advice sector, which is already stretched.

There are many good and worthy initiatives already under way, particularly those supported by pfeg (the Personal Finance Education Group) on whose Forum the ICM sits. But in the absence of personal finance being a serious and compulsory part of the national curriculum (which looks increasingly unlikely), it is clear that still more needs to be done.

The Institute has recently announced a partnership with DebtCred, as detailed in the pages of CreditManagement magazine http://bit.ly/eJSb2K, and this provides a genuine opportunity for us to get involved and make a difference in a really practical way either personally or through our employers. If I was to challenge you to stop for a moment and consider: "could I and should I give a couple of days a year to make a difference and help youngsters cope better as they enter adult life?"

If the answer is yes, please drop me an email at governance@icm.org.uk.

Follow me and the ICM on:

http://twitter.com/philipkingicm, http://twitter.com/icmorg or http://linkd.in/dd1hHF

1st Weekly Blog from Philip King, CEO of the ICM

There were two announcements in the last few days that especially caught my attention. The first was by the Forum for Private Business (FPB) who had submitted a freedom of information (FOI) request asking police forces how quickly they processed payments in the 2009/10 financial year.

It revealed companies in some parts of the country had to wait more than two months for payment from their local force. Companies doing business with the police in other areas, however, were paid in a matter of days.

Now there is nothing new or surprising in this. Across all industries and sectors, there are differences in practice and experience and I bet even those paying promptly end up paying some suppliers quicker than others.

The reason those suppliers get paid more quickly than others is similarly no secret. It comes down to having good credit management practices. Getting the basics right, such as ensuring the invoice details are correct and building personal relationships between departments is key to getting paid on time. Some practice is ingrained and part of the business culture, but other skills can be taught, and this is our role.

The second piece of news I read was in the Independent. It announced that one in 10 northerners 'will be jobless in the next 5 years'. A leading economics think-tank predicted that unemployment is set to breach the psychologically important 10 percent level over the next five years - but only in the north of the country.

Unemployment is bound to grow and - while it may be worse in the North - it's going to affect all areas, particularly as the public sector cuts bite. One impact will be the emergence of more sole traders who see redundancy as an opportunity to leave the world of PAYE and strike out on their own with their redundancy cheque firmly in hand. As suppliers, we should be prepared to give them good advice that will help their business survive the first critical 12 months. We could do worse than point them to the Managing Cashflow Guides at www.creditmanagement.org.uk

Meanwhile closer to home, the ICM exam results came out last weekend. As with the 'A' level students, some learners will be delighted with their performance and others devastated and disappointed. Studying while maintaining a career is never easy and they deserve our congratulations for their commitment (whatever the result) and our support. They are the credit professionals of tomorrow and will help raise the standards of what we do.