Weekly Blog by Philip King, CEO of the ICM - 'Catching the bus'

It's been a busy news week. I was interviewed on Jeff Randall Live on Sky News on Monday evening about the government's proposals to cap the cost of Payday Lending.  A bit like buses though, news stories of interest tend to come in twos and threes, and I had a view on the three main news stories the programme was covering.

Firstly, the Lawrence Tomlinson report containing allegations that RBS had pushed healthy small and medium-sized businesses into administration to strip their assets and then buy them back cheaply to make a profit.  As the MP Mark Garnier said in his interview: "I'm not a lawyer, but these allegations, if true, look a lot like fraud to me." How many credit professionals are looking back at bad debts incurred where they thought their decision to supply had been reasonable based on their assessment of customer risk only to be caught with a bad debt when the customer went in to insolvency and wondering if the allegations might be true?  Apart from the obvious impact on the businesses forced into insolvency, what might the wider impact on their suppliers and the economy be?

Secondly, the government was selling £900m of student loans to a debt management consortium for £160m. The loans had been taken out by students who started courses between 1990 and 1998.  Part of the reaction to the news was that debt collection companies would act irresponsibly and aggressively in recovering debts that have so far not been collected.  The Student Loans company doesn't have the best record in managing its loan book and particularly the older elements of the portfolio.  We're told the terms and conditions of the loans are not going to be changed as a result of the sale and, if engaging third parties increases the recovery of funds to the public purse, then I'm all for it.  Perhaps the debt collection companies will just apply good credit management principles and collect money that is overdue from people who can - and should - be repaying it.

Thirdly, the Chancellor's announcement that government will impose a duty on the FCA to cap the cost of payday lending.  Setting on one side the suggestion that the announcement is one of political expediency, there are bigger questions to be answered. How will the cap level be determined?  The quoting of the Australian model with its cap of 4% per month seems to overlook the 20% arrangement fee that can be charged, and the punitive penalties for late payment that can be applied.  And the last thing we want is for the cap to make short-term lenders flee the market forcing borrowers to use loan sharks instead.

I'm not averse to the principle of restricting overt profiteering that can exploit the most vulnerable but let's not forget that payday lenders aren't the only guilty parties here.  As I said to Jeff Randall, I went online and looked at what £100 payday loan for a month would cost.  I'd have to pay back £137.15. If I took an unauthorised overdraft on my current account with a High Street bank the cost would be £5 per day, capped at £95 in a month.  On another current account I looked at, the cap would be £150, and both of these accounts would also charge transaction fees on top.  On this comparison, charges of £37.15 sound a snip!

Equally big issues with payday lenders are the opportunity for borrowers to take out multiple loans with multiple lenders, the availability of repeated roll-overs, and - as I've said in this blog before - the failure of lenders to carry out adequate affordability checks ahead of granting loans.

Back to my buses analogy, I guess next week will be devoid of any significant news and we'll be back to following the exploits of celebrities and their social lives!

 

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 - 'The power to make a difference'

I was privileged to chair the 5th National Consumer Debt Conference, organised by Utility Week, in Birmingham on Tuesday. It was a full and interesting day with the order of subject matter judged exactly right.

 

The first section focused on the economic landscape looking at issues around ability to pay, the implications of the current welfare reforms including Universal Credit, and the mechanics of the government's Green Deal scheme. The second section looked at customer management including the use of analytics to identify the most vulnerable in our society, and a cross section of good practice examples of customer-driven strategies. The final part of the conference addressed billing and collections, exploring areas as diverse as fraud and meter-tampering, landlord web-portals, risk management strategies, and smart metering.

 

You'll probably guess from some of the subject matter above that the delegates were largely from the utility and energy sectors where there are some particular credit management issues. The water industry's problems arising from the obligation to supply, and difficulty in identifying customer details, particularly in tenancies, for example, are well known and equally well documented.

What always strikes me at events like this, however, is just how many themes are common across industries and sectors. While each has its own peculiarities, trends, and concerns, the principles and elements of good credit management practice are largely shared.

 

At the end of the conference day, I hosted an interactive workshop where we discussed, amongst other things, what best practice looks like. One of the common themes that emerged was the need to drive professionalism within organisations through the engagement and development of credit professionals within them.

 

Driving that professionalism is one of the key objectives of the Institute of Credit Management and I'm always proud to hear examples of where we're succeeding, and to be playing a part in raising standards and performance as a result.

 

 

 

Weekly Blog by Philip King, CEO of the ICM - 'Tangible examples of best practice'

One of my most enjoyable tasks is presenting the ICM's Quality in Credit Management Award to companies that have achieved the challenging accreditation. And it is happening with increasing regularity: we now have 29 accredited organisations and many more underway. This week I was privileged to present the award to the team at Venn Group in London.

Every organisation I visit is a demonstration of best practice but one thing in particular stood out for me at Venn Group: the way in which credit management practice and principles are integrated into the entire business. At the presentation of the award, the owners of the business and directors from every function were present and it was apparent that credit management isn't just a function within the business. Rather, cashflow is recognised as vital and every activity across the organisation from those who acquire business onwards recognises the importance of contributing to its management and control. I often talk about the importance of credit management sitting at the heart of the business and it's great to see a tangible example of it in practice.

 

On Monday, I presented at the launch of the ICM's partnership with Bank of America. The partnership is ground-breaking in the way it has been created. It will deliver an opportunity for all members of the Credit Risk Management team to develop skills, gain qualifications, and contribute to the validation of the quality of its operation. The excitement, passion and commitment of the team in Chester was fantastic to see and truly inspirational.

 

It's been another great week and I'm trying hard to forget the fact that I had to decline an invitation to Buckingham Palace on Monday for an event hosted by the Duke of York to launch the Start-Up Loans Company Ambassadors Scheme!

Weekly blog by Philip King, CEO of the ICM -'An added perspective'

I wrote in my blog last week about the danger of imposing prescriptive maximum payment terms on UK businesses and mentioned, by way of example, the reported offering by Canon and Nokia of favourable credit terms in their bid to keep Jessops' shops open as a route to market. 

This weekend the press suggested that the music and entertainment industry is falling over itself to keep HMV outlets open with The Sunday Times carrying the headline: "Music giants rush to keep HMV alive". The report ran: "The world's biggest music labels and film studios are assembling a multi-million pound rescue package to prevent HMV from going out of business. Universal Music, Warner Music and Sony are set to cut the price of CDs and DVDs, and give the retailer generous credit terms……."

Thinking on this reminds me of the wider role that credit professionals play in their businesses beyond risk mitigation and cash collection. When I address 'credit' audiences, I frequently remind them of the value they add to their businesses by contributing to, and in many cases even driving, the sales effort and activity. I refer to examples in my own career when I used a variety of tools and tactics (perhaps archaic by today's standards!) available to me at the time ranging from a credit reference agency to identify and pre-approve business customers for a number of mobile phone connections as a way of driving sales, to creative financial packages to allow my employer (a computer manufacturer) to supply product. We had a network of dealers, few of whom were good – on a credit basis – for any supplies on open account terms at all. Escrow accounts, back-to-back deals, end-user guarantees and many more solutions enabled us to ship product that would otherwise have remained unsold in the warehouse.

And this is where credit management comes into its own; where we can demonstrate real value. It is why credit management is such a challenging and rewarding career. In my 34th year as a credit professional I still get a huge kick out of it and even greater pleasure from leading an organisation of which I'm so proud and which remains committed to delivering the vital support our members need to deliver the cash.

Weekly Blog by Philip King, CEO of the ICM - 'Standing tall and proud'

When I said in my blog last week that it was time for credit professionals to stand up, to be noticed, and to be proud, I was talking about the value they contribute to their organisations and to the wider economy. I'm glad to say that I'm seeing a trend that exemplifies the pride I'm talking about.

I've noticed an increasing number of ICM members who include their designatory letters - AICM, MICM, MICM(Grad), or FICM - on their business cards, their email signatures, their LinkedIn profiles, and elsewhere. These letters are not just given away when someone becomes an ICM member; they have to be earned by gaining qualifications and/or having their practical experience verified, validated and reviewed.

Some might say the practice is archaic but I believe those who have earned them should be proud of their achievement and are right to use them in this way. If you don't tell people what you've achieved, who else will?

I've also seen a marked increase in the number of ICM members wearing the ICM badges we launched earlier this year. This, too, is a good way of promoting your professionalism and - if you don't have a badge - simply email icmmembership@icm.org.uk and we'll be delighted to send you one.

Don't be a shrinking violet!

Guest Blog by Nigel Fields, Director of International Credit at Twentieth Century Fox - 'Who the hell is Nigel Fields'

I thought, as this is my first ever Blog, that I should first start by letting you know; Who the hell is Nigel Fields?

 

OK, here I go, I think I am incredibly lucky!  In fact I feel life has been really kind to me, from being with my fantastic wife, Jackie since age of 13, (hey, I was not married then) rolling on to 32 years later with our two great kids Harry and Sally, who kindly make sure I never have any money to worry about and can continue to train and practice for myself the art of ‘Debt Management’.  I have met so many fantastic friends along the way.  And today I am working with, what I consider, to be one of the greatest businesses of all, ‘The MOVIE Business’ and in particular Twentieth Century Fox where I sit in Soho Square, London which is also probably the coolest, friendliest place in London.

 

I have been at Fox for 13 years now, and have established my role at Fox as Credit Director working with all countries outside of the USA and Canada.  Here’s a summary of what I get up to.

 

- Oversee Fox’s international risk management providing clarity of Fox’s objectives for risk and financial control to territories.

 

- Identify and monitor “at risk” customers within territories.

 

- Make recommendation for the mitigation of any risk gaps using best available and most cost effective solutions e.g. Credit Insurance, PUT options etc. and provide recommendations for doubtful debt provisions as required.

 

- Provide consolidated reporting of international Accounts Receivable.

 

- Assist Subsidiaries with debt recovery strategies.

 

- Best Practice reviews, improvements & enhancements.

 

- Provide the business with technical expertise in all areas of credit management and make best practice recommendations to territories for a structured credit management framework to improve cash flow where possible.

 

- Responsible for Credit vendor management.

 

 - Privileged to be a Member of the Institute of Credit Management and sit on the ICM Editorial Panel and Think Tank.

 

- Having to attend Premiere’s, meeting film stars and personalities, attending Awards e.g. Bafta’s, travelling the world and watching loads of films.  This makes it all so very hard.  It is a great business and I never ever get bored.

Weekly Blog by Philip King, CEO of the ICM - 'Seeing is believing'

After years of planning and anticipation, the finale of the Olympics Games is fast approaching. The predicted transport disasters have failed to materialise, the Team GB medal haul has been better than many expected, and generally people have little to say other than praise for an event that has done the UK proud and for plans brilliantly executed.

On a personal basis, I remain gutted that I was unable to obtain any tickets and attend an event in person, an emotion that has been heightened by the fact that I was in London for several days and sharing the tube with people who had been, or were going to, events. Nevertheless, there was a palpable feel-good factor in the capital and it was great to see people's joy and excitement. And the army of volunteers visible all over London seemed to me to be doing a fantastic job whenever I saw them interacting with visitors.

What is perhaps more interesting is the contrast between predictions and reality. There have been many stories in the press over the last day or two to highlight the point: hotels speak of block-bookings made for officials being released too late to allow for replacement guests to be found; the gridlock on the roads never really materialised; shops expecting a bonanza were disappointed as they found that Olympics visitors were doing no more than commuting from hotel to the Olympic Park and back. Other attractions found that the usual influx of visitors had stayed away so numbers were down, and huge numbers of staff worked from home so normal business was reduced.

So, why did people get caught out? Did LOCOG over-state the potential problems to ensure that the risk of them occurring was minimised, or did the media hype things so much that there was an over-reaction? Or, perhaps, the publicity had the desired effect and allowed the Games to be pulled off successfully and without the disasters that we'd all, if we're honest, probably expected to happen!

The lesson in this is that, although businesses need to listen to advice and take account of what they hear and are told, they also need to plan for themselves and apply basic rules of common sense in their planning. None of the situations outlined above can be that surprising when considered in the light of experience over the last few days. I know hindsight is wonderful but, if we always believe what we hear, we're likely to get caught out. By the same token, we should perhaps stop believing that there is no hope for an economic recovery and maybe, just maybe, we could turn the tide for our own organisations by applying our own positive spin to some of the things we hear.

Weekly Blog by Philip King, CEO of the ICM - 'Sound bites aren't enough'

Amid the hype around Project Merlin and the banks last week, the announcement from BIS of four new schemes http://bit.ly/gglodF specifically to help exporters seems to have got somewhat lost in the noise.

On the face of it, all four of the schemes have merit. They are designed, in simple terms, to enable businesses greater access to trade finance and insurance against credit risk where such help may not be available from the private sector.

As always with such initiatives, the devil is in the detail which I fear the headline announcement masks. It seems the circumstances in which the schemes will be available are limited, and the benefits will - in turn - also be restricted to a few rather than the many. Previous forays by government to support exporters have not been spectacularly successful; they have tended to be overcomplicated, and as a result, under-subscribed.

Export growth is crucial in the recovery we so desperately need, and schemes like these need to be visible, understood, and used; they need to be simple and easy to apply for; and they need to be flexible so their impact is maximised. The intention is laudable, and I don't want to write these off just yet. But there is a tendency for government to fail in its follow-through, and this time they need to listen and respond positively and quickly to feedback so the objectives of driving exports and aiding economic recovery in the UK can be met.

Businesses don't grow through sound bites. Behind the rhetoric, there need to be real and tangible measures of support.