AmCham Receivables Management Workshop11 April 2006

Warsaw

Iris Paeschke

Consultant

Control Risks

Subject

What is this presentation about?

• Focus is not on the legal requirements and procedures.

• But on operational issues of debt recovery.

Especially when the debtor is either insolvent or resides in remote jurisdictions debt recovery becomes problematic in pure practical terms.

Agenda

Define the problemDefine the problem

Questions and objectivesQuestions and objectives

Tools in detailTools in detail

To cope with the task: define the problem

Flash Point

You are facing a major problem: substantial losses of assets, e.g. information, goods, money, tender etc.

Solution

Use your information resources or a consultancy to enlighten the circumstances.

Definition

Define the problem and narrow the issue down in-house.

A first step to asset recovery is business intelligence

– Collect more information on the debtor. Identifying addresses, obtaining rudimentary corporate filings gives you first data you can work with. This work can be done in-house if the creditor has installed a bad debt policy and spent time on training its team.

– However, an "easy on bad debt" policy is just as severe as an "easy on corruption" or "easy on fraud" policy. Bad debts have a tendency to become endemic and thus threaten the financial health of a company.

What should be done first

Operational objectives:• Who is the ultimate beneficary of a company when the debtor 's company

shields its assets through shell companies and off-shore entities?

• Does a company still own some assets although it has filed for insolvency?

• Are there indications of fraudulent behaviour?

• Do law-enforcement agencies need to get involved?

Tactical objectives:• Even if civil litigation against managers of debtor companies might look

promising: How realistic is it that these managers do have in fact have assets to pay off the debt?

• If the debtor asks for a settlement: What is his maximum ability to pay, in contrast to his maximum willingness to pay?

Questions arise …

Where the money goes

Our experience with asset tracing and asset recovery in Poland, Germany and Eastern Europe show some principle guidelines, how to cope with the practical issues of bad debt collecting:

– Bad debts follow similar patterns and bad debtors use similar methods of shielding their assets.

– Owners of insolvent companies have a tendency to shield assets prior to the default. These assets are often not very well hidden and can be identified.

– If there are any signs of fraud, there is almost always an opportunity to cooperate with law enforcement. This holds true even for remote places and countries.

– The costs of collecting have to be monitored carefully. There is no point in chasing potential claims that will never materialise.

Tools in detail

Open Sources ResearchOpen Sources Research

Searching of Files / WorkshopSearching of Files / Workshop

IT ForensicsIT Forensics

Close Questioning / InterviewsClose Questioning / Interviews

Special TechniquesSpecial Techniques

Open Sources Research

What information do we use?

• Internet

• Chat rooms

• News boards

• Public Registers

• Press & Business Databases

• Other Special Databases

Workshop / Internal Files

Mexiko City

Los AngelesNew York

London Berlin

Djakarta

Melbourne

Sydney

Shanghai

It is important that all files related to the task are included into the inquiries. Internal files, such as

• Personnel file

• Reports of internal auditors / lawyer

• Letters

• Notes

Special information, e.g.

• Holiday / Sickness list

• Itemised bill (fixed and cellular)

A workshop can reveal other important information, which become useful later on.

Computer Forensics

Los AngelesNew York

London Berlin

Djakarta

Melbourne

Sydney

Shanghai

What are the targets?

• Personal Computer

• Server

• Network

What are we looking for?

• Hardware

• Software

• User

• Configuration

• Internet History, server files

• Emails (you have to read them all !)

• Keywords / Documents

• Pictures

Close Questioning / Interviews

Los AngelesNew York

London Berlin

Djakarta

Melbourne

Sydney

Shanghai

When most of the information are gathered a close questioning of the suspects is suggestive.

Questioning should be done by external experts only. Why?

• Suspects do not know us.

• We are trained on questioning.

• We are not involved in the day to day business.

Special Techniques

Los AngelesNew York

London Berlin

Djakarta

Melbourne

Sydney

Shanghai

In extraordinary circumstances we use special techniques to retrieve the information.

In dependence on the issue, we have a wide range of methods we are able to use. However such methods are

• Used as ultima ratio only.

• According to the local jurisdiction.

Dos and Don‘ts

Don‘ts:– Don‘t use obscure or illegal methods.– Don‘t seek for revenge.– Don‘t let you put off the problem and do not be frighten.– Don‘t wait too long.

Dos:– Structurise and standardise the bad debts collection process.– Your employees should be trained on it.– The process should be initated under any circumstances.– It should be embedded into a legal process, together with

the legal department and/or lawyer– Check for fraudulent behaviour.

If so: involve internal auditors or external consultants.– At the end: use your cases for preventive measures.

Improve your know-your-customer-policy.

Contact

Alle hier vorgestellten Ideen und Vorschläge sind geistiges Eigentum der Control Risks Deutschland GmbH und unterliegen dem Urheberrecht. Jede Vervielfältigung im Ganzen oder in Teilen sowie die Weitergabe an Dritte ist nicht gestattet. Für den Fall, daß es nicht zur Auftragsvergabe durch den Partner

(Adressaten) kommt, dürfen die hier vorgestellten Ideen und Vorschläge nicht verwendet werden.

Control Risksul. Koszykowa 5400-675 Warszawa

T: +48-22-630-8240F: +48-22-630-8569

www.control-risks.com

Iris PaeschkeConsultant

Iris.Paeschke@control-risks.com