In boosting businesses, we could spurt like Ferraris, but we’re moving at Turtle speed
The analysis of the use of funds and current tendencies in the country’s economy leads to the obvious conclusion that we use the available financial resources in Lithuania in a too conservative way, and, instead of the opportunity to exploit the situation and spurt at the capacity of Ferrari, we choose a safe but a very slow growth at the speed of a Turtle.
From a psychological point of view, the situation is understandable, since along with the usual risks – commercial, technological and many others, business today faces the biggest challenge of regulation.
Recalling the lessons of 2009-2011 crisis, both business companies and banks more often ground the management of their economic situation on risk minimization. In other words, for reasons of caution, they would rather not grant a loan than allot time for a more thorough analysis of the situation.
However, a qualified and comprehensive risk management provide opportunities for business development, especially now, when we have a sufficient number of automated management tools based on data.
Several weeks ago, a survey carried out by the Bank of Lithuania (LB) showed that at the present moment, a more careful consideration should be given to hotels, restaurants, and part of real estate companies. However, the significantly reduced or discontinued funding has had a negative effect on an absolute majority of business sectors whose situation during the pandemic has not gotten worse and has even improved.
Capital adequacy is good, but a reluctance to lend money remains
Responsible lending constitutes the backbone of any economy, and Lithuanian business has learned to take a responsible attitude to loan repayments. For example, Lithuania is marked out among other countries of the European Union (EU) by the smallest – only 3% of all loan portfolio – part of business enterprises which have made use of a moratorium on loans declared in the spring of 2020.
In addition, according to the Bank of Lithuania, part of non-performing loans has been regularly decreasing and now has reached the lowest historical level of 1.5%. In other words, in their concern about high credit ratings and a good financial reputation, the enterprises are doing their utmost to repay both loans and interest on time.
With full knowledge of the aforementioned facts, what surprises, is a particularly prudent financing of business or strict conditions of granting loans, especially taking into account the fact that the population’s and enterprises’ deposits have reached record heights on a global scale. In Lithuania, the capital adequacy ratio of the bank sector having reached the highest bar of 25% in 2015, has remained at the top and currently fluctuates at around 22%.
The situation is changing dynamically, but every company must be evaluated separately
On the other hand, the analysis of the financial situation of enterprises warns that the situation in the market is changing dynamically. For example, if in 2020, 11% of enterprises entered the highest and high classes of bankruptcy risk, this year there are 17% of such enterprises. There is a greater probability that part of enterprises may fall behind on their payments. For example, in 2020 a high and the highest risk of payment delays was attributed to 18% of companies, however, this year the number of such enterprises has increased by 31%.
And still, the analysis of separate sectors provides more clarity. For example, the number of construction companies of high and the highest classes of risk has risen over the year from 19 % in (2020) to 23% in (2021). And in the transport sector from 15% to 23% respectively. A greater emphasis should be laid on the situation of trading companies. The companies of this sector have split into two blocs – companies whose activity was restricted and the financial situation was getting worse, and the ones whose situation was changing for the better.
Unfortunately, in the catering sector the situation is still the worst. Last year 30% of these companies were classified as having high or the highest risk, and this year this figure reached 45%. However, it is believed that a gradual loosening of business restrictions would enable the recovering of this sector.
The services sector is now doing well, – part of its enterprises of high and highest risk remains moderate, although it has increased by 6% to 9%. Every enterprise must be evaluated individually, and if the financial position and discipline are strong, there are no reasons for the discontinuation of financing such businesses.
We are living in many-speed economic conditions. When some enterprises are made to stop their activity, others experience a boom and have successfully moved their business to digital space. The EU business support measures have deferred the declaration of bankruptcy for part of enterprises. However, the situation can change even more dynamically when the states‘ support is withdrawn. This aspect makes one carefully supervise one‘s business partners, require quarterly financial reports, a record of the quality of transparent property and its declaration.
What rules would I most recommend to comply with? The enterprises which have the experience of assessing their partners, know that information in credit bureau systems which is updated every day, includes tens of various indicators, and algorithms which calculate creditworthiness and risk, evaluate more than 100 different parameters. However, at present, in evaluating the new partners‘ financial statements, activities or shareholders‘ business relationships, I would suggest paying particular attention to negative information. Check if there are no court actions, if the number of employees has not drastically decreased, and if there are no recorded arrears. Under the conditions of big flow of information your business could be assisted by an early warning system which would allow to see the threatening changes and thus, react immediately.
We have a sufficient number of tools of risk management, it is time to make a more efficient use of capital
Current technological innovations make it possible to both disclose and find information about the buyer‘s or partner‘s debts during a few seconds. Normally, the essential information about overdue payments is freely available. Therefore, I would urge again that every granting of credit should be considered separately. Evaluating the aforementioned figures, it becomes obvious that we have not used great possibilities to help economy recover as soon as possible. Guarding ourselves against a very small part of unreliable debtors, we punish a far bigger part of disciplined businesses.
An operative exchange of information about debtors could assist us and others in making more precise and quicker decisions as well as preventing a domino effect, when the debt of one enterprise establishes the whole chain of overdue payments.
Let us go back to strategies of a Turtle or Ferrari. There are different tools of risk management. It is possible to insure oneself against taking on any risk. In this case the enterprise will grow slowly.
Or, on the contrary, one can use all the capacities and possibilities of Ferrari. This car has not only fast acceleration and high speed, but also a well-operating brake system which in business, is analogous to data-based risk management.
There is no doubt that crediting must be responsible and take into consideration all the risks. However, at present there are enough reliable tools which assist in making optimal decisions. Therefore we can better employ capital, promote the country‘s business and stimulate its economy.
Jekaterina Rojaka,
Chief Commercial Officer,
Creditinfo Lithuania
More needs to be done to achieve gender parity
Independent analysis done by Creditinfo using its vast data assets showed that gender balance in the workplace is far from being achieved. Companies need to keep this top of mind when it comes to creating leadership opportunities for women as the world moves towards closing the gap on gender parity.
Analysis by Creditinfo Iceland showed that last year, women were only appointed CEOs in a quarter of new hires in Iceland. Women accounted for 25% of new hires for the position of CEO, although this was an improvement on the 20% average over the last five years. Today, women hold around 18% of the CEO positions in the 6,000 active companies, but only about 13% of them are CEOs of the 1,000 higher-turnover companies.
The FKA (Women’s Association in Business) in Iceland, has a set a goal in their “Gender Balance Scale” project that by 2027 the gender ratio will be at least 40/60 in the executive boards in Iceland. The project was established in 2017 and has helped to promote diversity and balance through greater gender equality in management positions.
If we look at the rate of change of last 10 years, it is clear that the goal will not be achieved until 2061. If the share of women in CEO positions is to reach 40% before then, the proportion of women in new hires should be between 58% and 70% by 2027. The analysis also highlights an interesting statistic; a woman is more likely to take over the CEO position if her predecessor was also a woman. That is some food for thought for the gentlemen!
Brynja Baldursdóttir, Managing Director of Creditinfo Iceland has clear views on how to drive change, she says “Given the current proportion of women in new hires, it is clear that the goal of women being at least 40% of CEOs In Iceland by 2027 will not be achieved. It may be more encouraging to focus on raising the proportion of women in new employment to at least 50% in all sectors by 2027. Managers can thus make an immediate impact and help tip the scales.”
In Lithuania gender equality still seems a remote concept according to an analysis recently conducted by Creditinfo Lithuania. At the beginning of March 2021, there were almost 100,000 company managers in Lithuania, of these, only 30% were women. Probably unsurprising the biggest gap is in the construction, manufacturing, mining and quarrying, transport and agriculture sectors. Whereas the smallest gap is in the services, hotel and restaurant businesses. Men start managing companies at just a slightly younger age than women: the average age of female managers is 47 years, and male – 46 years of age. According to the data, a total of 98,127 people worked in the position of corporate managers in Lithuania at the beginning of March, out of which 30% were women, showing the sorry state of affairs.
It is often believed that more women than men are employed in trade, but businesses in this sector are almost three times more likely to be managed by men: 27% women and 73% men.
“Although there is a bias in historically male employee dominated industries the female employee dominated industries are still majority led by males, so the logic does not hold. Across all industries the focus must be on executive management selection on merit alone,” says Jekaterina Rojaka, Creditinfo Lithunaia‘s COO.
According to a report done by the United Nations, women remain significantly underrepresented in all aspects of decision-making, and violence against women in public life is widespread. The attitude that women should not have public roles, enduring norms about gender roles and legal discrimination compound these challenges and devalue women’s contributions to decision-making, threatening sustainable development. The report recommends that in order reach equality in participation and decision-making in public life, it is necessary to implement international and national commitments and norms, including through temporary special measures, create more enabling environments and institutional systems, reduce violence against women in political life and strengthen the voices of women, who face multiple forms of discrimination.
According to another report by the UN Women, women are at the forefront of the battle against COVID-19, as front-line and health sector workers, as scientists, doctors and caregivers, yet they get paid 11 per cent less globally than their male counterparts. An analysis of COVID-19 task teams from 87 countries found only 3.5 per cent of them had gender parity. As a result, this year’s International Women’s Day is a rallying cry for Generation Equality, to act for an equal future for all.
Creditinfo Group
Creditinfo has a rich diversity of talent within the company. In each of our offices we have a mix of nationalities, genders, ages, cultures, sexual orientation, education among others. These differences within the Creditinfo enable the company to thrive and help us to embrace our company values of respect, innovation and no nonsense and ultimately, we create greater trust, internally and with our clients.
We strive to achieve a balance of genders within each of our 30+ markets, however we still see today a lower number of female applicants for certain roles during the recruitment process, often IT and analytical roles, which limits our options when hiring. Globally, we have 34% females and 66% male, and those percentages are also mirrored in management positions worldwide with approximately 63% male and 37% female.
With focus on International Women’s Day, we asked the Group HR & Operations Support at Creditinfo Group for her views on closing in on the gender gap.
“International Women’s Day has given us an opportunity to celebrate the achievements of women worldwide and to also give thought to those women who are not so fortunate. I consider myself lucky to have worked for companies throughout my career that largely support women’s equality, Creditinfo being one of those, where we celebrate and recognize efforts by the women in our company. Recently, our General Manager from Ukraine, Kateryna Danylchenko was recognized as one of the top-50 most influential women of Ukrainian Fintech and these are among some of the achievements we are always proud of. It’d be great to see a more equal split since women’s full and effective participation and leadership in of all areas of life drives progress for everyone”, states Emma Camilleri, Group HR & Operations Support at Creditinfo Group.
#GenerationEquality #IWD2021
