How To Build a Strong Workout Team—Before Workloads Grow Further

As they prepare for a potential uptick in problem loans, banks are taking a fresh look at how they staff workout teams. At RMA’s most recent Annual Risk Management Virtual Conference —and in follow-up conversations since—panelists shared their thoughts: 

Build a pipeline before you’re underwater. Waiting until portfolios are distressed to find workout officers is a mistake. As head of special accounts management at BMO, Stanley Julian keeps a list of internal candidates who’ve expressed interest in managing special loans. The bank promotes awareness of workout practices across the organization—especially among frontline underwriters. “When we’ve done that over the years, we’ve actually had some of the lines of business … join us in looking at how we work files out,” Julian said. That internal visibility helps BMO pull in qualified staff quickly when problem loans spike. 

Create formal rotations to grow future leaders. At Huntington National Bank, Rob Mace’s team launched a rotational program in collaboration with the front line. Staff get stints in workout to gain experience, deepen their understanding of credit deterioration, and build skills they can bring back to other roles. That creates a bench to draw from if conditions worsen. “We have a pretty good pool of talent that we have access to,” said Mace, executive managing director and head of Huntington’s Financial Recovery Group. 

Don’t underestimate the mindset shift. Moving from origination to workout requires more than new responsibilities—it requires a new perspective. “It’s normal to want to put the needs of a customer first,” said Bill Loftus, relationship manager for national banks at ProSight Financial Association. “But when moving to workout, the mindset shifts to shoring up the bank’s interests and doing what is best for the organization.” At BMO, Julian said that’s something potential recruits are made aware of early. “They know the mindset. They know the slight changes,” he said.  

Look for essential traits. Experience is important, but the right qualities are just as critical. Panelists highlighted: 

• Curiosity and tenacity. “You’ve got to figure it out,” said Nina Ross, head of the asset restructuring and recovery management group for the Americas at Société Générale. “The best workout officers really have that desire to figure out what the problem is and to fix it.” 

• Confidence and negotiation skills. “I negotiate for a living,” Julian said. Whether convincing syndicate partners, senior management, or the borrower, the ability to make a strong, well-supported case is key. 

• Calm under pressure. “These are stress situations,” said Mace. The best officers communicate clearly, explain expectations, and avoid escalating tension with borrowers. 

Ross said the market now has a deeper bench of experienced workout professionals than in recent years. However, the need for workouts is growing “as many existing cases are not attracting as much third-party M&A or refinancing interest as a few years ago,” owing to higher interest rates and uncertainty. 

With distress rising and exit opportunities for banks and borrowers dwindling, your workout team is a key defense. Developing the right people now can save a lot of trouble later. For more on this topic, read “Building and Boosting Your Bank’s Workout Team and Capabilities” in The RMA Journal.