UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Phan Ngoc Thuy Duong BAD TRAINING SKILL OF DEBT COLLECTION CENTER AND VERIFICATION DEPARTMENT AT VP BANK MASTER OF BUSINESS (HONOURS) Ho Chi Minh City – Year 2019 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Phan Ngoc Thuy Duong BAD TRAINING SKILL OF DEBT COLLECTION CENTER AND VERIFICATION DEPARTMENT AT VP BANK MASTER OF BUSINESS (HONOURS) SUPERVISOR: Dr Doan Anh Tuan Ho Chi Minh City – Year 2019 TABLE OF CONTENTS Executive summary Company overview 1.1 Viet Nam Prosperity Joint Stock Commercial Bank (VP Bank) 1.2 Organizational chart 1.3 Risk Management Department Symptoms: High bad debt (NPL) ratio in Retail segment Problem indentification 3.1 3.1.1 Problem finding process 10 3.1.2 Poor credit risk management policy 10 3.1.3 Bad training skill in debt recovery and verification 11 3.2 Problem validation 13 3.3 The importance of main problem 14 Cause justification 15 4.1 Possible causes 15 4.1.1 Lack of training document 15 4.1.2 No department specializing in training 15 4.1.3 Uneven knowledge of instructors 16 4.1.4 Lack of cost for training 16 4.2 Potential problem Validating causes 16 Alternative solution and action plan 18 5.1 Solution 1: Propose to establish training team for Verification and Collection department 19 5.2 Solution 2: Build internal training program 25 5.3 Solution 3: Hire external partners to train staffs of Collection and Verification department 28 Supporting information 34 REFERENCES 41 LIST OF FIGURES Figure 1: VP Bank’s organization chart Figure 2: Risk Management Department’s organization chart Figure 3: NPL ratio of banks at the end of the third quarter of 2018 Figure 4: % New NPL by month from 2017 to 2018 Figure 5: Accumulated New NPL by product in 2018 LIST OF DIAGRAMS Diagram 1: Initial Cause-effect map of Risk Management Department Diagram 2: Updated Cause-effect map of Risk Management Department Diagram 3: Final Cause-effect map of Risk Management Department LIST OF TABLES Table 1: Reasons for delinquency of NPLs LIST OF ABBREVIATIONS NPL Non performing loan UPL Unsecured personal loan KPI Key performance indicator CI Credit institution VPB Viet Nam Prosperity Joint Stock Commercial Bank (VP Bank) Executive summary Bad debt is considered a big problem for the banking system in Vietnam in particular and the economy in general In recent years, the bad debt ratio in Vietnam has been constantly rising This is a consequence of many internal and external causes But in it, the outstanding problem is the limited risk management of commercial banks but directly Recognizing that, the state bank as well as commercial banks have focused on completing the management of bad debts This is the basis for controlling and minimizing losses in credit activities, ensuring banking operation efficiency and promoting the country's economic development Vietnam Prosperity Joint Stock Commercial Bank is one of the joint stock commercial banks established early and developing steadily in Vietnam VP Bank is constantly expanding credit activities and many other products and services In parallel with this development orientation, risks arising from credit activities increased significantly, reflected in the annual bad debt ratio of the bank Based on the symptom is high NPL rate in retail segment, after verifying potential problems, the main problem of bad training skill in debt recovery and verification is revealed with two main causes are pointed out which are Since then, by using internal reports and conducting in depth interview with some staffs to understand the main problem, the thesis would like to propose some solutions to improve the management of bad debts in credit activities of VP Bank Company overview 1.1 Viet Nam Prosperity Joint Stock Commercial Bank (VP Bank) Vietnam Prosperity Joint Stock Commercial Bank (VP Bank) was established on August 12, 1993 After nearly 25 years of operation, VP Bank has developed its network to 219 transaction points with a staff of nearly 24,000 employees By the end of 2017, VP Bank's charter capital has increased to VND 15,706 billion VP Bank is gradually asserting the reputation of a dynamic bank with stable and responsible financial capacity to the community In 2017, VP Bank closed its 5-year journey (2012-2017) with great achievements in scale and profitability, making VP Bank one of the leading commercial joint stock banks in Vietnam Especially, 2017 is a historic milestone for the bank when nearly 1.5 billion shares were officially listed on HOSE, attracting great attention of domestic and international investors With constant efforts, VP Bank's brand has become more and more strong and confirmed through many prestigious awards Particularly in 2017, VP Bank received 20 domestic and international awards continuously, showing the recognition of prestigious organizations for VP Bank's impressive growth in brand value VP Bank's new brand with the motto "Act for dreams" is built from the following elements: Professional, Dedicated, Different, and Simple Towards a long-term vision, VP Bank is determined to promote the image of a bank that always strives to serve customers with the friendly attitude and the fastest speed VP Bank is ranked by Brand Finance, the world's leading brand valuation consultancy, as one of the four banks with the highest brand value and one of the 22 most valuable brands in Vietnam in 2017 1.2 Organizational chart Source: VP Bank’s website (www.vpbank.com.vn) Figure 1: VP Bank’s organization chart 1.3 Risk Management Department Figure 2: Risk Management Department’s organization chart As in organization structure of Risk Management Department in figure 2, the department divided into many teams In this thesis’ scope there is three teams in retail segment, namely: Debt Collection Center (include Debt Collection Strategy and Retail Debt Collection), Retail Risk and Verification Department should be focused on Each team has specific responsibility: Debt Collection Strategy - Develop management and debt recovery strategies; - Build and manage automatic debt reminder system; - Set up training programs to train debt recovery officers; - Control the quality of debt recovery through the reporting system; - Make plans for debt recovery in each period based on the strategy of the bank's leadership Retail Debt Collection Responsible for recovering loans from individual customers, including: - Remind pre-due debts and overdue debts by SMS message system based on the list of loans due in the month; - Call overdue customer to collect debt according to the available scenario; - Field visit to meet customers directly; - List out loans with signs of fraud then sent to the in charge department for further actions; - List out customers having difficulties in repaying debts to implement financial solutions Verification Department - Analyze and assess customer's risk level when making a loan decision; - Assessing risks with disbursed loans: determining the financial situation of loan applicants Retail risk - Develop and implement a credit risk management framework - Develop and implement a credit risk strategy based on VPB's credit risk appetite - Give opinions on credit risk aspects for the deployment of new credit products and credit activities in the new market - Prepare annual debt collection plan - Evaluate debt recovery strategies that are being applied - Evaluate the quality of debt collection activities compared to the plan implement and measure, include: + Content of training; + Ability of trainers; + Cost for training; + Resources; + Timeline; + Training methods Implement Implement training Managers, program base on plan staffs Review Compare the performance Collect feedback from all and of employees before and stakeholders to determine the modify after training to determine effectiveness of the program training whether the training and what the trainer has program program meets the training conveyed (including objectives Managers knowledge or skills that employees have received) 27 5.3 Solution 3: Hire external partners to train staffs of Collection and Verification department The level of trainers also affects the effectiveness of training and development of human resources Hence, the company should choose trainers carefully in different sources such as external organizations or invite training experts The trainee needs to have extensive knowledge, experience, knowledge of the situation of organizational, strategies and training methods Currently, Verification and Collection Department is applying on-board training which is sending experienced staff to guide those who are new staffs The advantage of this kind of training is that training is carried out regularly, maintained continuously, without interruption; company take advantage of internal resources; training conditions can be flexible in case strategy of department is changed… This kind of training is also the simple way to organize and minimize associated cost Arranging a highly qualified staff to guide a weak employee to help this person, on the one hand, learn many skills from colleagues, on the other hand, he could being confident about being advised if there is a problem For experienced employees, mentoring others is an affirmation of their work, giving them a sense of management role However, for this kind of training, instructors often not have pedagogical knowledge, so the instruction is not scientific and it is difficult for new staffs to absorb or learn both the bad habits of the instructor New staffs will perform their own tasks when encountering problems will ask the instructor, this will limit their chance of learning Sometimes new staffs are afraid to ask, instructors not actively train, lead to the effectiveness of this kind of training is not high Besides, the instructor may feel the new staff as a "threat" to their job or position so they are not enthusiastic to guide Also the training can interrupt the daily tasks of instructors Verification and Collection Department can organize focused training programs through professional training vendor This kind of training gives businesses a team of qualified trainers in training In addition, the trained employees are equipped the same quality, which can form standards in the work process If all employees have been trained in the same way, there are more opportunities for them to the same Training courses will help employees work consistently and centrally; strengthen the spirit of working with the team The evaluation of training helps the Bank assess the ability, professional skills of staff before and after the training process, discover errors that need to be supplemented and improved in training courses, serving the objectives and business strategies of the Bank Therefore, in the training progress, the stage of evaluating the effectiveness of training and development is important and necessary 28 Time schedule Process Objectives Actions Responsibilities Jan, Feb, Mar, Apr, May, Jun, 2020 2020 2020 2020 2020 2020 Analyze need training of the The first step of a of training process is to - Firstly, analysis of Managers workers: The main content accurately identify the of employee analysis needs of human includes: analysis of resources that need to be records individuals to get trained The their information and determination of human qualifications, abilities, resource training needs is skills to see if they can a relevant factor and guarantee the minimum direct decision to requirements of the job implement the next steps Next is analyzing the of a training process performance results to see Training needs are the level of their work usually determined from completion, what skills are the company's business missing? What skills plans and human should be added to them resource plans, based on - Second, organizational which determine the analysis: determine whether 29 training and the level of development of development needs for the organization: the company to meet job development goal of the requirements and business in the future, the implementation of the performance of the plan business in a certain period of time From there, show us the overall view of the business, the strengths and weaknesses from which to improve by training Third, analyze the requirements of the job: Analyzing the work based on the job description, the standard version For the person who does the job, the standard version does the job so that the business can know who really needs training 30 Learn about Learn about skills and capabilities of knowledge outsource achieve companies objectives needed Managers, HR to strategic of training program Managers, HR Choose proper Select companies that outsource match goals and budget company of department Cooperate In this step, partners and with outsource trainers develop practical company to situations used in the develop program, exercises, cases training study and structure of program training material Seek approval from higher level manager Head of the HR department in cooperate with Managers of Collection and Verification Department to develop a plan and submits it to the Director and Head 31 of the Training Department for approval and signing Implement Evaluate Implement training program After each training Monitoring and evaluating training course, it is necessary to the training program program evaluate the effectiveness of the training program has achieved both quantity and quality The evaluation of training effectiveness is conducted based on the evaluation criteria The main criteria that can be used to evaluate training effectiveness include: change in productivity, quality and labor efficiency compared to before training The 32 change of knowledge and skills of staffs after training is often shown in the results of work performance 33 Supporting information No Name Gender Position Working Working experience experience at (year) VPB Interview Place of date interview Le Viet Thu Female Collection Manager 10 Mar-2019 VPB Vo Thi Sa Mi Female Senior Debt Collection Officer Mar-2019 VPB Pham Thi Hoang Anh Female Debt Collection Officer Mar-2019 VPB Nguyen Hong Ngoc Female Retail Risk Team Leader Mar-2019 VPB Hoang Ho Nhu Quynh Female Senior Retail Risk Officer 2 Mar-2019 VPB Tran Thi Lien Oanh Female Verification Team Leader 5 Mar-2019 VPB Pham Dinh Le Dong Male Verification Officer 1 Mar-2019 VPB INTERVIEW GUIDE Introduction Hello, my name is Phan Ngoc Thuy Duong from Retail Risk Management Department of VP Bank Firstly, I want to say thank you for your time This interview might take you about 15-20 minutes After reviewing financial reports of retail department, I found that NPL rate in retail segment of 2018 is higher than previous months and also higher than the target Therefore, I would like to ask you some questions to deeply understand about this situation By the way, I will take some note because I don’t want to miss any information that you shared Thanks for your understanding and supporting 34 Warm-up questions - What is your name and your job position? - How long have you worked at VP Bank? - What’s your main responsibility in work? Main body - In your opinion, which factors that might affect to high NPL rate in retail segment? - What is the main factor? Why you think so? - Do your department have team specializing in training? - Do you think your job should require training or not? - Do you think skill training will impact to the performance of staff in your team? Thanks and close Questions and answers What is your name and your job position? Coding Ms Thu: My name is Le Viet Thu - Collection Manager Collection Manager Ms Mi: My name is Vo Thi Sa Mi - Senior Debt Collection Officer Senior Debt Collection Officer Ms Anh: My name is Pham Thi Hoang Anh - Debt Collection Officer Debt Collection Officer Ms Ngoc: My name is Nguyen Hong Ngoc - Retail Risk Team Leader Retail Risk Team Leader Category Job Position Ms Quynh: My name is Hoang Ho Nhu Quynh - Senior Retail Risk Officer Senior Retail Risk Officer Ms Oanh: My name is Tran Thi Lien Oanh - Senior Verification Officer Senior Verification Officer Mr Dong: My name is Pham Dinh Le Dong -Verification Officer Verification Officer How long have you worked at VP Bank? Employees’ tenure Ms Thu: years 35 Ms Mi: years Ms Anh: year Ms Ngoc: years Ms Quynh: years Ms Oanh: years Mr Dong: year What’s your main responsibility in work? Job description Ms Thu: Generally, my job is management overdue loan portfolio Ms Mi: I’m in charge in allocation new overdue loans to each staff in my team, support my staffs to call customers having bad attitude and attach new staff to guide them how to work efficiently Ms Anh: My daily task is call overdue customers for their payment Ms Ngoc: My task is setting credit policy for retail segment, ensures that the strategic objectives of the organization are fulfilled Ms Quynh: My task is answering questions for business units in terms of credit policies Ms Oanh: My main responsibility is approve, reject, or coordinate the approval or rejection of lines of credit or personal loans Like Ms Mi, I also have to provide training for new staffs and guide them in work Mr Dong: My task is verifying customers’ application to make decision of approve or reject a retail loan 36 In your opinion, which factors that might affect to high NPL rate in Factors affect to NPL retail segment? rate in retail segment Ms Thu: Within my scope of work, high NPL rate is due to unresponsive Unresponsive debt recovery skills debt recovery skills Otherwise, partly due to the nature of the loan, for example, there’re cases that customer is confirmed fraud so that cannot be recovered Ms Ngoc: In my opinion, high NPL rate in retail segment partly due to the Excessive credit expansion excessive credit expansion, which means poorly selected customers, the Compliance with the credit process is ability to monitor the use of weak loans But, the compliance with the credit loose process is loose, in addition with the weakness of staff that is the main reason The weakness of staff that lead to increasing of credit risk Ms Oanh: I think poor verification skill and lacking of skill in handle Poor verification skill and lacking of overdue loan in early stage that make the loan move to higher cycles and skill in handle overdue loan become bad debt What is the main factor? Why you think so? Main factor affect to Ms Thu: I think skill of collection staffs is the main factor that make overdue Skill of collection staffs NPL rate loan become NPLs The ratio of fraud customer is not too much to cause the big impact to NPL rate Ms Ngoc: Like I mentioned before, our policy is aligned with bank’s Skill of verification and collection strategy so the remained problem is skill of verification and collection staffs staffs which is very important to help the bank identify problem loans and can 37 negotiate with customers in order to avoid transferring debt groups Also, as I observed in my previous business trip to these departments, there’re many Don’t have training team new staffs start to work after 2-3 days being trained, how can they work with that such few knowledge! They even don’t have training team to train for Skill of verification staffs new staff and coaching current staffs Ms Oanh: Within my scope of work, I think the main factor that caused high NPL rate is the skill of verification staffs With the weak in loan justification, they easily approve for a risky loan which leads to an increase in credit risk Do your department have team specializing in training? Team specializing in Ms Mi: No, currently we don’t have For new staff, senior staff will spend No training team, senior staffs attach 2-3 days to attach them and guide them basic knowledge and skill to handle and guide new staffs training overdue customers However, skill and knowledge of these staffs are different therefore also affect the quality of training Besides, we don’t have Quality Control (QC) team evaluate collectors’ performance in order to give prompt feedback on their performance and conduct coaching Assigned senior staffs to train for Ms Oanh: No, we assigned senior staffs to train for junior one junior one Assigned a senior staff to guide Ms Anh: No, when I started work at Collection Center of VP Bank, year ago, my manager assigned a senior staff to become my mentor to support me 38 in work, guided me how to use system and answer my questions in terms of handling overdue customers Do you think your job should require training or not? The need of having Ms Mi: Yes, with the nature of work that usually interact with customer to Should have training training convince them pay their debt, if funding condition allow, I think we should have Ms Oanh: Yes, If staff have not had the training, both staff and the bank If staff have not had the training, will suffer from poorer performance both staff and the bank will suffer from poorer performance Ms Anh: Yes, personally I had a lot of difficulties when I started to work Training is very important and my performance was very bad in several months So I think training is very important for my job Mr Dong: I have the same idea with Ms Anh Besides, I think training in Training in very first steps make very first steps make staffs more confident in work staffs more confident in work Do you think skill training will impact to the performance of staff in Training and its your team? And how? impact to Ms Mi: Definitely yes! With strong skills, collectors can resolve overdue With strong skills, achieve their performance of staff loans in early stages, prevent accounts move to higher buckets that cause bad target and also save the bank from debt, then achieve their target and also save the bank from loss of bad loans loss of bad loans 39 Ms Oanh: Obviously! If verification staffs is trained professionally, they If staffs is trained professionally, will be able to identify loans with signs of fraud or high risk then reject these prevent the loan from becoming bad applications debt which causing loss to the bank then avoid the difficulty of debt recovery in the future, even prevent the loan from becoming bad debt which causing loss to the bank 40 REFERENCES To MT Credit risk management and bad debt controlling 2013 Boffey R, Robson GN Bank Credit Risk Management 1995 Kihuro JM, Iraya CM Credit Risk Management and Bank Performance: A Critical Literature Review 2018 Timsal A, Awais M, Shoaib O On job Training and Its Effectiveness: An Employee Perspective 2016 Chen T-Y, Chang P-L, Yeh C-W The study of career needs, career development programmes and job satisfaction levels of R&D personnel: the case of Taiwan 2010 Orokov B, Durning D, Pushkarev S Employee Training And Development In Kyrgyzstan: Leninskoye Village Government Jr WA, Jr WB, Edens PS, Bell ST Effectiveness of Training in Organizations: A Meta-Analysis of Design and Evaluation Features 2003 Sahinidis AG, Bouris J Employee perceived training effectiveness relationship to employee attitudes 2008 Raheja DG Dynamic Manufacturing, R H Hayes, S C Wheelwright and K B Clark, The Free Press, A Division of Macmillan 1991 10 Ahmad A, Jehanzeb K, Alkelabi DSAH Role of Learning Theories in Training While Training the Trainers 2012 11 Truc X Cắt giảm chi phí đào tạo nguồn nhân lực, khó hay dễ? 2016 [Available from: https://kynabiz.vn/bai-viet/giam-chi-phi-dao-tao-nguon-nhan-luc.html 41 ...UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Phan Ngoc Thuy Duong BAD TRAINING SKILL OF DEBT COLLECTION CENTER AND VERIFICATION DEPARTMENT AT VP BANK MASTER... Management Department 4.1.1 Lack of training document According to the observation and confirmation of managers and staffs at Collection and Verification department, both of these departments... the bank is always urgent and important in long-term After analyzing the potential cause of the main problem of Collection and Verification of retail segment of VP Bank Bad training skill in debt