While there are several process and technical solutions to the immdeiate problem, the basic problem of addressing the 'human attitude element' seems to have been missed. Some sort of 'sensitivity training' for employees to show them that while their actions are understandable and perhaps even perceived by them to be the right thing to do, has further, loss-making consequences. Making them feel 'caught' and penalizing them will not solve the potentially larger problem of newer loopholes being found and misused.
There are many loopholes in the system as mentioned in the case study. so its important to i) update the software where all these cheque details are entered to avoid insufficient enteries. ii) The appraisal of the branch managers should not be only on business generated, they should be given some target for cheque collections also. iii)The credit for a client should not given until cheque image is uploaded along with the details like cheque no.(in full), date, bank name and amount.
The best method in my opinion would be to allow clients to buy only based on the cash balance that is available with them(no exposures at all) that may in the initial stages be a dampner by way of low volumes but in the ultimate analysis this wil help both the clients and the brokerage houses...Clients will be benifitted by being able to hold on to the stock as long as they are not getting their price(each client has a target price as per his/her risk profile)without inflating the cost as there is no margin funding and therefore no RMS selling in times of market blip. From the broker's side the benifit will be that there will be no additional pressure for RMS and it will be a simple method of carrying out investors instructions of buying and selling
We suggest to impliment the system by improving following
scan Copy of Cheques is been done must on the first entry date and same cheque no on second day Banks Stamp Recipt`s Scan copy should be mandatory so RMS should be done in proper manner
If the broking firms apply strictly the same terms and conditions of RMS to its associates and clients, everything will go smoothly. Needless to say that the credit worthiness of the asociates/clients properly assessed on a quarterly/half yearly basis by a responsible group and entered into the system without fail.
The decision take by Deepak Mehta is short term. I think so he has to take some more discussion as follow: -
· Training is the most important among all employees across all the branches as there is a possibility that employees do not know the seriousness of filling the fake entries in the system. · Take the meeting of all the Branch Manager and discuss the past and current position of the company. The reasons of the bad debts and what is the impact on them because if the parent company survive then only they have the future and also implement the system of appraisal based on the amount of revenue collected by the individual branch. · Make the correction in the software that the double entry of cheque will not possible in the system. Also ask the branched to take the Xerox copy of the cheques or scan copy and save the same in the system for the future reference. · Take a weekly or monthly review meeting with all the branch managers and discuss the last month trends with them what are the sales and what are the money remain un-recovered. · Make a surprise audit of branches and cheque for all the financial matters. Appoint the external agency at it will work more effectively. · Start giving off the incentives to the branches for achieving the minimum debt and good sale figure. · From franchise take the safety amount and they shall be allowed to do the business in respect with that only. Also periodically review the performance of franchise and give them also the incentives. · Modify the software so that without entering all the details it should not work and also put a minimum amount to be entered in the system. Also all details of the customer so the customer can be traced any moment of time.
Make Trading possible thru internet only. Internet software should take care to allow trading as per limit possible and not thru cheques. Inform all the existing customers. Invite them with minimum brokerage and incentives. If they really want to work with you they will join OR they have two option either change themself or look elsewhere where they will do the same thing.
* Integrated software for branches and HO * Payment to client should not be released unless credit for the shares received * No credit for purchase of shares unless and untill payment received from client is credited to our bank account * Daily report on purchase and sale of shares by clients * Daily report on delivery of shares by the client and delivery of shares to the client * Daily report on funds due from client and monitoring of the same day wise (T 2) * Daily report on funds due to client and monitoring of the same day wise (T 2) * In case of default as above status on sale of shares and recovery of outstanding * Systems should automatically sale shares in case of default * Systems should also block the client other holding to the extent of amount due from him
All this would ensure that the recovery from the client is normal
as righly suggested by the crack team, they should panelise the defaulters with heavy charges as 1% or5 so should give the identification number to who so ever is trading on behalf of the clients and in case of credibility loss or non payment on the part of the client the lineint employees will be panelised. and every detail along with the cheque no. should be scanned on real time basis.
There r many loopholes in the system as mentioned in the case study. so its important to i) update the software where all these cheque details are entered to avoid insufficient enteries. ii) The appraisal of the branch managers should not be only on business generated, they should be given some target for cheque collection also. iii)The credit for a client should not given until cheque image is uploaded along with the details like cheque no.(in full), date, bank name and amount.
