How information visualisation can turn the insolvency tightrope into an open road.

RE-SHAPING INSOLVENCY

W H I T E P A P E R

Copyright © 2013 Encompass Corporation. All Rights Reserved

OVERVIEW 2

INDUSTRY SNAPSHOT 4

WALKING THE INSOLVENCY TIGHTROPE - BRIEF BACKGROUND 5

A BALANCING ACT IN THE DARK 7

THE TECHNOLOGY SAFETY NET 10

VISUALISATION – THE FULL PICTURE IN A UNIVERSAL LANGUAGE 12

THE ENCOMPASS SOLUTION – PAVING THE WAY 13

CONCLUSION 16

ABOUT ENCOMPASS 17

Contents

OVERVIEWConsulting and salvaging are not always the first words that come to mind when referring to the insolvency industry (also known as the restructuring and insolvency industry). The industry has long had a stigma attached to its name for being the ‘corporate undertakers’ that wind up businesses and sell off the assets to recover money. The reality, however, is that insolvency practitioners provide a life line to potentially insolvent businesses, helping them restructure and reorganise their commitments and formulate strategies for a way forward. The primary aim of insolvency practitioners is to maximise returns to creditors and safeguard the interests of stakeholders in accordance with statutory priorities. It is, therefore, critical for them to see a business’s full financial and commercial position, fast.

The industry is often criticised by media and creditors for inflated costs, not appreciating the many inherent challenges faced. The most obvious challenge is that of taking on insolvency jobs without the guarantee of payment. In addition, insolvency practitioners often operate in the dark when taking over the administration of an insolvent company, thereby taking on significant personal risk. The strict industry regulations further add to the woes of the practitioners, stipulating that they properly evaluate all assets and contact the creditors in a certain time frame to inform them of the situation. These are all time critical matters and, hence, place a significant amount of pressure on the practitioners. While they are committed to providing high quality outcomes for all jobs undertaken, insolvency practitioners also need to maximise revenue for their firms and mitigate personal risks. Walking this tightrope of competing priorities and challenges is an ongoing burden and at the same time the key to success.

insolvency practitioners often operate in the dark when taking over the administration of an insolvent company, thereby taking on significant personal risk.

It is critical for (insolvency practitioners) to see a business’s full financial and commercial position, fast.

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Visualisation technology enables practitioners to see relevant information at a glance and save significant time when investigating a company’s financial position.

Technological solutions can provide the much needed support for insolvency practitioners by helping address the many challenges they face. Visualisation technology enables practitioners to see relevant information at a glance and save significant time when investigating a company’s financial position.

This white paper reveals how, due to the heavy reliance of insolvency practitioners on commercial information (such as reports from ASIC, PPSR and Credit Bureaus), cloud based visualisation technology can provide significant benefits. Visualisation can convert the commercial information, that practitioners routinely search and review, into easy to understand multi-dimensional pictures, thereby reducing the risk of human error. This paper also explains how these easy to use solutions, can enable practitioners to draw links and relationships, in order to clearly see company directors’ past and present commitments and make the right decisions. This in turn ultimately facilitates higher quality outcomes at low costs, opening the road to enhanced profitability.

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Australian Securities and Investment Commission (ASIC) reports that there are currently 681 registered liquidators in Australia, a number that has declined since 1999 when there were 874 registered liquidators (Figure 1). At the same time, there were 10,074 corporate insolvencies registered in Australia in 2011-2012 with 78.5 per cent of them having less than 20 employees and 85.5 per cent of them having less than $100,000 of assets . This shows that small to medium sized businesses continue to dominate the insolvency circuit. Insolvencies may be on the rise within the SMB sector, however this is not the case in the enterprise sector where the banks are being particularly lenient towards organisations in that space. Since the GFC, the cautious business spending and borrowing has driven the banks to try and find ways to ‘keep’ their customers rather than replacing them.

INDUSTRY SNAPSHOT

Since the GFC, the cautious business spending and borrowing has driven the banks to try and find ways to ‘keep’ their customers rather than replacing them.

Figure 1 Source: ASIC 2013

1ASIC report on corporate insolvencies 2011-2012

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WALKING THE INSOLVENCY TIGHTROPE – BRIEF BACKGROUND: The insolvency industry has been walking the tightrope for a few years now, with media scrutiny and government investigation intensifying around 2007. One of the main reasons for such scrutiny was the presence of some rogue operators whose unethical work practices adversely reflected on the entire industry. According to a Senate report, ASIC experienced a spike in the complaints against insolvency practitioners between 2007 and 2009. This resulted in a Senate inquiry in 2010 into the industry and the complaint handling process in place by ASIC and Insolvency Practitioners Association of Australia (IPAA), the professional body for insolvency practitioners. It was noted that the complaints against insolvency practitioners between 2007 and 2009, rose at a rate proportionally greater than the number of insolvency appointments between these years2:

complaints against insolvency practitioners between 2007 and 2009, rose at a rate proportionally greater than the number of insolvency appointments between these years.

Source: ASIC and Insolvency Industry Senate Report 2010

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2Insolvency Industry Senate Report 2010

Eight per cent of these complaints were related to remuneration issues including over servicing and over charging by the firms and another 12 per cent related to failure to act in a timely manner. On the back of this inquiry, the Senate made some recommendations including the need for greater transparency by the insolvency practitioners in relation to the charges and costs of insolvency procedures. Furthermore, the IPAA now mandates practitioners to maintain a system that requires staff to record:

» Period of time spent on the job

» Categories of work performed

» Details of work being performed

Although insolvency practitioners have always been meticulous about recording and reporting the time spent on a job, the legislation now draws more attention to this aspect of their day to day operations, putting added pressure on the time critical nature of their work.

Although insolvency practitioners have always been meticulous about recording and reporting the time spent on a job, the legislation now draws more attention to this aspect of their day to day operations

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A BALANCING ACT IN THE DARK:

In the greater scheme of things, excessive paper work is the least of the insolvency practitioners’ problems. The industry faces many other challenges in its day to day operations that are often overlooked by the media and governing bodies. There is prevalent criticism by stakeholders that insolvency firms overcharge for their services. However, others claim there is a strong case for the practitioners charging a premium for their services including the following:

The delicate balancing act of resource allocation is mostly carried out in the dark, where a process of investigation and taking over a business that little or nothing is known about, can reveal many surprises. This uncertainty combined with the pressure of timely communications to creditors and managing competing stakeholder priorities are among the challenges often ignored by the industry’s critics.

» The complex and unpredictable nature of the job

» A high exposure to personal liability and risk

» Other extraneous tasks that need to be carried out in the liquidation process

» Third party engagement where necessary for the liquidation process

» No guarantee of fee generation from insolvency jobs that still utilize a firm’s resources

the delicate balancing act of resource allocation is mostly carried out in the dark, where a process of investigation and taking over a business that little or nothing is known about, can reveal many surprises.

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In a recent survey conducted by Encompass Corporation (November 2013), 95 participants from the insolvency industry were asked:

» what are the biggest pain points for an insolvency practitioner, and

» what the critical aspects of their role are.

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Pain Points of Insolvency Industry

Critical Aspects of InsolvencyPractitioners’ role

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It can be seen from the responses that managing reputation and managing competing stakeholder interests pose significant issues for the practitioners and result in a juggling act when trying to mitigate risk and ensuring profitability of the jobs undertaken. Delivering high quality outcomes and understanding the full financial position of a company also scored very high when it came to the critical aspects of an insolvency practitioner’s role.

It also needs to be kept in mind that timely and clear communications play a significant role in the insolvency process. When it comes to engaging stakeholders, it is not as easy as sending out emails to advise them that a certain company has become insolvent. Insolvency practitioners deal with creditors from all walks of life, and therefore, need to ensure that the information they provide to the creditors is easily understood - be it a tradesperson or a professional. A clear and simple language has the advantage of putting all stakeholders on a level playing field ensuring that creditors can respond to what they are owed.

Insolvency practitioners deal with creditors from all walks of life and therefore, need to ensure that the information they provide to the creditors is easily understood - be it a tradesperson or a professional.

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THE TECHNOLOGY SAFETY NET While many technological solutions are available on the market, insolvency practitioners are time poor and traditionally rely on manual processes. A survey conducted by Encompass in November 2013 shows that in order for insolvency practitioners to consider adoption of a technological solution it must have the following attributes in order of priority:

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Ease of use

Error reduction

Revenue generation

Cost savings

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Technology Priorities for Insolvency Practitioners

1. Save them time,

2. Reduce the risk of human error,

3. Be easy to understand and use,

4. Reduce costs, and

5. Generate revenue

These results are in line with the challenges faced by practitioners in their day to day practice where they are involved in the juggling act of managing competing priorities.

Technological solutions currently used within the insolvency industry, such as electronic document storage, data analytics, practice management software and email communications help address the abovementioned priorities by providing assistance during the course of a job and help with the ongoing investigations. However, in order to steer the ongoing investigation in the right direction and to ensure high quality outcomes, insolvency practitioners need to have a clear knowledge of the links and relationships between assets and directors at the beginning of a job.

Visualisation technology can provide this particular advantage to them. Such solutions are critical to help mitigate risk that insolvency practitioners incur with each job they take on and ensure that they are meeting their primary objective of maximising returns for the creditors as well as remaining competitive. Insolvency professionals, therefore, need to start seeking out technology solutions that will give them the full picture, fast and help them enhance efficiencies from the very beginning of a job

…insolvency practitioners need to have a clear knowledge of the links and relationships between assets and directors at the beginning of a job...visualisation technology can provide this particular advantage to them

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VISUALISATION – THE FULL PICTURE IN A UNIVERSAL LANGUAGE: We are, by nature, visual beings. A picture is processed 60,000 times faster by the human brain than words. A technological solution that creates a visual picture of people, companies, property and assets involved in a job (i.e. commercial information) provides a very pertinent solution for insolvency practitioners, not only in terms of being able to see the full picture fast, but also as a mechanism for sharing complex information with ease. When practitioners are able to find relevant information fast from a haystack of data, it mitigates the risk of human error and oversight and saves a considerable amount of time. This is the main reason for the rise in the adoption of visualisation solutions and the use of infographics by people across industries. Time-poor corporate professionals rely on ‘at a glance’ overviews of reports before drilling down into the relevant data because the pictures can immediately reveal the important issues that need addressing and help prioritise actions. In other words, visualisation can turn information into actionable insights, instantly.

However, there is an added benefit of visualisation in the case of insolvency practice. When the big picture of a company’s corporate tree is instantly available, it also helps practitioners uncover other business opportunities or find assets that may help to restructure a potentially insolvent company. The bottom line is, a technological solution that converts commercial information into an actionable visual format plays a critical role in making the right decisions from the very beginning of a job and preventing re-work further down the line.

A technological solution that creates a visual picture of people, companies, property and assets involved in a job (ie. commercial information) provides a very pertinent solution for insolvency practitioners

a technological solution that converts commercial information into an actionable visual format plays a critical role in making the right decisions from the very beginning of a job and preventing re-work further down the line.

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THE ENCOMPASS SOLUTION – PAVING THE WAY:Currently there are a number of software solutions on the market that allow companies to convert their internal information into more traditional forms of visualisation such as pie charts, graphs or heat maps. However, insolvency practitioners also heavily rely on external information sources (such as ASIC, PPSR, AFSA, Land Title Offices and Credit Bureaus etc.) to make their decisions and get an idea of a company’s commercial position. These reports, obtained from Information Providers and Credit Bureaus, are presented in linear PDF format where in some cases, hundreds of pages need to be read through to extract relevant high value information. Furthermore, the information is usually complex, text based and difficult to standardise. Re-entering data from these reports is error-prone, tedious and time consuming.

These reports obtained from Information Providers and Credit Bureaus are presented in linear PDF format where in some cases, hundreds of pages need to be read through to extract relevant high value information.

This is where Encompass, a cloud based visualisation solution, fills the gap and addresses a real need for practitioners to overcome these challenges. Encompass instantly converts commercial information into a picture with simple point and click functionality. This enables practitioners to more easily and accurately foresee the complexities of a job from the very beginning and, as a result, make better decisions around which jobs to take on and how to allocate resources to ensure profitability. With Encompass, users are able to clearly spot links that would otherwise be difficult to see in an information haystack, uncovering potential risks, as well as opportunities.

Encompass instantly converts commercial information into a picture with simple point and click functionality.

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While the commercial information is always available in a picture format in Encompass, the solution also offers a number of other benefits beyond just the visualisation aspect. To start with, simply being able to access multiple data sources from one easy-to-use place and conduct multiple searches at once, offers significant time savings.

Another benefit, highly valued by insolvency practitioners, is that Encompass presents the information in an Excel table style format for cross checking and extracting other details from the reports that may be needed to fully understand security interests. For example, PPSR data can be easily filtered and sorted by collateral class,

and registrations with PMSIs or ALLPAAPs can be identified immediately.

This multi-dimensional view of commercial information and the ability to quickly and easily identify flags offers the much needed peace of mind when it comes to ensuring the best decisions are made and personal risk is minimised.

The other less obvious, but very valuable benefit of Encompass is its ability to clearly record the due diligence undertaken by practitioners during the end-to-end insolvency process in a way that can be easily understood by stakeholders at all levels, facilitating compliance.

With Encompass, users are able to clearly spot links that would otherwise be difficult to see in an information haystack, uncovering potential risks, as well as opportunities.

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With visualisation at its core, Encompass assists processes such as sharing, managing and optimising the use of information across teams, departments and borders. It puts data into perspective by extracting, consolidating and displaying links instantly in an interactive online format.

For an increasingly mobile workforce, this cloud based solution means that the information can be accessed anytime, from anywhere, in an easily retrievable format. The online search, review and manage ecosystem enables firms to get more done in shorter time frames with minimum effort, minimum waste and maximum efficiencies. This in turn ultimately increases the profitability of each and every job while paving the way to deliver high quality outcomes.

From this...

...to this!

The online search, review and manage ecosystem enables firms to get more done in shorter time frames with minimum effort, minimum waste and maximum efficiencies....ultimately increasing the profitability of each and every job.

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CONCLUSION

Insolvency practitioners face many challenges in their day to day lives, walking the tightrope in order to deliver high quality outcomes and protect their reputation while avoiding exposure to personal risk; they do this along with the balancing act of managing competing stakeholder priorities and efficient use of scarce resources. The increasing regulations and scepticism surrounding this profession further compound the challenges already faced by the practitioners.

This is where technology, and in particular visualisation technology, can help turn the insolvency tightrope into an open road. Commercial information obtained from Information Providers and Credit Bureaus is heavily relied upon by insolvency practitioners. Encompass, with its capability to automatically convert commercial information into easy to understand pictures, allows practitioners to make informed decisions from the very beginning of a matter, by being able to assess a company’s full commercial position, fast. Furthermore, Encompass can provide the means to consolidate, manage and review commercial data effectively, which translates into significant time savings and effortless reporting, while reducing the risk of human error. In combination, these benefits go a long way towards streamlining work and thereby easing many pressures felt by insolvency practitioners.

This is where technology, and in particular visualisation technology, can help turn the insolvency tightrope into an open road.

Encompass can provide the means to consolidate, manage and review commercial data effectively, which translates into significant time savings and effortless reporting, while reducing the risk of human error.

Encompass Corporation is the developer of Encompass software and is based in Sydney with over 40 employees and growing fast. Encompass is a web-based application that powerfully and securely consolidates corporate, personal, property, asset and other disparate data sets from a growing list of regulatory, information provider and credit bureau sources. In Australia, these include the company’s regulator - ASIC, Bankruptcy and Secured Interests Registers, Land Title information and other Government Regulatory data, GDC personal verification data, RP Data/ Core Logic property AVMs and reports and Experian commercial and consumer credit reports.

Encompass displays people, property, companies

and assets, as symbols on an interactive visual chart in your web browser. This visualisation can then be used to uncover relationships, access legal documents and find out more about different entities in the picture. The resulting intelligence can be saved, refreshed and shared to grow revenue, reduce costs and increase productivity.

Encompass Corporation has recently established offices in the UK and has its sights firmly set on North America and other international markets.

For more information visit www.encompasscorporation.comor call 1300Encompass

ABOUT ENCOMPASS

@ @ @

Encompass Corporation Pty LtdLevel 4, 65 York Street Sydney NSW, Australia 2000 1300Encompass info@encompasscorporation.com

Encompass Corporation Level 9, 440 Collins Street, Melbourne 3000 1300Encompass info@encompasscorporation.com

Encompass Corporation Pty Ltd10th Floor, 3 Hardman Street, Spinningfields, Manchester. M3 3HF +44 7885675083 info@encompasscorporation.com

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