Click HERE for a download of the Financial Services and Insurance Group Overview PowerPoint or view the presentation below:
We are proud to introduce our Turnaround and Restructuring practice to you. Our services are designed to help all companies improve their financial positions and rebound from the negative effects of Covid-19. Examples of services include:
· Restructuring debt
· Diagnosing issues quickly
· Producing 13-week cash forecasts
· Developing action-oriented short and long-term plans
· Producing timely dashboards
· Project managing cost reductions
Who are we?
CFO Consulting Partners is consulting firm comprised of CFOs and other senior financial executives. We provide a suite of CFO services and have the experience and horsepower to put your client’s business back on track. We formed our firm in 2006, we are 25 consultants strong and our sole focus is helping companies become stronger.
Please let us know if we can arrange a Zoom meeting with you and/or your team.
For further information on this service, click on the link below for our Turnaround and Restructuring services one pager:
Turnaround and Restructuring Services Managing your business during and after COVID-19
The Turnaround and Restructuring Services group of CFO Consulting Partners can provide its expertise to your crisis management team with a roadmap that can define and identify cashflow and cash management needs. We’ll work with your team to develop agility and improve decision making to address key issues resulting from the Covid-19 crisis. Additionally, our services would include detailed financial planning, an assessment of operations and processes, and assistance in the areas of communications to employees, customers / clients, the board of directors and other key stakeholders.
Our experienced team of senior-level financial professionals can provide independent, objective support to business owners, BODs, CEOs and CFOs on funding, liquidity, tactical execution, and other issues to improve cash flow and financial performance.
Funding and Liquidity
- Evaluate liquidity position
- Prepare cash flow projections: best case, expected case, worse case
- Assess working capital including vendor and customer management
- Evaluate long term financing for potential loan restructuring
- Provide introductions to new sources of financing
- Utilize bankruptcy protection via our legal partners as a last resortTactical Execution: restructure to right size your business
- Streamline business processes and eliminate non value-added work
- Evaluate overhead structure including human capital
- Assess project, product and customer profitability
- Support renegotiations: contracts, vendor agreements, leases, utilities
- Identify and implement cost reduction and margin improvement opportunities
- Develop KPIs and executive dashboards including cash for better decision makingStrategic Assessments
- Budgets, forecasts and 3 to 5 year business plans
- Capacity and facility rationalization, location strategy and operating leverage
- Evaluate information technology platforms and opportunities
- Evaluate competitive environment and opportunities
- Guidance on the strategic positioning of your company via M&A activity.
- Buy-side or sell-side support
- Introduction to private equity, investment banks, venture capital and wealth manager
For more information, please contact David DeMuth firstname.lastname@example.org or Allan Tepper email@example.com, or call David at 609-309-9307 x700
On June 25th CFO Consulting Partners’ Director Chip Steppacher and Managing Director Eric Segal were hosted by Pam Perdue on a webinar focused on restoring Bank financial and operational performance in uncertain times. Follow this link to view a recording of the event:
Continuity ( https://www.continuity.net/ ) is a provider of regulatory technology (RegTech) solutions that automate risk and compliance management for the financial services industry.
On June 18th, 2020 CFO Consulting Partners Director Larry Davis and Managing Director Eric Segal presented a webinar with Northern New Jersey Community Bankers on Leadership Opportunities Through The COVID-19 pandemic. Crown Bank Vice-Chairman Paul Fitzgerald moderated the discussion and Jill Freeman of Employment Practices Group, LLC ( https://www.epgstrategy.com/ ) provided thoughts and advice on Organizational and Leadership Opportunities.
Click here for the Webinar Presentation
- Clearly define goals and project plans, and monitor and report on status. These disciplines are more important now than ever before to enable processes to run smoothly and avoid fire drills that are even more challenging in a remote environment.
- Communicate more than “normal” so that everyone can become comfortable with remote work and interactions.
- Ensure that the technology and information security requirements are in place so that your team can operate effectively on a remote basis
- Use detailed project plans, checklists, timelines and other mechanisms to define project requirements, clarify roles within the team, identify dependencies, and communicate status. Monthly and quarterly closing checklists and similar outlines are extremely helpful for all required deliverables: Board and senior management reports, press releases, SEC reporting, etc.
- Make resources available to all who need them in real time.
- Develop a file storage plan and use it consistently while maintaining appropriate access security over those files. Typically, companies will create a central folder for each period’s financial reports.
- Finished work products should be stored centrally and shared according to agreed-upon nomenclature so that team members can locate and process as needed.
- One individual should own a document and be the gatekeeper for changes proposed by internal preparers, executive management, external legal and accounting advisors, investor relations etc.
- The gatekeeper should maintain version control so that reviewers can easily identify updates to the documents. “Track Changes” and blacklined documents help focus reviewers’ efforts.
- Establish deadlines for comments and limit the number of drafts to minimize time spent processing successive versions. Relevant comments will always need to be considered but avoid excessive wordsmithing once you have a solid document.
Thinking Ahead – Accounting for Loan Losses During and After Covid-19
One of the many challenges posed by the current health crisis is the need for lenders to reassess their borrowers’ ability to repay their loans. While it may seem unfair, or even unseemly, to have to address this issue at this time, financial institutions will need to do exactly that in closing their books and reporting on the First Quarter of 2020 in their regulatory reports and (for SEC registrants) Forms 10-Q.
The accounting approach most community institutions are following, and on which we will focus here, is the traditional, probable incurred loss model. This model requires institutions to provide for losses that are probable to have been incurred under the GAAP literature in Accounting Standards Codification (ASC) 450, Contingencies, and 310, Receivables. In practice, this usually involves a modeled component, based on historical write-offs over a look-back period, and a qualitative component, based on the current state and trend of economic and other factors affecting the portfolio. A good summary of the factors to be considered in this qualitative analysis are the nine points summarized in an Interagency Policy Statement issued in 2006 by federal banking agencies, which can be found at this link: https://www.occ.gov/news-issuances/bulletins/2006/bulletin-2006-47a.pdf
Generally, increased loss provisions are expected but likely too few facts are available to make specific loss assumptions. Measuring specific incurred losses at the end of Q1 will be difficult and most likely will be addressed through additional qualitative factors. Reserve assumptions for those credits already under analysis should be reevaluated and likely dealt with across product and delinquency categories.
Following are the nine points from the Policy Statement, in italics, followed in each case by our comments:
1. Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses. This would include loan forbearance and other regulatory relief measures enacted to assist with resolution of the crisis: https://www.fdic.gov/news/news/press/2020/pr20038a.pdf
2. Changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments. The effects of the current health crisis will be pervasive, as covered in the other points.
3. Changes in the nature and volume of the portfolio and in the terms of loans. Institutions will need to address any shifts in new lending – in some portfolio segments, new production will have stopped, and thus not be available to offset increased non-performing loans and normal amortization within those segments. Thus, looking forward and doing the math, loss rates will increase within these portfolio segments.
4. Changes in the experience, ability, and depth of lending management and other relevant staff. Will there be sufficient staff available to effectively manage the portfolio? Will remote collection efforts be as effective as prior techniques?
5. Changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans. A sharp increase in delinquencies can be expected, albeit delayed by the TDR forbearance mentioned above. The ultimate losses may be mitigated by any government guarantees that are available, as well as borrowers’ ability to access business interruption insurance.
6. Changes in the quality of the institution’s loan review system.
Improvements that strengthen the process of reviewing loans could be a mitigating factor. If however, the loan review process weakens, either because of staff illness or other limitations, this factor may be another reason to strengthen reserves.
7. Changes in the value of underlying collateral for collateral-dependent loans. Real estate loans will be a challenging area, as the impact of current developments on the commercial and residential real estate markets will take some time to shake out, however declines in market values seem likely.
8. The existence and effect of any concentrations of credit, and changes in the level of such concentrations. The effect of concentrations can become more severe as conditions in certain industry sectors worsen, and the relative size of concentrations can become larger as healthier loans run off in a low origination environment.
9. The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution’s existing portfolio. These factors include forbearance that is enabled by legislation e.g., restrictions on foreclosure that lead to increased losses from deterioration in the physical condition of properties and/or in the property market.
Your portfolio consists of two types of borrowers: healthy and current borrowers who may be negatively affected by the duration and severity of the current crisis; and those already exhibiting financial stress (past due and delinquent accounts, businesses already under severe attack from a variety of sources including the lack of a viable internet strategy, lower cost of foreign competition, and many others) for which the current crisis may finalize their situation. Both may benefit from the governmental assistance and forbearance programs, however the exclusion from TDR accounting applies only to the former borrowers. You should track and maintain records of your borrowers’ status throughout the deferment and modification process in order to demonstrate those which are not TDRs.
We have discussed the challenge of first quarter reserving with senior representatives from several large accounting firms, and the following pieces of practical advice emerged:
* Now is not too soon to begin discussing reserving considerations with professional service providers, including auditors and consultants.
* Most institutions are targeting timely filings of their First Quarter reports, notwithstanding the grace periods being offered by regulators, including the FDIC and SEC. See the announcement of the grace periods at:
* Auditors, regulators, analysts and other interested parties will be looking for a strengthening of the environmental/qualitative reserve, along with supporting evidence that identifies the impact of current events and links to any adjustments.
* Whatever process is followed, it will be necessary to step back and consider whether the result makes sense.
* Whatever answer is arrived at for First Quarter reporting, further adjustments will undoubtedly be required in the Second and Third Quarters as more information becomes available.
We are familiar with these issues and accustomed to working remotely. Please let us know if we can help in any way.
Note on CECL: Institutions that have adopted the new Current Expected Credit Loss Model in the First Quarter will have similar considerations, but with the additional challenge of adopting the new model. They should also consider the possible impact of the CARES Act on timing of adoption, and related regulatory actions, including the Federal Institutions Letter on the interaction between timing of adoption and capital relief:
Larry Davis – firstname.lastname@example.org
Paul Karr – email@example.com
Eric Segal – firstname.lastname@example.org
- We have developed significant expertise in helping companies achieve their business and accounting & finance goals, including buying and selling businesses, raising capital, strengthening internal controls, improving cash flow management and developing growth plans.
- Clients have benefited from our all-senior-level financial management team who have “been there, done that.” Our people have held CFO or Controller positions in large and small companies, most are CPAs from major firms and have advanced degrees.
- Clients have been aided by our firm-wide team approach to problem solving. Clients have access to the expertise of all of our team members to diagnose and solve problems.
- Clients have prospered from having a boutique firm that moves quickly and has the depth of knowledge and experience to meet their needs.
- Finally, we are proud to say that our clients recognize us as the “go-to” firm for CFO services provided to the community banking industry.
This video can be viewed using this link.
Insurance Company Credit Rating Advisory Practice, Part 2
Marc Liebowitz, CFO Consulting Partners LLC
There are three primary drivers of insurance credit ratings:
- Risk adjusted capital levels
- Operating results
- Market profile which is the overall evaluation of strategies, products, underwriting strength and risk diversification.
In a previous article, we covered risk adjusted capitalization. Click here for the first article in the series. In this installment, we review how credit rating agencies evaluate operating results and market profile. Our focus is on the A.M. Best Company (AMB) and Kroll Bond Rating Agency (KBRA) methodologies as these agencies are most relevant to the mid-market insurance company ratings universe. The AMB and KBRA rating methodologies are available through their respective web sites:
To measure the relative strength of a group’s operating results, analysts, develop a view of overall earnings power and compare those estimates to peer group averages and industry norms. The major components of this analysis are:
- Comprehensive evaluation and trend analysis of financial outcomes, returns, and ratios
- Development of multi-year projections and stress testing those forecasts
- Review of key metrics for the consolidated organization and for individual business segments
- Analysis of earnings by product and of investment portfolio earnings by asset type
- Comparison of company specific results against peer group and industry-wide aggregates
Benchmarking comparisons are influential parts of the earnings analysis and management teams that demonstrate an understanding of key strategic and operational business elements which are apparent from this analysis are more likely to achieve their desired ratings outcome.
The market profile is a qualitative evaluation of a company’s spread of risk, revenue composition, and management strength. Given the qualitative nature of this analysis, management should provide a clear view of strategic plans and other elements which can provide a full picture of the company and how management approached the competitive landscape in its key markets.
A clear presentation of management’s plans to grow the company and improve operational efficiencies is essential to getting the appropriate rating for an organization. Sometimes there are areas where the goals of management and credit agencies are at odds. For example, a strategy to grow revenues and build the bottom line can be seen by the credit agency as a plan to add risk to the balance sheet. CFO Consulting Partners can work with the clients on how to best communicate the benefits of strategic actions and review strategies to mitigate the perceived risk.