Asset Acceptance Capital Corp. A Practical Approach to Enterprise - PowerPoint PPT Presentation

Asset Acceptance Capital Corp. A Practical Approach to Enterprise Risk Management Detroit Chapter IIA September 14, 2010 1

Presenters • Jeffrey S. Bankowski, CIA, CPA, CFF Jeff is currently the Vice President of Strategy, Analytics, and Shared Services for Asset Acceptance Capital Corp. In his current role, Jeff is responsible for Corporate Strategy, Portfolio Management, M&A, Analytics, Direct Marketing, and Shared Service operations. Previously, Jeff was the Director of Internal Audit for Asset Acceptance. Jeff has also served as the Chief Accounting Officer and Director of Worldwide Accounting Operations for Teksid Aluminum and has held financial and operational roles with BP, KPMG, and the Chicago Mercantile Exchange. He currently serves on the Board of Governors for the Detroit Chapter IIA. • Keith Carlson, CIA Keith is the Internal Audit Manager for Asset Acceptance Capital Corp., which is a leading purchaser and collector of charged-off consumer debt. In his current role, Keith is responsible for ensuring that the day to day activities of the audit department are completed to goal. More specifically, he is responsible for ensuring that the Sarbanes- Oxley initiative as well as the Company’s process improvement audits are completed for the audit year. Keith has 16 years of internal audit experience and prior to his current position, Keith has worked in an internal capacity at Credit Acceptance Capital Corporation, General Motors, Conseco and Allstate. Keith has experience with Enterprise Risk Management, risk-based auditing, and data mining techniques. 2

Agenda and Table of Contents  Company Overview  Profile  Collections  Portfolio Summary  Company Strategy  Enterprise Risk Management at AACC  ERM  Discipline  Internal Audit’s Role  Tools Used  Successes  Challenges  Next Steps  How to use? 3

AACC - Company Profile  Leading purchaser and collector of charged-off consumer debt with roots dating to 1962  Unpaid obligations originating at credit card issuers, consumer finance companies, healthcare providers, retail merchants, telecommunications and other utility providers  From January 1, 2000 through December 31, 2009, purchased 1,090 portfolios with face value of $40.4 billion, investing $998.0 million for an average of 2.47 percent of face value  Headquartered in Warren, Michigan  Public Company since February 2004  Nasdaq: AACC  Credit Facility – required to be rated by Moody’s and S&P 4

Company Collections Overview Collection Channels at Asset Acceptance Capital Corp. FY2009 Call Center Collections FY2009 Legal Collections FY2009 Other Collections 42.6% of Cash Collections 42.4% of Cash Collections 15.0% of Cash Collections  1,009 Total Account Representatives  Call Center Collections in MI, OH, FL, TX, AZ, IL, India  Legal Collections  In-house in MI, OH, FL, TX, AZ, IL, MD, NJ, VA  Forwarding network  Other Collections  Primarily Agency network which is used to manage capacity 5

Portfolio Summary Portfolio by Industry Other(1) , 8.8% Other Installment Loans , 3.4% Auto Deficiency , 3.4% Health Club , 4.0% Healthcare , 6.4% Telecommunicatio ns/Utility/Gas , 7.9% General Purpose Credit Cards , Private Label Credit 51.7% Cards , 14.4% Total Face Value: $40.4 Billion 6

AACC Corporate Strategy  Positioning the company for growth  Drive additional capacity through off-shore initiative  Increase purchasing - expect 2010 levels to exceed historical levels  Improving our competitive positioning  Improved operational efficiencies  Improved analytics  Optimizing our capital structure  Amended credit facility  Review capital markets  Enhancing our financial discipline  Cost optimization  ABM and Business Intelligence applications 7

Enterprise Risk Management – Why? AACC Senior Management determined that an approach to identify, assess, and evaluate critical risks – that could be detrimental to the Company – was essential to its long term growth and prosperity. 8

What is ERM to AACC?  ERM is about establishing the oversight, control and discipline to drive continuous improvement of an organization’s risk management capabilities in a constantly changing operating environment  Ensuring Asset has the right capabilities for managing the most important risks, and getting away from managing risk through pure brute force 9

What ERM Provides to AACC  Proactively identify and better manage Asset’s risks  Distribute resources to better seize opportunities and improve risk mitigation  Minimize unacceptable variability and losses  Respond systematically to our changing business environment  Clarify responsibility and accountability for managing risk  Improve Executive and Board communication including reporting  Protect Asset’s reputation in the marketplace 10

Progression of ERM at AACC 2004………………….........................2008………………………….Current Business (Unit) Risk Enterprise Risk Sarbanes- Oxley Management Management Business risk and internal Business risk and opportunities, Financial risks, hazards and controls, taking a risk-by-risk taking an entity-level portfolio internal controls approach view of risk Protect and enhance enterprise Protect enterprise value Protect enterprise value value Documented and applied across Treasury, insurance and Business managers accountable the enterprise, at every level operations and unit Finance and operations Management Strategy-setting Selected risk areas, units and Selected risk areas, units and Enterprise-wide processes processes 11

How did AACC get here? A Roadmap for Success:  Training on the concepts (Discipline) of ERM Internal Audit Director Point Person   Interview Key Leaders within AACC  Ask “What are the main risks?”  Educate/Train leaders on ERM Break out groups   Training conducted throughout the Company Spear headed by Director of IAD and Controller   Rollout Phase Once training complete (always on-going) rolled out to all areas of the Company  12

Internal Audit Role in ERM  Leading the Company towards ERM  Finding opportunity in change  Using risk management techniques to address pressing concerns  Adapting techniques to fit the Company  Transition over to Management Management owns ERM! 13

Internal Audit’s Role in ERM - Do’s and Don'ts Source: IIA UK & Ireland 14

Discipline of ERM at AACC  Foundation – establish common terms including (stated objectives for the Company, risk frame work, and rating guidelines established) ensuring they meeting the Company’s strategy, including mission, vision, and values  Risk Identification – interview key players to determine what keeps them up at night Risk Management Foundation Risk Risk Evaluation Identification Company & Monitoring Mission, Strategy & Values Risk Assessment Risk Response  Risk Assessment – using rating guidelines, assess potential impact and likelihood of occurrence  Risk Response – work to establish risk responses, starting with basic concepts (accept, avoid, etc) and then detail the response, including Key Risk Indicators  Risk Evaluation & Monitoring – Monitor metrics and KPI’s in order to make adjustments to resources 15

Discipline of ERM at AACC  Point of departure – “Processes are stable and many policies are in place. Some gaps are present in that responses may be reactionary.” Where were we?  How – keep it simple and understandable  Focus on risk identification and ranking  Identify key risk events through interviews  Provide standard guidelines for rankings, based on a 1-10 scale with 1 being the lowest risk or the most controlled  Develop Key Risk Indicators (“KRI”)  Point of arrival – “Process benchmarks are achievable. Corrective action is taken when limits are exceeded.” Where are we headed? 16