1. In.risk.solutions.inc. “Credit From The Inside Out” The Whys, The Wherefores, and A Few Innovations A Presentation to The Professional Credit and Financial Association of Calgary Quality Inn, Calgary, September 16 th, 2008 Ian Lydiatt President InRisk Solutions Inc. E-mail: ilydiatt@inrisksolutions.comilydiatt@inrisksolutions.com www.inrisksolutions.com (403) 815-2173

2. In.risk.solutions.inc. AGENDA 1.Credit`s agenda vs others 2.Traditional approaches 3.Securities & potential problems 4.Blow-ups & BOPs 5.Credit – a revised role to consider 6.Cost benefits 7.Tug-of-wars with other `credit takers` 8.Credit tools 9.Credit innovations

3. In.risk.solutions.inc. Volatile Times : Opposing Views Internal demands for increased credit Requirement to manage more = better, with less Bottom line left to ‘other’ departments, marketing/mgmt/shareholders need revenues up

4. In.risk.solutions.inc. Credit Relative to Other Departments Credit Relevance for a company - relative in proximity to Mktg Credit’s Motivation – Directly in proportion to finding solutions Credit is not a pawn but a King-Maker

5. In.risk.solutions.inc. The Traditional Approach 1.Assess Financials 2.Compare to Requirements 3.Check references 4.Check Credit Reporting Agencies 5.Conclude = Approve or Reject subject to: –Pre-payment –Parent Guarantee –ILC - Cash Deposit –Credit Insurance – Performance Bond

6. In.risk.solutions.inc. Potential Problems - Securities Cash Deposits or Payments –If taken within 90 days of a business failure –May be deemed to be part of why business failed –Always needs to be in the `normal course of business ` - no lump sums on past due Fix... All arrangements done in writing and in advance as a contemporaneous exchange of agreement & goods-services

7. In.risk.solutions.inc. Potential Problems - Securities Certified Cheque –If certified by debtor...

8. In.risk.solutions.inc. Potential Problems - Securities Certified Cheque –If certified by debtor... Can be cancelled for lame reasons: ``lost – stolen`` (maybe fraud)

9. In.risk.solutions.inc. Potential Problems - Securities Certified Cheque –If certified by debtor... Can be cancelled for lame reasons: lost - stolen (fraud) –If certified by creditor...

10. In.risk.solutions.inc. Potential Problems - Securities Certified Cheque –If certified by debtor... Can be cancelled for lame reasons: lost - stolen (fraud) –If certified by creditor... Can`t be cancelled if... receipt obtained as direct contract between creditor and bank

11. In.risk.solutions.inc. Potential Problems - Securities Visa – MasterCard (not sure on AmEx)... –For large transactions – say over $1,000.00.. These can be reversed without any ability to defend as bank will not irrevocably provide

12. In.risk.solutions.inc. If your gut tells you there will be a problem …. … if you open an account you consider is too risky without security, you are likely right to think it will blow up; it’s just a matter of time ….. be careful

13. In.risk.solutions.inc. “It is nearly impossible to calculate the half life of a landmine, but knowing its properties is half the battle”

14. In.risk.solutions.inc.

15. Credit as a “New” Resource Ask to particpate in weekly sales meetings Provide positive “we’ll find a way” comments Don’t be seen as a ‘No way’ person Volunteer to do a slide presentation to sales & marketing as to what credit does

16. In.risk.solutions.inc. Net Loss Relative to Revenues ($000s to %) 1,000400,000200,000100,00050,00025,000 500200,000100,00050,00025,00012,500 20080,00040,00020,00010,0005,000 10040,00020,00010,0005,0002,500 5020,00010,0005,0002,5001,250.25.5124 …in any loss [left column], you have to double the sales shown at your profit % [bottom row] to recover loss and make target!

17. In.risk.solutions.inc. Credit as a “New” Resource team player meetings essential Legal and credit teams have same view Credit/legal needs to be involved at the start of any strategy or complex scenario so.. –both can interact/develop ideas to resolve –both get all the facts first hand as team members

18. In.risk.solutions.inc. Team Work = Organizational Win Marketing Credit Legal Business Development Mgmt Lead Scope Plan Method Glue Involvement from day one to finish Weekly meetings – updates Ideas Happen – Department barriers melt down

19. Banker Canada Revenue Agency Other Creditors Other Debt Shareholder Payments

20. In.risk.solutions.inc. Credit has to be the ‘gate keeper’ to compare legal entity within the: »Documents »Security »System »Billings

21. In.risk.solutions.inc. Credit has to be the ‘gate keeper’ to continuously examine legal entity »Consolidation changes »Outside agencies »State Documentation »Certificates of Incorporations

22. In.risk.solutions.inc. What to look for as indicators … Accounting irregularities and statements that ask more questions than answer “Nothing we published is inconsistent with what we told people in the past, it’s just more complete” Robert Brace, CFO, Duke, Jan 2002 Sudden change to accept cash calls, security requests, & contract changes initiated by you Sudden increase in credit references, or credit lines – have good reasons when permitting

23. In.risk.solutions.inc. Credit Tools for Volatile Times Insurance broker [no-cost] gives advice on: –credit insurance –performance bonds –other security instruments

24. In.risk.solutions.inc. Barn’s burnt down ……. now I can see the moon Masahide

25. In.risk.solutions.inc. Credit Innovations

26. In.risk.solutions.inc. Credit Innovations Tri-Parti Agreement Term Deposit Assignment Specific Assignment CFO Letter

27. In.risk.solutions.inc. Credit Innovations CFO Letter Credit should be encouraged to call CFO: - arrange for letter - comfort factors, time lines, and majority ownership changes If cooperation is minimal, response is telling: - Results may not be predictable - Profile of individual and company: ‘difficult’ - There is good likelihood of poor communications [and collections] in troubled times

28. In.risk.solutions.inc. “ I am still learning” Michelangelo