Weekly Blog by Philip King, CEO of the ICM - 'No man is an island'

I've just left a board meeting of the Start-Up Loans Company and never cease to be amazed at what can be achieved by a small group of people pulling in the same direction. Indeed, I may have quoted Winston Churchill words in a previous blog: "Never doubt that small groups of people can change the world. In fact it’s the only thing that ever has."

 

The first board meeting was only six months ago and, since then, an infrastructure has been pulled together, Delivery Partners have been appointed, a significant number of loans have been advanced, and some big challenges have been overcome. They've been overcome by a committed group of people pooling their talent and resources, and coming up with solutions, and it's fascinating to see what can come out of a two-hour meeting with real focus.

 

At ICM HQ, we're doing some work here to ensure our management team is as effective as it can be because we know that an effective team can make a real difference. One of my favourite quotations, and one I frequently repeat at HQ, is: "Creative thinking makes it possible; teamwork makes it happen.” Wherever you are, whether you are at work or at home, whether part of a large group or small, we all invariably work as a team. It is teams, more than individuals, which turn ideas into reality.

 

No man is an island after all!

Weekly Blog by Philip King, CEO of the ICM - 'Be careful what you wish for'

In a Financial Times survey of 83 economists (including 11 former members of the Bank of England's Monetary Policy Committee) earlier this week there was a consensus, by a majority of three to one, that the economic outlook in 2012 would deteriorate. It also showed that almost all of those expressing an opinion said the UK outlook would be much worse if the Euro collapsed. I can't say I'm surprised by the findings - I think we've all known for a while that this year is going to be tough and little better - if at all - than 2011.

I quoted Richard Tyler of the Telegraph in my blog on 1 December saying that we should all commit not to say Britain would have another recession on the basis that these things can become self-fulfilling. I'm not sure what impact our words have but I do know something of the positive impact credit professionals can have on their businesses and that is something we certainly should be talking about.

2012 is the year when we, as credit professionals, need to stand up and be counted. We need to make sure that our peers, colleagues, and Boards know and understand the contribution we can - and do - make. When a potential order is difficult to accept, we can engineer payment terms and security to make the unacceptable acceptable. When a coveted order is almost out of reach, payment terms used cleverly can make the unattainable attainable. When a situation with a debtor is looking like it could go horribly wrong, careful management and close contact can make the potentially irrecoverable recoverable.

Whatever sector and industry we work in, and whatever our role, we need to show our professionalism, be proud of our profession, and raise awareness of the significance of our contribution. Two practical steps we might take: firstly, calculate the cash-flow value of one day's sales to our businesses so we can talk about our contribution in terms of hard cash rather than the reduction of one day in DSO (the former is much more meaningful to the rest of the business). Secondly, we can show we are professionals and belong to an organisation representing our profession by wearing the new ICM badge. If you haven't got yours yet, simply send an email to members@icm.org.uk quoting your correct email address and saying how many people currently work in your credit department.

I'm not a great believer in New Year's resolutions but I do passionately believe in setting goals, and showing commitment to them by monitoring progress. For 2012, be proud of your professionalism, stand up and be counted, and don't be afraid to demonstrate your value.

Weekly Blog by Philip King, CEO of the ICM - 'Men behaving badly'

The ITV 'Exposure' programme aired on Monday night used covert recording of a bailiff behaving very badly indeed. Shocking revelations that - in many respects - beggared belief. What was even more surprising was the assertion that no complaints had been received by his employers during the three years he had worked for them. Was this because the people he called upon didn't know their rights or what standards of behaviour they could expect? Or was it because they felt that any complaints they did raise would simply fall on deaf ears?

If the Tribunal, Courts and Enforcement 2007 had been fully implemented, the bailiff concerned would have been subject to an enhanced certification process that would have included aspects such as diversity awareness and conflict management; both would clearly have been useful, and complaints would have been dealt with by the Courts. As events have unfolded, the Act was only partially implemented and a parallel consultation proposing regulation instead by an independent body was never taken forward either, even though the enforcement industry would have welcomed such an additional regulation (my thanks to Chris Bell of Shergroup for his validation of the facts here).

I've been involved in meetings with various bodies and the Government for several years discussing the proposals and alternatives interminably but - as has frequently been highlighted in the credit press - no progress has been made and the issues remain. I don't believe the problems are endemic, but it only takes one bad apple to spoil the whole barrel and damage the reputation of the entire industry. The reality is that bailiffs are only acting to recover money that is the subject of a warrant issued by the court and is rightfully due, yet that fact gets lost in the noise of behaviour and attitudes that can't be condoned. They also get confused with the world of 'Lock, Stock and Two Smoking Barrel's' that is as far away from professional enforcement as it is possible to be, but make for a good photo-caption!

Self-regulation is not a viable option unless and until it is carried out in a much more rigorous way. I've been encouraged by recent initiatives like the 'video recording badges' being piloted by some Marston High Court Enforcement Officers. I don't know how feasible such measures would be on a widespread scale but technology like this would allow for closer monitoring of activity and would help rebuild confidence. The last thing we need is a belief that enforcement of warrants is unfair.

Weekly Blog by Philip King, CEO of the ICM -'Kill or cure the zombies'

On Monday the Financial Times ran a story with the headline "Institutions urged to kill or cure the zombies" which talked about "zombie" businesses, to describe those that can pay interest on their debts but has no viable means of repaying the principal over the long term. The article highlights the fact that many businesses are passed the point of no return but are staying afloat because of low interest rates, HMRC's discretionary Time to Pay arrangements, and/or banks keeping businesses in "intensive care" rather than allowing them to fail. It is little comfort to see a respected newspaper making the very same arguments that I have been saying for at least the last two years in my public assertions that there is a spike of corporate insolvencies waiting just round the corner. I recognise that it has taken longer to reach the corner than I anticipated but I continue to maintain that we are going to see a substantial increase at some point. Too many businesses are in a state of denial and it is only going to take a change in one factor to push them over the edge, be that the rent quarter day this week, a negative response to a request for an extension to the HMRC Time to Pay arrangement, an increase in interest rates, or another factor such as a large customer failing or failing to pay sufficiently promptly.

If you watched Dragons Den this week you might have seen the director of a twenty year old business seeking £100,000 investment to help his business grow. Upon questioning, it became apparent that the business had been loosing money in three of the last four years, had a very low balance sheet net worth and, if current forecasts were met, would be technically insolvent at the end of the current financial period. The argument that sales next year would be much better and would see a return to profit seemed to have little substance and, not surprisingly, there were no takers among the dragons. It's obviously difficult to see the whole picture from a few edited minutes on TV but the scenario of a business thinking tomorrow will be better without realising the reality of its financial situation today is not uncommon.

In the FT article, Christine Elliott, Chief Executive of the Institute of Turnaround said "she would like to see institutions that have potentially viable businesses under their care change their mindset. They should either recognise non-viable businesses and deal with them through insolvency or put in place a transformation plan to achieve their potential". We credit professionals have a very similar task: to recognise viable businesses and help create profitable sales for our own organisations, and to recognise non-viable businesses and ensure exposure is minimised. Sometimes we to have to decide whether to kill or cure the zombies.