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Prepared for Dr Kanagi KanapathyDated 3 June 2015
CMGB6104 Operations Management
RISK BASED SITE VISIT IMPROVEMENT PROCESS
Business Instalment Loan Unit
Parimala Devi R. Palaniappan CGA130067Regina Yan Ginny CGA130032Suraya Natrah Malek CGA130148Ismona Kamaruzaman CGA130016Fauzan Aris CGA140054
Group 2 proudly presents…
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SCB’s Risk Based Site Visit Improvement Plan
1 2 3 4 5 6 7 8 9
REGINA
Retail Client Business Client
Guarantee Installment Loan (GIL)44.5% Bank55.5% Malaysia Credit Guarantee Corporation
Business Installment LoanRM 100,000 – RM1.0millionRM 650,000 – RM 30million
(small businesses)
Business Installment Loan (BIL)
100% Bank
No collateral, property valuation report, security deposit required. Fast approval within 2 weeks Loan repayment 12 - 84 months
Bank Credit Department
1.0 Introduction SURAYA
Introduction
Sales team to submit the case
Application form Required
Documents
Credit Analyst to review the case
PASS
FAIL
Credit requirement
Debt serving ration
Credit Analyst trigger Site Visit
Site Visit officer will receiveSite Visit notification through email by Credit Analyst
Site Visit will be carried out by Site Visit Officer
Report will be uploaded into the system and printed out in hard copy form for Credit Approvers to make final approval
Business Installment Loan Process Flow
1.0 SURAYA
Methodology
QUALITATIVE Data Collection
QUANTITATIVE Data Collection
INTERVIEW – First Round• 2 credit analysts• 2 credit approvers • 2 site visit officers
Purpose: To understand the overall process and issues arising
INTERVIEW – Second Round• Head of Credit and Process Manager
Purpose: To explore on the possibilities of streamlining the risk based site visit process to better fulfil both the credit and client needs
STATISTICS• Site visit process • Turnaround time (TAT)
Purpose: To measure the current process work load and performance levels to identify if the specified process standards were met
2.0 SURAYA
Process Analysis
Unsatisfactory Turnaround
Time (TAT)
TAT Target = 2 days42.9% reached 4 days31.2% reached 2 days25.9% within 2 daysIssues:• Unable to obtain customer
appointment • Lengthy document required
Lack of communication
• Misinterpretation of process and information between Credit Analyst & Site Visit Officer
• Second site visit has to be conducted due to lack of information and documents
Fraud DetectionIdentified
from the site visit
High Repeating Number of Site Visit
• Site Visit report rejected by Credit Analyst due to incomplete information.
• Site Visit Officer unable to sight business activity
• Trigger second & third site visit thus increase TAT.
10 to 15 cases reported as fraudSituation:• Applicant sharing business premises
with other company (same industry)• Applicant mock up the business
activity during the visitation• Site visit officer unable to investigate
further due to time limitation
Too many additional
documentation after site visit
Programme Pending• Loan approved based on
mandatory document• Incomplete document
will affect the process.• Credit analyst & approver
require more document after the site visit to fulfill the comfort level in underwriting
3.0 FAUZAN
Recommendations
Introducing an Automated Risk
Profiling Checklist using Microsoft
Excel
Site visit conducted
based on Risk Profiling Checklist
Collection of additional documents
based on Risk Level
4.0 PARI
Recommendations
Fraud Risk Control Fraud Cum Credit Risk Control
• Internal Blacklist checking
• Business vintage
• Company’s operating address
• Information of Guarantors/Board of Directors/ Key person
• Information of
company’s Auditor/ Secretary
• Issuance of key person’s identity card
• Other Irregularities noted
• Applicant company’s CCRIS profile
• Key person & guarantor’s credit card utilization
• Bank statement transaction
• Key residential address
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6
51
2
3
4
1
2
3
4
5.15.0
Automated Risk Profiling ChecklistTo trigger the customer’s risk level following two sections:
5.1
PARI
Recommendations
Profiling Criteria Parameter Ranking Rating
Check against Internal blacklist
Applicant company is not dealing with any party listed in the internal blacklist
a) Not dealing 3
b) Dealing 10
Business Vintage Business Vintage vs Key sponsor’s age a) Business Vintage > 5 years ANDb) Key sponsor’s age was between 30 to 50 at
the point the company was incorporated
3
Company’s Operating Address
Is there a recent change in operating address in the last 3 years
a) At existing operating address >2 years 3
b) At existing operating address < 1 year 10
Shareholder board of director/ key person
a) Is there a recent change in direction in last yearb) Is there a recent change in key person in last 3
years
a) No change in both items 3
b) Change in (a) but no change in (b) 7
c) Both (a) and (b) changes 10
Company’s Auditor/ Secretary
a) Is there a recent change in auditors/company secretary in last 3 years
No change 3
Yes 10
Key Sponsor’ identity card
Issuance no > 3x Issuance no =< 2x 3
Is there other irregularities noted?
a) Inconsistent of key sponsor’s signatureb) Inconsistent of font size in documents submittedc) E-SSM status reflected dormantd) Error in Audited Report/Management reporte) Utility bill < RM200.00
No 3
Yes 10
Fraud Risk Control Profiling Checklist
5.0 PARI
Profiling Criteria Parameter Ranking Rating
Applicant company’s CCRIS profile
a) Bureau vintage >= 3 years based on loan obtainedb) Is there a property backed loan?c) Is there a working capital loan?d) Pending Application =<
a) Fulfill all 4 items 3
b) Fulfill atleast 2 items 7
c) Full fill less than 2 items 10
Key sponsor’s & guarantor’s credit card utilisation (CCU)
Level of key sponsor’s & CCU a) CCU < 70% 3
b) CCU >= 70% to <85% 7
C) CCU >= 85% 10
Bank Statement Transactions
a) Are credit/debit transaction inline with business nature
b) Are there obvious knitting transactionc) IS there any significant variance between bank
statement & financial report
a) Bank statement inline and no knitting transaction and =< 20% variance
3
b)Bank statement inline and no knitting transactions and >=20% to =<50% variance
7
C) Bank statement not inline 10
Key sponsor’s residential address
Type of key person’s residence match with profile a) There is a housing loan facility in CCRIS >= RM 500k
3
b) There is a housing loan facility in CCRIS <= RM 500k
7
c)No housing loan facility 10
Fraud cum Credit Risk Control Profiling Checklist
5.0 Recommendations PARI
≤ 55 56 - 70 ≥ 70LOWRISK
MEDIUMRISK
HIGHRISK
RISK LEVEL
Conduct site visit process based on the risk profiling checklist.
Upon completing – calculated score appearing on top of the checklist. The score is divided into 3 risk levels
Low Risk Level cut off score <=55 Medium risk Level cut off score between 56 to 70 High Risk Level cut off score >70
Site visit officers – follow the guidelines closely as per the respective risk levels.
Recommendations5.0
Site Visit Conducted based on Risk Profiling Checklist5.2
PARI
Low Risk(Score Cut off <= 55)
Medium Risk(Score Cut off : 56 -70)
High Risk(Score Cut off: > 70)
1. Not to sight any bank statements Not to sight any bank statements To sight latest 2 months bank statements
2. No invoices is required for all types of business including business without stock
To collect 3 largest invoices each from buyers & suppliers. Invoices are to be selected by the credit & in the event invoices are not available, SVO to randomly choose 3 invoices each from buyers & suppliers & match with bank statement. In the event none of the invoices are available, SV will be fail.
To collect 3 largest invoices each from buyers & suppliers. Invoices are to be selected by the credit & in the event invoices are not available, SVO to randomly choose 3 invoices each from buyers & suppliers & match with bank statement. In the event none of the invoices are available, SV will be fail.
3. Not to sight any Tenancy Agreement, SPA, Payment Voucher, Assessment Bil
Not to sight any Tenancy Agreement, SPA, Payment Voucher, Assessment Bill
Not to sight any Tenancy Agreement, SPA, Payment Voucher, Assessment Bill
5.3
5.0 Recommendations
Collection of Additional Documents based on Risk Level• Only selected documents are proposed to collect during site visit based on risk level. • Credit analysts and Credit Approvers are strictly advised to call and verify some
queries through phone verification if they still need further clarification from client. • No additional documents to be collected during site visit and after site visit apart
from the required documents requested as per risk level.
PARI
Site Visit based on Risk Profiling level
Collection of Document based on Risk Level
Automated Risk Profiling Checklist (Microsoft Excel)
ImproveCustomer
Satisfaction
Improve Process
Efficiency
Reduce operating
cost
Able to reduce misunderstanding between credit analyst, credit approvers and site visit officers
Site visit officers are able to reduce visiting time from 60 minutes to 45 minutes for Low Risk level – conduct the premise visitation accurately and without fraud
Credit Analysts and Credit Approvers do not need to collect additional documents to fulfil their comfort level to underwrite the loans
Proposed process helps to reduce the number of repeated site visits to certain premises which causes hassle to clients
Recommendations5.0
LESSONS LEARNT:
PARI
Process Improvement Plan
1Credit
Analyst
2Credit
Approver
4Site
Visit Officer
Headed by Senior Credit Approver
No Activity Resources Period Duration (Weeks)
1 Credit team & site visit gathering
Credit team & site visit team
Week 1 1
2 Simple system development in Excel
Credit & Site Visit & MIS team
Week 2 1
3 User Training & Testing Credit & Site Visit Week 3 1
4 Post Production Monitoring Credit, Site Visit & MIS Team
Week 4 to Week 6 3
TOTAL WEEKS 6 WEEKS
The feasible implementation period includes one (1) month with additional of two (2) weeks for post-implementation monitoring, evaluation and review
6.0
6.1 Setup Project Management Team
PARI
Process Improvement Plan
Credit Team and Site Visit Gathering Further discussion
• Standardize site visit risk profiling checklist
• Criteria for automated risk profiling checklist
• Physical documents to collect during site visit based on risk level checklist
• Site Visit tracking in Microsoft Excel
• Standardize email trigger to site visit officers
1
2
6.2
6.0
3
4
5
• Discuss and documenting risk based site visit requirement for the proposed changes
• Consider the conditions and requirement to meet all the project stakeholders’ expectations (ie. possible conflicts arising among stakeholders)
PARI
Use Microsoft Excel for the Site Visit Improvement Process6.3
6.0
6.4
6.5
Process Improvement Plan PARI
MIS team to develop the recommended process in Excel Cost Efficient
User Training & Testing Users are required to update the site visit file for tracking purposes Site visit officers will refer back to the risk profiling checklist to
prepare report upon site visit completion
Post Implementation Monitoring and Evaluation To ensure stability of process and system Allocate 3 weeks for monitoring and evaluation to
address any issues arising
MonitoringObjectives of monitoring
Ensure all the activities are progressing according to the timeline and goals stated within the constraints
Facilitate and assist the progress tracking through defining specific indicators
Implement problem identification system that can predict possible issues arising and formulate responses – to bring the people and processes back on track.
1
2
3
7.0
10 – 15 minutes
Daily Reporting to Project Champion
Credit Analyst
Site Visit Officer
Regular updates are essential to spot issues and take corrective actions speedily to get back on track
Monitoring & CommunicationProject Manager should track the daily
progress, update, consolidate and report the latest progress to the project
team and top management
ISMONA
Identifying
RISK MANAGEMENTAnalyzing Planning Controlling
Reduce risks of what could go wrong and are take preventive measures to avoid unnecessary conflicts, disagreements or mistakes
Project team should escalate reoccurring issues to higher management action
Common Risks
System (Microsoft Excel) down time or error due to upgrade, bugs fixing or
unforeseen events
Absence or Unavailability of a Key Resource
Monitoring7.0 ISMONA
Sustaining Changes
Explanation of the
improvement process by Credit Analysts,
Credit Approvers
and Site Visit
Officers
10-15 minutes
short meeting
Collect, analyze & review TAT statistics
Stakeholder will be more acceptable of the new
approach by elaborating the improved process benefits
from their point of view
To find out on project team and stakeholders concerns,
issues or feedback to the improved process
Compare the previous and improved process results to assess how far the improved
process has assisted in meeting the desired TAT and obtaining
satisfaction from clients
Observe & Follow the Improved Process
8.0 ISMONA
Conclusion9.0 REGINA
Close the GapsHigh turnaround timeCollection of too many documentsHigh frequency of repeating visitsLengthy visiting time
Improve turnaround timeReduce misunderstandingsReduce visiting timeNot needed to collect additional documentsReduce number of repeated visits
Change Management
Continuous Communication
Monitoring & Evaluation
Bottom line, Efficiency,
Productivity, ROI
ReferencesAbout Us (2015). Standard Chartered Bank Malaysia Berhad. Retrieved from https://www.sc.com/my/about-us/ Business Instalment Loan (2015). Standard Chartered Bank Malaysia Berhad. Retrieved from https://www.sc.com/my/sme/business-expansion-business-instalment-loan.html Dietrich, D. and Hauch, A. (2014). Bank capital regulation, loan contracts and corporate investment. Quarterly Review of Economics and Finance. 54, 230-241. Divino, J. A. and Rocha, L. S. (2013). Probability of default in collateralized credit operations. North American Journal of Economics and Finance. 25, 276-292. Heizer, J. & Render, B. (2014). Operations Management: Sustainability and Supply Chain Management, 11th ed. Pearson Education Limited: Essex. Jeston, J. and Nelis, J. (2014). Business Process Management. 3rd ed. Project Management Institute. (2013). A Guide to the Project Management Body of Knowledge (PMBOK Guide), 5th ed.
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Przanowski, K. (2014). Credit acceptance process strategy case studies – the power of Credit Scoring. 1-38. Rosing, M. V., Scheer, A. and Scheel, H. V. (2014). The Complete Business Process Handbook: Body of Knowledge from Process Modeling to BPM. Slack, N., Chambers, S., Harland, C., Harrison, A. and Johnson, R. (2010). Operations Management, 6th
ed. Prentice Hall London. SME Banking (2015). Standard Chartered Bank Malaysia Berhad. Retrieved from https://www.sc.com/my/sme/ Valacich, J. and Scheider, C. (2014). Information Systems Today: Managing in the Digital World, 6th ed.
Pearson Education Limited: Essex.
References10
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