ABSTRACT
Optimal value management in lending and credit workout starts from the right strategy and follows proper and consistent governance and organisational approaches, down to the level of key processes, reporting lines, IT/operations capabilities and HR management. The chosen, best available strategy could then be better executed as part of an internal, independent but still captive, bank credit workout unit, or be pursued via selective outsourcing or third-party alliances and joint ventures (JV). If we agree that, as the authors argue, credit workout is eventually part of the “alternative asset management” industry, the end goal for a credit workout unit is to identify, pursue and realise the best mix of “beta tracking” and “alpha generation” strategies – optimising their related efficiency and effectiveness. This chapter identifies the “seven pillars” that can allow to workout units to deliver sustainable, meaningful and uncorrelated “overperformance” – the authors argue how most of them can be more easily pursued via JV structures where a third party is bringing a “private equity mind set,” focused on delivering superior net present value, avoiding conflict of interests and addressing the open market in a competitive and profit-seeking way.
