Focus on Assessing the Capacity and Management of Business Leaders:

scientific, quality, in-depth, ensuring all professional staff grasp and implement quickly.

Build and perfect an independent risk assessment department.

The independent risk assessment department needs to be built in a way that is both dedicated and capable, true to its role as the final stop in the assessment process. To do so, this department must be in charge of experienced individuals, with courage and opinions, dedicated to the profession, good at professional skills and a spirit of learning, regularly updating new knowledge to meet the risk control needs that the bank has set.

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In addition, for this department to truly be effective, it is necessary to have clear, appropriate, and strong enough mechanisms and policies to empower more and separate this department from other specialized departments, even from leaders. Only then can independent risk assessment work become more substantial and effective.

Strengthening consulting activities for SMEs

Banks can expand their consulting activities for SMEs. Consulting does not stop at explaining regulations and rules to customers, but also considers the effectiveness of the project with them, thereby helping them develop a production and business plan. As analyzed in Chapter II, the weakest point of SMEs today is that they are not able to build feasible projects, and the habit of using professional consulting has not yet formed in the majority of Vietnamese enterprises. Issues that need consulting include: technology information, market tastes, determining a reasonable investment capital structure, managing the production and business process, calculating market inputs and outputs, and long-term effectiveness.

In addition, banks should organize an information network to help businesses. Many SMEs, due to lack of information or inaccurate information, sign contracts that are disadvantageous to themselves. Banks, due to their relationships with many customers in different industries and fields, have experts to collect and analyze information.

Information should be able to meet the missing information needs of enterprises, helping enterprises reduce costs, avoid information asymmetry and increase business efficiency for SMEs.

3.3.3.4. Focus on assessing the capacity and management of business leaders:

To effectively assess the capacity and management of a business, the appraisal officer first needs to collect and exploit all information about the business through channels: business partners, CIC, government agencies, and personal relationships.

In the limited information conditions, the CB's actual access to the unit is extremely important, greatly supporting the work of assessing the enterprise's management capacity. Therefore, to make this work effectively, the CB needs to prepare the following contents:

 Find out the experience and expertise of the company's leadership team. The more experience and the higher the expertise, the better the leadership team's ability to lead the company. In the current period of fierce competition, it is necessary for leaders to not only have abundant experience, but also have knowledge and qualifications to be able to manage well, grasp and respond promptly to market changes.

 Is the management method of the top leader and the executive board scientific and supported by the collective? This is also an important factor because reasonable management will create stability in personnel, unity and solidarity of the whole collective, control the increase in costs, strictly manage customer debts, thereby increasing revenue and profit, contributing to the enterprise's effective operation, being able to survive and develop further.

 Changes in the company's leadership personnel. The departure or entry of talented personnel to the company also helps the appraisal committee evaluate the company's management and operational capacity.

 Another factor that needs to be paid attention to when evaluating is assessing the goodwill of the customer. This factor is very important because the more goodwill the customer has,

If the bank cooperates well, the bank's lending process will be more favorable even when the enterprise is facing the most difficulties. On the contrary, lending will also be very difficult for the bank when the enterprise's situation is not so bad but the enterprise lacks goodwill to cooperate with the bank.

Appraisers often only pay attention to enterprises that are or have been in overdue debt, and pay little attention to enterprises with good debt repayment history or have never had a relationship with a bank. In fact, not all enterprises with bad debt repayment history are not goodwilled, and enterprises with good debt repayment or have not borrowed from a bank have high goodwill. Therefore, this goodwill must be highly appreciated by appraisers, applied to all customers, and requires appraisers to have a lot of experience, the ability to observe, make subtle, in-depth, and sensitive judgments when contacting customers, because not only appraise before and during the lending process (when the enterprise needs the support of the bank), but also assess the goodwill and cooperation of customers in case of risks (if any).

3.3.3.5. Complete the analysis of the financial situation of the enterprise:

Through the financial reports provided by the enterprise, CBTD needs to analyze the indicators well to evaluate the debt situation, repayment ability, average working capital turnover rate, product consumption situation, and profit of the enterprise. When analyzing the data, CBTD pays special attention to the profitability of the loan project and other sources of income of the customer. The reason is that the feasibility of the project directly affects the debt repayment ability of the enterprise. If the project is feasible, leading to effective production and business activities and generating revenue, the customer will be able to repay the debt when the credit contract is due.

In general, the analysis should focus on the following key issues:

- Enterprises must have full conditions for borrowing capital according to specific regulations for each customer and each type of loan to ensure timely collection of principal and interest.

- Loan plans and projects must be effective and feasible.

- Loan application documents must be complete according to regulations. If there is a dispute, legal safety for the bank must be ensured.

- Legal capacity of customers such as legal establishment decision, business registration, decision to appoint legal representative before the law...

- Assess customer's character and reputation to minimize risks.

Through analyzing the current situation of customers, credit officers must make a general assessment of the business situation, the reasonableness of the loan demand, the ability to repay, and the feasibility of the loan plan. In addition, in the process of using capital, banks need to strengthen the inspection and control of the use of loans, thereby promptly providing support solutions and timely advice when SMEs encounter difficulties in the process of using capital.

3.3.3.6. Improving project appraisal and collateral capacity:

Improve project appraisal capacity.

Credit appraisal is the most important step in the lending process because through the credit appraisal results, bank leaders can decide whether to lend or not based on the proposal of the CBTD combined with consideration of the project's risk level, as well as the financial capacity and goodwill of the customer.

- To improve the quality of project appraisal, banks need to pay due attention to appraisal work, specifically:

Arrange for qualified, experienced and competent credit appraisal staff.

Provide and support equipment and facilities so that appraisal officers can access, search and filter project-related information easily and conveniently.

Regularly organize training sessions and courses on project and plan appraisal.

Project for professional staff to update knowledge, information, and improve appraisal skills.

If possible, it is necessary to separate the appraisal department in detail according to the major fields that banks often lend to, for example, the appraisal department specializes in the field of construction, or the department specializes in commerce, seafood, etc. because in reality, not all appraisal officers can be knowledgeable in all business fields. Therefore, the above separation will help appraisal officers have conditions to specialize more deeply in their appraisal work.

Establish and continuously improve the process and guidelines for project appraisal, the more detailed the better, so that appraisal quality is consistent and improved, avoiding differences and inconsistencies in qualifications between appraisal officers, which will definitely affect appraisal efficiency.

In addition, banks also need to apply software technology in project appraisal to quickly process relevant parameters to produce accurate results.

- For appraisal CBs, to effectively appraise projects, it is also necessary to pay attention to the following issues:

When evaluating projects in different fields, officers need to actively consult and learn related information to have an overview of the customer loan project. Industry analysis plays an important role because it shows the future development prospects and feasibility of the project. Contents to consider when analyzing the industry:

Industry development trends: determine what the market demand for this field is now, past, present and future growth rates.

Market share situation of competitors and customers: consider the position, competitiveness, advantages and disadvantages of customers in the current market, the potential of competitors. Government policies and guidelines for this industry: identify factors and trends that are favorable or unfavorable for customers' operations in the future.

Project efficiency is the main source of revenue to repay bank loans, so when analyzing, it is necessary to avoid subjectivity due to too much attention to collateral assets, leading to ignoring important factors of the plan such as: feasibility, source of debt repayment.

Determine the appropriate loan repayment period. This is a very important factor, because if the project's capital turnover is not determined in accordance with the repayment period, it will reduce the effectiveness of the project and greatly affect the customer's ability to repay the debt. Therefore, the appraisal officer needs to accurately determine the enterprise's capital turnover, accordingly, the capital turnover starts from the time the enterprise has cash - buys raw materials - unfinished products

- finished products - sales - receivables - cash, all of which last for how long, to ensure that when the business receives the money for the goods, it is also the time to pay the debt to the bank.

In addition, the appraisal CB also needs to boldly advise and persuade customers to accept loans with loan terms corresponding to the project's capital turnover, especially in cases where the customer's capital turnover is fast, to ensure that the loan is used for the right purpose and is effective. Because customers often tend to prefer to borrow for a longer period than the capital turnover as long as possible to occupy the capital, but this will be very risky for the bank.

Improve the ability to assess real estate assets.

- To ensure the quality of collateral appraisal, both ensuring the interests of customers and not causing damage to banks, commercial banks need to implement the following solutions:

If possible, commercial banks should establish a subsidiary company specializing in valuation. The establishment of this company will help make asset valuation more rigorous due to the constraints of governing processes and regulations, and more professional due to being equipped with modern technologies and techniques to help make valuation more accurate. In addition, appraisal officers also have the opportunity to be trained and improve the necessary appraisal skills to meet the needs of asset valuation with complex factors and high values. In addition, the bank has an appraisal company

Specialized appraisal also helps the appraisal process to be carried out faster because the appraisal officer does not have to perform other tasks, and at the same time creates trust in customers due to professionalism, accuracy and objectivity.

In case there are no conditions to establish a specialized valuation company, commercial banks need to separate the credit department and the asset valuation department. According to that model, the credit department does not perform asset valuation work and vice versa, the asset valuation officer does not perform lending work to avoid overlapping and mutual dependence in the working process, which can easily lead to collusion and compromise on valuation value, affecting the asset valuation results as at Vietinbank and Agribank at present. Separating into two departments as above also helps the appraisal officer have time to research and consult market prices, thereby performing the appraisal work faster, more accurately and more effectively.

Commercial banks also need to pay attention to and continuously train and improve the professional capacity of asset appraisal, especially legal knowledge for appraisal officers through regular, short-term and long-term training courses, ensuring that appraisal officers are updated and enhanced with relevant knowledge to meet the increasingly high, complex and diverse demand for asset appraisal.

In addition, banks need to develop detailed and strict regulations and procedures for receiving and appraising assets to help appraisers have a basis for implementation, avoiding the mentality of working carelessly, sloppily, confusedly, and subjectively, which can easily lead to risks and losses for the bank.

- For the appraisal officers, when conducting asset appraisal, the following points should be noted:

Pay attention to the legality of the property, see if the property is in dispute, litigation or is in the planning or clearance area. With only appraisal through documents and actual examination, in the current conditions, the appraisal CB can hardly conduct appraisal of this factor safely and effectively, or based on the customer's commitment, must try to convince the customer to accept the verification procedure.

property information at the City Department of Natural Resources and Environment. Only then will

Ensure the legality of assets and protect the interests of the bank.

In addition, the ability to sell assets is also a factor that the appraiser needs to pay attention to. For specialized assets such as high-tech machinery that can only be used for a few industries, or special goods and materials that are rarely used, there will be high invisible depreciation, so even if they have high value, it is difficult to value them highly due to low ability to sell. Especially for mortgaged assets such as houses and land, not all assets are easily transferable. The high or low ability to sell assets depends on many factors such as location (large alley, small alley, near the market or center, whether it falls in bad locations such as three-way intersections, manholes, etc.), area (large, small), structure (elephant head, mouse tail or wide at the back, wide or small frontage, balanced width and length or not), value (very high, high or medium, etc.).

For assets of great value, complexity, and high specialization, the appraiser needs to request the hiring of specialized agencies to evaluate the assets as a legal basis for valuation, both to protect their own interests and to limit potential risks to the bank.

In addition, for some special, specialized, and rare assets, it is necessary to assess whether the asset is allowed to be traded or not, by comparing it with the State's list of restricted and prohibited assets, or requesting the guarantor to present additional legal documents stating that the asset is allowed to be traded normally.

3.3.3.7. Focus on scoring and rating corporate credit:

It is better to identify and limit lending to incompetent customers from the beginning than to discover incompetent customers after the loan has been disbursed. Therefore, it is very important to pay attention to the work of scoring and rating corporate credit before deciding to lend to customers.

To effectively score and rank corporate credit, commercial banks need to perform the following tasks:

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