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.