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…

OutlineInt

rodu

ction

Met

hodo

logy

Proc

ess A

nalys

is

Susta

ining

Chan

ges

Proc

ess I

mpr

ovem

ent P

lan

Imple

men

tatio

n Mon

itorin

g

Reco

mmenda

tions

Conc

lusio

nRe

fere

nces

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

7

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.

10

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

THANK YOU