Workout departments, why a separate and independant organisation is needed

The crisis is not over, but signs of positive developments are emerging in many countries including in Bulgaria and Romania. With the start of a new growth phase, the financial institutions will, once again, embark on a cruise to sell credits and gain market shares.

Of course they will promise that they will take their precautions, that they have learned from the past. These promisses will be forgotten in about 24 months at the latest if we do not suffer a double dip recession.

For the department in charge of the credits in difficulty, it should mean more possibilities to find constructive solutions and exits. Indeed, the best solution is to give full responsibility for the treatment of the risky positions to the workout department, to separate these credit issues from the current business and concentrate them in a so-called bank for bad debts. This does not have to be a new legal entity. It can of course also be a real workout department that can really act independently from the structure that was responsible for the sale of the bad credits. The result will be that, at last, the necessary provisions will be created and solution found.

The customers in difficulty can only pray for the creation of these new departments that will give a chance to envisage a positive future.

After the crisis and ... before the next crisis

2009 has been, as expected, the year of indiscriminate cost cutting in many companies in the region. Indeed, due to the missing cash and to the time pressure, as well as to dramatic decreases in sales (more than 50% often in comparison with 2008), the companies had to act to survive.

If most companies have survived the hearthquake somehow by cutting mostly production employees and not realising the planed investment program, they are left in a very fragile state and would probably not survive a second tremor, even a lighter one.

What is missing, and has been recognised in 2010 by the leading companies, is a deep and far reaching analysis of the organisation and of the processes. Old habits that were not damageable during the boom phase have to be changed and control mechanisms implemented. Budget have to be prepared and key performance indicators selected.

New management rules and often new managers have to be put in place.

DO NOT LET THE NEXT HEARTHQUAKE SURPRISE YOU.

The country will not be hit by the global crisis

"The Bulgarian National Bank governor has ambitiously stated that the country will not be hit by the global crisis due to the stability of the banking system. “Despite the heavy global crisis all around the world, the Bulgarian economy and the citizens have and will escape unhurt,” Ivan Iskrov said. “Bulgaria's banking system is extremely well capitalized with the capital adequacy ratio standing at more than 17%. The banks stage good performances and have big enough buffers,” he added. In his words the currency board regime is in very good state with its coverage in foreign exchange reserves standing at more than 211% and continuing to increase".

Darik Radio

Sorry to disagree Mr. Governor. The country has already been hit and I know of some companies with large problems at hand for which banks have not provided for. My impression is that from the banking point of view, the crisis has not startet yet.

The Bulgarian police, on its road to productivity

I have the pleasure to confirm that the Bulgarian police is on its road to productivity. Until a few months ago, the speed checks on the road (the so-called pay my salary for the month in cash please control) were done by 2 policemen + 1 car. The new strategy seems to be to add 1 policeman + 1 car for each control. The only reason I can imagine is that someone thought it would be more difficult for the policemen to be bribed in a larger group. I would suggest that this measure will probably just make the fines higher unless you put all the policemen each day together on the road to do one speed check, at which point I assume that the bribe would be so high, that the Bulgarian citizens would react and redirect all these lost resources towards more productive goals. By the way, I thought that there was a financial crisis...

Situation is getting worse

"The share of bad credits in Bulgaria may soar to 16.5% at the end of the year, which means that every sixth bank loan will become unserviced, the national bank has warned in a report on the banking sector. This nightmarish forecast may come true if GDP falls by seven percent this year and by another 2.5% next year. The budget for next year provides 6.3% drop in the country's GDP by the end of the year and by another two percent next year. The share of unserviced loans increased by as much as 140 pct y/y in the period April-June 2009. Despite the deteriorating quality of the bank loans, the tendency started in the last trimester of 2008, the banking system in Bulgaria is relatively stable".

We are experiencing the first signs of positive and active behavior from the companies in the market. They are starting to ask us to resolve their problems, which is a good sign. Indeed looking for solutions proactively happens in the fourth phase of a crisis. I read about this model a long time ago. I could see it happen in practice in Bulgaria this time. It took about 12 months for the problems to be recognised and worked upon. Let us hope that it is not too late.

Tradebul

TradeBul is a directory of Bulgarian companies in the B2B and B2C markets. The reasons for the development of this directory are the following:

• There are no directory in English of Bulgarian companies that list their product in an efficient way,
• Many companies do not have a reliable website or are to be found online easily,
• Many companies are not actively selling, they prefer to serve their usual customers and "wait for the next phone call".
  

In the past 3 months, we have started to actively look for customers in Western Europe for some of the major B2B production companies in Bulgaria.

FACIT:

although some companies have a unique equipment and can deliver the appropriate quality level, nobody knows these companies. The reflexion of one major buyer was clear: "I have been purchasing casting parts in Eastern Europe, but not yet in Bulgaria. Do they have a casting tradition?"

We hope that by offering this plattform, we can participate in the positive development of the Bulgarian companies abroad. In most categories, you may find only 1 or 2 companies. This is not an issue. These companies have unique capabilities that they have to export and are at least protected from the competition of local suppliers.We wish you a lot of pleasure on the platform.

FOR THE BUYERS: if you want to send us your requests for quotes, so that we contact the most suitable company in Bulgaria, please do not hesitate to do so.

FOR THE SELLERS: please check the following information:Is your company registered on the platform? ,
Are the information correct?
Do you want to add additional information. If yes, then please contact us to discuss a full membership. We will give you access to the data of your company, so that you can manage them by yourself.

Please send us your feedback by clicking on the contact page. This is a first test version. We look forward to supporting you. This directory will be made public in the largest online buying communities while offering a local flavor.

Your Trust & Value Group

Directory of Bulgarian companies

To solve the crisis puzzle for many companies, it will no be enough to reduce production costs or optimise processes. That is the reason why we have started the first directory of Bulgarian companies in English. Indeed, we have seen that a huge number of Bulgarian companies do not have a professional sales organisation and are thus not known abroad. They have been generating sales from 1 to 3 large international customers and were deeply hit by the crisis.

Our experience speaking with foreign companies is not that there is no market. In many industries, it is that nobody knows about the Bulgarian companies and that it is difficult to communicate with them. For this reason, we have decided this directory. We are still in the development phase and would be delighted to hear your comments about it. Should we add some additional information? Is it usable?

Thank you very much for your support in helping the local economy out of the crisis.

After the Summer break

The Summer break has been nice thank you very much. And we are back online and back to work. The crisis is still destroying businesses although the order book is slowly filling again. The major banks are starting to consider the really poor situation of many customers and taking actions to at least understand their risks and think about corrective actions, although "nobody is ready now to lose money" I was told, which will eventually happen. The sooner you are ready to lose money, the less money you will lose, trust me. All these games about recognising credit risk later will not help the real economy. It will just produce nicer balance sheets.

It is a game of decreasing asset value and unpaid interest rates accumulating. The worst situation is of course for companies that have leveraged their position to buy ground plots, as these plots do not generate any revenue.

12 months ago our prediction was that the price of the m2 in the business park region in Sofia could well drop to 3 to 5 euros. We are not to far from that sadly. The prices in a new nice building just out of the ring are at 6 Euros per m2. This will challenge many assumptions.

Reality is that Bulgaria is going through its first capitalistic crisis and that the generation running the economy does not have a lot of ideas about to come to term with this. It is a pity, that the same mistakes will be repeated, mistakes that have been made in other countries in other crises before.

Crisis, which crisis ?

I had the pleasure to recently travel to London. London should be one of the cities in the world most deprived by the current crisis. Shops should be empty, people should be queuing to get some subsidised bread. Not at all. On a bright Sunday afternoon and for the first time in my life, I saw at least 5 cashing machines with people queuing in front to get their money. It was not like 1 of 2 persons queuing, it was a queue of at least 10 to 15 people waiting on average 10 to 15 minutes to get this precious and rare product (ie. pounds). My hypotheses are the following:

1. they have not credit card any longer and have to pay cash (most improbable)
2. they are afraid not to get they money from their accounts on Monday because their bank will go bankrupt and have chosen to empty the cash machines instead (it is Monday and nothing seems to have happen so far according to the FR).
3. it is a new religion (worship of cash, as cash is king will they have heard from their boss).
4. they need money to spend (is it the return of consumption?). Spend? I thought that we had a crisis.

To top it, I read an article in the Sunday edition of the Times. Headhunters are calling bankers and offering them new jobs, promising to double the highest bonus they have ever received if they accept the offer. These guys will never learn.

I am ready to start the new pyramidal game, just tell me how much, where and when I should invest. You better be in the first row to get out and reach as soon as possible. Starting a ponzy scheme, call me office in New York.

PS: why is this game with three cups where you have to found out where the bean is hidden not allowed, when such games happen everyday in the financial industry?

Once again with my car accross the border

I had recently the pleasure to travel once again accross the border with my Austrian car. The employees at the border are getting more efficient (and the traffic was limited), so that I had not waiting time. Where I did have to wait was to get through the "vignette" control, one of the most inefficient system of toll road in the world. The purpose of the 4 stage process is to sell me a "vignette" if necessary and the cost of the process is hugely high.

Let say for the sake of the argumentation that there are 10 main border crossing to Bulgaria. Let say that at each of these border crossing we shave this most stupid system and that 1 employees works at each stage. Then we need 4 employees times 5 shifts ==> 20 employees + at least 5 for sickdays and holidays. Let say that this shift has a shift leader and a deputy shift leader (10 bosses). These are then 35 employees. Multiplied by 10 crossing points, these are 350 employees. Add at least 20 to 30 IT employees plus some central management employees and you reach the phenomenal number of 400. Multiply by € 5000 per year (which should be the approximate full cost of one employee and...

€ 2.000.000

This is the employee cost of the system.

Divided by € 35 for a yearly "vignette" ==> the first

57.000

cars "vignettes" just for covering the cost of the system.

And I am not counting the time lost to cross the border. Of course if you believe that you are something special, as it is often the case in Bulgaria, you do not wait in the queue, but just drive in front by the "vignette" and drive further.

Why are the Bulgarians not reacting to this improper conduct of so-called important and rich people. Is it a cultural question? Are they afraid? Are they willing to lose their time?

I am very happy to propose a detailled analysis and solution of the vignette issue to the government and get paid 10% of the savings. Please do not hesitate to contact me.