ICTF – SymposiumApril 2018

Best Practices to become world-class

Re-engineering the Global Credit Department

FACT SHEET

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FACT SHEET

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FACT SHEET

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FACT SHEET

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FACT SHEET

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AGENDA

Mandate

Landscape in 2008

The Fundamentals & Challenges

Project Clean-up

Policy/Procedures

People/Accountability

Systems/Technology

Reporting/Analytics8

THE MANDATE

Ability to manage credit risk in any environment

Align policy, processes, controls across the Credit Organizations

Consolidate A/R at customer level across the Credit organization

Consolidate Reporting across the Credit organization in USD (by Business segments and Overall)

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OUR LANDSCAPE IN 2008

Landscape in 2008– 2 business segments Pulp and Paper– AR monthly average +/- 400.0M–$12M or 5% over 90+ days– 3 Credit Groups operating North America– 15 employees– Multiple A/R systems– Manual collection processes– No consolidation tools– Cash tied up in disputes– Overlapping tasks between Credit and its O2C partners

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WHAT IS RE-ENGINEERING?

Re-engineering–Rethinking and Redesign of a business credit process to achieve

dramatic improvements in critical measures of performance such as DSO, BPDSO, ADD, CEI, % Current and % over 30 days etc. while maintaining cost, service and speed at a reasonable and optimal level.

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CHALLENGES

Centralized Corporate Credit office

Decentralized Credit operations (7 offices)

Multiple ERP Systems

No Collection Tools (manual tasks)

No single point of information in AR

Cash tied up in disputes

Limited reporting and forecasting capabilities

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REGARDLESS OF THE CHALLENGES…

To be successful, the following are essential:–Engagement of all O2C players–Human capital is the most valuable resource –Cash is king –80% of our clients will survive a financial crisis –Customer acquisition is key –Understanding our customers business is key–Understanding our customers in their ecosystem is imperative–Finally…–Turn your customers into partners

– By…– Partnering with Sales

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FIRST - PROJECT CLEAN-UP

Engage in cleaning up our AR – Unpaid invoices and discrepancies of all sorts amounted to +/- $12M

or 5%– Develop a Credit Authorization Request process (CARE) to handle

discrepancies at source

• Various industry studies revealed that +/- 15% of all invoices are affected by deductions OR +/-10% of all open items on AR

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SECOND – REVIEW OUR CREDIT PROCESSES

Domtar credit policy* – Global scope

– Credit Process– Terms of Payment and Security Instrument– Collections Procedures– Bad Debt Process– Reporting– Security Review

– Corporate Values– Mission statement*(Policy prescribes discretionary actions for various group)

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CREDIT POLICY (CONT'D)

■CREDIT POLICY– Align with Export Policy– Close all regional gaps– Apply across all functions

–Credit risk–Collections–Cash applications–Deductions management

– Ensure consistency in DOA

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THIRD - POSITION FOR THE FUTURE

■PEOPLE/ACCOUNTABILITY– Normalize the credit titles

– Corporate Credit Chief (1)– Credit Group Leader (6)– Credit Manger (8)– Credit Analyst (29)

– Align mandate & skills– Increase focus on loss reduction; collections; discrepancies*

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POSITION FOR THE FUTURE (CONT'D)

■TECHNOLOGY– SharePoint

–On-line collaboration–Reporting (upload)– Approval site for all documents exchange

–Credit Scoring–Terms –Write-off –Settlement

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POSITION FOR THE FUTURE (CONT'D)

■TECHNOLOGY– Cash-on-Time (COT)*

– Centralized AR data from multi-systems to a single tool– Single customer AR consolidation– Daily consolidated view of accounts– Prioritization strategies on various activities– Segmentation of accounts:

– by analyst, products, risk level etc

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POSITION FOR THE FUTURE (CONT'D)

■METRICS (Go beyond the metrics)– Also provide visibility to the following:

– Portfolio Risk profile by segment– Major High Risk Accounts– Critical Accounts– Priority Accounts– Major Accounts <70% current (slow paying)

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WHERE BEST TO DELIVER OUR SERVICES

MAIN FUNCTIONS– Credit Risk Management (Corporate)– Reporting & Consolidation (Corporate)– All other credit functions remained with our Regional Offices:

– Customer Acquisition– Collections– Order Release– Cash Applications– Customer Relations

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OUR LANDSCAPE IN 2016

Our success story results– 91% of Consolidated AR in a current position

– Pulp portfolio at 97%– Paper portfolio at 95%

– 2% of AR past due or disputed 61 days +– 80% of exposure greater than $500k– 3 business segments Pulp & Paper and Personal Care– AR monthly average +/- $700.0M– 7 different Credit Groups in Major Geographic Regions

–(NA, APAC, EU)– Global losses as a % of sales stands at less than .5%

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MINDSET CHANGE

Benefits of getting the basics right– Move from Risk Avoidance to Risk vs. Reward– More quality time to manage Risk– Contribute to Sales Growth– Achieve Operational Excellence

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WHERE DO WE GO FROM HERE - NEXT FRONTIER

■ OFFERING SELF-SERVICE TOOLS– Documents visibility– Ability to apply credits to open invoices– Online Credit application– Use of Fintech where applicable–etc

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