Business Profile and Mollllllllllll.pptx

Business

1. Business Client Profile and business model

2. BUSINESS FOCUS House bank for SME companies; Strong efforts on building long-term relationship with business clients; main focus on customer communication to find out and utilize the business potential; Strong and systematic approach in acquisition of new clients – necessity of renewing the customer base; Clear understanding and more selective approach towards clients – business client profile; targeted approach towards good clients of other banks; Focus on banking services; Reasonable approach in lending, focused on quality; Emphasis on staff and management quality. 2 Business focus and business client profile BUSINESS CLIENT PROFILE Companies with sustainable business model: New Very small clients – targeting companies in the upper level of the category (more mature and developed businesses with up to 10 employees); with reasonable investments and behavior towards loans; quality and officiality of financial reports and company organization; Small clients – companies with higher level of formality, very good quality of financial reports, solid management capacity (managers with long-term vision, possessing all required competences to run the business), sustainable business model; Medium clients – focus only on formal clients, with excellent management, market position and image.

3. 3 3 Business client p rofile 3 Criteria Description Clear ownership structure The actual business owners are identified (offshore companies are not considered as ones with clear ownership structure and the bank does not engage with them)*; The owners as per the constitutive documents of the enterprise are the actual owners; Relatedness with other individuals and legal entities can be identified, tracked and explained ; Issues: Insufficient information about the origin of the funds for establishing the business; Missing information about other related parties and their involvement in the business; Examples: One of the owners is a foreign entity, of whom we have no information; A minority partner with a 10% share, of whom we have collected no information; The company is owned by two shareholders: a local private individual and an offshore legal entity. * Transfers to and from companies, registered in offshore zones, are not processed by the bank, even in the cases that we do not suspect money-laundering activity.

4. 4 4 Business client p rofile 4 Criteria Description Established business No changes of the main business; constant and consistent business development; The client has all necessary commercial and/or production premises located at permanent addresses (i.e. commercial and/or production units are not moved from one location to another for no objective reasons); Clear organizational structure, with division of functions and responsibilities in the company; All investments in the business are thought-out, planned, and explained with clear and sound business development ideas; Any parallel lines of the activity correspond (supplement and/or support) to the main line of business; Issues: No explanation why a client has several different unrelated business activities; U nreasonable investments in new and unknown business ventures are often underestimated; The financial effects from an investment are often not calculated. Examples: A client has two business lines with nothing in common - wine production and an advertising agency; A client who sells clothes and has 4 shops changes their locations every two years.

5. 5 5 Business client p rofile 5 Criteria Description Sustainability of the business model The whole business history can be tracked and it shows successful restructuring in the past years; There is market demand for the goods/services supplied, the business has potential to continue operating on the same (or greater) scale in the future; The company's competitive advantages are easily identifiable; The business has good long-term development perspectives; The business activity and legal form of registration correspond to the business segment of reference; The existence of the business is not dependent on temporary factors (for example on temporary market niches); The business is not dependent on a single person and there is continuity; Issues: Stagnation of the business in the past few years (no growth in revenues, no investments, etc.) is often underestimated; Missing information about the competition; The specific market potential and long-term business development perspectives are not taken into account; Scarce information and comments on the management structure and succession. Examples: No investments in the business in the past 5 years and no information on profit distribution; The business is managed by one person only; no plans about succession.

6. 6 6 Business client profile 6 Criteria Description Management quality The management has a clear idea of the business model and realistic business development plans, based on excellent awareness of the market and competition; Managers have the required competencies (know-how and experience) to manage the business, and there is a clear distribution of responsibilities in the company; The principles of management are constant and consistent; Issues: The values of the company owners and the main principles of management are often not described; The values of the company owners contradict generally accepted standards of conduct; Examples: A grain producer is planning to start construction business as it is rumored that the margins in construction are very lucrative; The company owner chooses key employees based on the family relations rather than the necessary competencies.

7. 7 7 Business client profile 7 Criteria Description Established counterparty relations Long-term relations with suppliers, clients, financial institutions and other partners; Correct partner relations - fulfilment of all commitments, no overdue liabilities; The business is not dependent on a single client and/or supplier; Investments in HR development It is the company's policy to ensure training and additional qualifications for the staff; Staff turnover is low or none, most employees work at the company for a long time and have the required competencies. Issues: The risk of losing a key client/supplier is often underestimated, as well as signs of poor financial management (investments financed with loans for working capital, etc.); Not enough attention is paid to the working conditions and the attitude to employees; no information is presented about the qualification and turnover of staff. Examples: The company is selling its production to 5 main clients, one of them is generating more than 60% of the income; no explanation whether there is a risk of losing the client and how the company can overcome the situation; The company is known in the city for its high staff turnover. There are no comments and explanation of the managers of the business about the reasons.

8. 8 8 Business client profile 8 Criteria Description Proper accountancy At least 90% of gross income is booked; The balance sheet provides a realistic picture of the company's current situation (at least 90% of the company's assets and liabilities are reflected in the official reports); The structure of assets and liabilities corresponds to the type of business activity; The company's financial result is profit and tax and social security contributions are regularly paid; Good capitalization The capitalization of the company is relevant to the type of activity – production, trade or services ; The equity is relevant to the profits generated in the years of operation; Net working capital is positive (the company can cover its short-term liabilities with its short-term assets); Issues: We still arrange meetings and try to attract new clients with low formality of the business and companies that are close to the lower level of the business categories as defined by the bank; There are no comments on the quality of the accounting information, often the numbers from the reports are just copied without any further analysis. Examples : In the official financial reports of a small grocery there is a high amount booked in receivables from clients (not typical for that type of business).