Stellar Book Review of Credit Risk Management - The Novel in The Asset Magazine

In the March 2015 edition of The Asset the Assistant Editor, Christoph Kober, reviews Credit Risk Management – The Novel (Part One).

Here is a short extract:

“In The Novel, Wells presents technical concepts in a manner that is enlightening to anyone interested in how oil majors and traders fuel the world economy. In the sometimes covert world of commodities, the book reveals how large oil majors can do business even with nefarious traders and national oil companies with erratic payment patterns.

Practical advice wrapped in lively accounts of how large commodity deals are brokered make the book a helpful guide not only to credit professionals but treasurers and financial directors as well.

But The Novel also has room for fiction. James “Jim” E Cricket, the head of the team of “creditphiles” at ShamOil, fancies more than just collateral when dealing with risky buyers. World peace is what he really strives for. Jim nearly brokers the smooth fall of the Berlin Wall and the end of Apartheid in a matter of just a few months.

The Novel recounts some of the most dramatic geopolitical events at the end of the 20th century – which of course proved to be watershed moments for the commodities industries as well. Fast forward two decades and geopolitical hotspots throughout the world again keep businesses on their toes. Although set in the 1990s, the solutions presented by Wells were in fact developed more recently, he says, and their applicability today adds to the book’s relevance.

Wells aims to reach an entirely different group of readers with The Novel – students and graduates undecided where to work. “Younger people looking for a career in finance are drawn to investment banking because of the money it offers. I have always found that working in business is much more exciting because real stuff moves as a result of your actions as a credit specialist. There are very few finance programmes that give students exposure to credit risk management in their courses. I hope The Novel can add to this education and show that managing customer and supplier risk in a real business is an exciting career opportunity.”

Credit Risk Management – The Novel, Part One (2013) is published by T3P LIMITED and available for purchase at Amazon.
ISBN: 978-0-9576279-2-5, 104 pages

To read the whole Book Review click: www.t3plimited.com/TAMar2015TheNovelReviewCK.pdf

To subscribe to The Asset click: www.theasset.com

A Novel about Credit Risk Management ... No way! How can that work?

Credit Risk Management - The Novel (Part One) presents two cracking good stories for your enjoyment and enlightenment.

It is the first narrative non-fiction novel to feature the true to life experiences of a team of professionals managing business to business credit risk, day to day. This is intertwined with a parallel story that follows the adventures of Credit Exec and Secret Agent, James E Cricket, which provides an undercurrent of twists and turns.

Click this widget to browse inside a sample of this unique and innovative book, satisfy your curiosity….



Visit and follow the James E Cricket fictitious celebrity Facebook page to learn more about his early life, and other useful posts at www.facebook.com/jamesecricket.

List of the 15 Banking Groups Now Live on BPO

This list includes 6 of the top 15 Trade banks (based on Cat 7 traffic)

ANZ - Australia & New Zealand Banking Group
Bank of China
Bank of Tokyo-Mitsubishi UFJ
Bangkok Bank
BNP Paribas
China CITIC Bank
CIMB - Commerce International Merchant Bankers Berhad
Commerzbank
Hua Nan Bank (Head Office: Taipei )
Korea Exchange Bank ( KEB )
Maybank - Malayan Banking Berhad
Siam Commercial Bank ( SCB Thailand )
Standard Chartered Bank ( SCB )
Türkiye Is Bankasi ( Isbank )
UniCredit

Information as at October 16, 2014 supplied by SWIFT

Plenty of banks to turn to for this service if yours is a laggard.

Ron Wells

Routine Counterparty (CP) Credit Risk Reviews – Alternatives Proposed

Does ‘an Annual Review for every CP’ make sense?

Most text books and training sessions, hence most in-house credit policy documents, stipulate that every customer (and often suppliers as well) should be reviewed as to credit worthiness at least once every year. Such a review usually coincides with publication of annual financial statements by the Counterparty (CP).

This methodology harks back to the early half of the 20th century, after WWII, when change was linear (slow but steadily positive) and most Counterparties published audited financial statements or were fully covered by acceptable collateral.

Apart from the odd market collapse, each of which was discounted as an aberration and after which the steady state resumed, most CPs’ businesses progressed from year to year. Therefore the annual review merely served to satisfy auditors and bank regulators that enough diligence was being applied to keep the creditor companies and banks respectively safe from suffering excessive bad debt.

As we approached the second millennium, by the Gregorian calendar, the linear progress steady-state had evaporated but even as we draw near to 2015 most corporate and bank policy documents still require annual credit risk reviews for all Counterparties or Clients.

Credit Risk Review Policy Revision Recommendations

Regarding the timing and required depth of CP Credit Risk reviews each organisation should adopt a policy appropriate to its particular circumstances. Therefore this discussion highlights some alternative policy approaches in order to provide ideas to be considered by policy makers.
It is submitted that the most appropriate approach for a business to adopt may be the application of a different assessment and review policy to each of several sub-portfolios identified within the overall counterparty array.

TO READ THE FULL ARTICLE CLICK HERE

ALTERNATIVE RISK ASSESSMENT AND REVIEW POLICY OPTIONS DISCUSSED IN THE ARTICLE

Why not a ‘no credit analysis or review at all’ policy?
1. Building a sub-portfolio of diverse counterparties that are not financially transparent and/or are ‘start-ups’
2. Restricting CP exposures to a ‘short-list’ of what are considered low risk entities.
What about the 80% of Counterparties that warrant regular review?
1. Proposed Review-Minimum Policy for Relatively Minor Exposure CPs
2. Review Policy for CPs that do not Qualify for the Review-Minimum treatment

What about CPs that are Margined, should they be treated differently?

The Article Conclusion

The identification of sub-groups within your risk portfolio and application of the appropriate review policy to each will both improve the efficient use of expertise and reduce risk overall.

Adopting this approach will enable internal credit risk assessment and management experts to dedicate more time to monitoring higher risk counterparties and the relevant business environment. To read the article click here.

Bretton Woods - No. Globalisation - Yes

Greetings …

I had the pleasure of attending the FCIB Conference in Budapest a couple of weeks ago. The key-note speech by the Chief Economist of Fortis Bank was amusing, interesting and informative. This was a veritable highlight. Some comments that stuck include; the USA resembles the Roman Empire before it fell, with a near zero savings rate and a $9 trillion debt burden. You can hear the silent cry of US residents – so we have no money, never-mind let’s go to the mall and spend some more of someone else’s money! The prediction is that – if we are all very lucky – the lenders to the US citizenry will not ask for repayment until about 2012/13. So we only have to deal with the sub-prime fall out for now.

The other point well made, amid many a chuckle, was that (i) globalisation, and (ii) technology have changed the rules for the world economy, so the Bretton Woods US consumer dominated model and the associated control mechanisms no longer apply.

Participation in the world economy has grown ten fold since 1990 (800 million American-European-Japanese participants to 6000 million citizens) and technology has made the world ten times faster. Business has been turned on its head by technology and open access, from a heavy asset based fixed address model to an intelligence-connectivity model. Nation states have lost control since intelligence and connectivity has no fixed address.

The positive spin-off for all world citizens has been enormous. Sustained and stable economic growth, low inflation and low real interest rates; despite the world financial crises companies in the real economy are still in good shape.

Were you at the FCIB conference I Budapest? If so, what were your impressions? If not, do you agree with the sentiments that I have poorly represented above?

Regards Ron

PS: Find out more about the FCIB on www.fcibglobal.com

Invitation to join GCMG – No formalities required …

You are warmly invited to become a member of GCMG – in fact you are already a member. We do not need to know your name, or where you live, you need no qualification other than an interest in B2B credit management, which you obviously already possess. There is no fee to pay!

There are three types of member of GCMG, you are free to choose which one you wish to be and free to change category whenever you like.

The first type of member is a Spectator, who visits the blog from time to time and reads the content. Spectators sometimes pass on a link to friends and colleagues, or send a copy of an interesting item posted.

The second is a Questioner, who visits regularly and from time to time submits a question related to international B2B credit management.

The third is a Contributor, who offers answers and advice to Questioners via blog comments. Contributors are also encouraged to suggest books and articles that members may find interesting and to post reviews. Suggestions regarding new techniques and technologies are likewise welcome. Send an email to info@barrettwells.com and your contribution will be posted under your name or nom-de-plume, as you wish.

All members are valuable, all are welcome.

Ron Wells

Note: B2B = business to business