Weekly Blog by Philip King, CEO of the ICM - 'A reason for good cheer'

As we enter the Christmas break, it's good to pause and reflect on the last 12 months.  Our Regional Roadshow programme, for example, has been really successful and it was great to end the year with a superb event at the premises of Schuco in Milton Keynes.  It was an excellent venue with great speakers, and proved to be a fantastic example of the ICM credit community at its best.

 

Looking at our wider activity, we've had some notable success too.  By the end of the 2012 there will have been 125,000 downloads in the year, over 50,000 more than in 2011, and almost 400,000 downloads in total of the Managing Cashflow Guides that were written and launched in 2008.  The Prompt Payment Code (PPC), which we host and administer for BIS, featured in a November House of Commons debate when the ICM received no less than eight mentions, and we've seen a surge in sign-ups in the last few weeks - particularly from large organisations - with signatories now standing at over 1,240.

 

Even more encouraging however is recent research by Experian showing that the PPC has had a positive effect on payment times.  It found that on average those who had signed up to the Code paid five days earlier than those who had not.  Furthermore, there has been a sizeable improvement over the period amongst PPC signatories who now pay 12 days quicker than in December 2008.

 

The Code was launched late on Christmas Eve, 2008 and, while I accept that there is much much more to be done, it's great to see independent evidence that it is has made some progress in changing the culture it was designed to achieve.

 

I'm looking forward to an exciting 2013.  In the meantime, may I wish you a very happy Christmas and a peaceful, prosperous and productive New Year.

 

Guest Blog by Bill Dunlop, Managing Director of Tower Associates - On the edge of a precipice'

The ICM joined forces with P&A Receivables, Experian, AON, and Tower Associates to run an event in London last week looking at practical implications of the Eurozone crisis. I thought - since this was so topical - I'd ask Bill Dunlop, Managing Director of Tower Associates to share his thoughts, and here they are:

"Since early December 2011, I have been working with partners to facilitate a series of workshops to examine the effects of single or multi-country exit from the Eurozone. The purpose of the workshops was to best acquaint our clients with economic, political and social events as they unfolded and what impact country exit would have on operational credit management for businesses having outstanding debts in those countries. They were also to afford the opportunity of considering the areas of operational concern and develop the template of a plan to be implemented in the event of exit occurring.

Despite these workshops being informative, well attended and generating intelligent debate, I am extremely concerned that the rapid deterioration of the economic, political and social situation is not being matched by heightened company awareness, planning and creative thought in response. Since December, the balance of economic prediction has shifted from probable Greek recovery to likely Greek exit within 12 to 18 months. In my opinion the combination of social and political unrest will accelerate this exit and we will be faced with the immediate and predicted 50 to 60 percent depreciation in the new currency. The effect of this on companies trading in Greece will be significant but, possibly because of the size of its economy, in most cases may be manageable. However, many of the pressures faced by Greece are closely mirrored in Portugal, Spain, Ireland and Italy. My greatest fear is that the Greek exit will create contagion to such a level that some or all of these other counties will follow and operate their own currency or effectively create a two tier Eurozone; either way, we will be faced with considerable depreciation of their respective currencies in those.

The effect of this on operational credit management would be close to catastrophic and there are compelling questions, as professionals, we would have to give consideration to before the event -

* Are we likely to be asked for debt forgiveness to the value of the depreciation? Most probably yes!

* How do we quickly 'stress test' our account portfolio to establish that it remains economically viable?

* How do we structure our bad debt provision in response?

* Could our customers invoke 'force majeure' to avoid payment of existing debts?

* Where possible, how do we operate more effective control over our stock in term of repatriation of existing stock or enhanced protection of future stocks?

* What future instruments of security or insurance may be available?

* Does our existing insurance cover this eventuality? Most probably not!

* Should we or can we be considering converting older debt to long term debt or customer loans?

Hopefully, I'm being overly pessimistic, but I think it's better to address these questions before the hypothetical event, rather than after the actual tragedy."