Developing information sources for identifying and handling financial distress in Latvia

Contracting authorities: European Bank for Reconstruction and Development, European Commission DG REFORM

Beneficiary: Ministry of Justice

Background

Recent years have seen significant improvements in solutions that are available to individuals and businesses for identifying and dealing with financial distress in Latvia. There are a number of agencies and organisations that aggregate information on how financial distress should be identified and handled. However, a complicated language is often used in available information and materials, with individuals and businesses finding it difficult to access the information because it is often published in various unconnected resources. As a result, the information is fragmented, people find it difficult to understand, and it doesn’t help individuals and businesses identify and address financial difficulties.

On 15 September 2021, in collaboration with the European Commission and the European Bank for Reconstruction and Development, PwC Latvia began work on the project “Developing Information Sources for Identifying and Resolving Financial Distress in Latvia.” The project was carried out over a period of 17 months and saw PwC Latvia evaluate the sources of information on financial distress available in Latvia and draw up suggestions for future action to help individuals and businesses avoid or resolve financial distress early. Our deliverables have been submitted to the Ministry of Justice.

Our tasks

The engagement focussed on a number of matters important for individuals and businesses in identifying and handling financial distress. Our tasks were as follows:

Describe the characteristics of these groups and their habits in obtaining information
Carry out an in-depth research into currently available sources of information and come up with a strategy for presenting information in a suitable way or ways

Develop the content of this information

As part of this engagement, we carried out an in-depth analysis of the status quo to identify key trends in communication on financial distress matters in order to assess the information-gathering habits of individuals and businesses and examples of the best practice abroad.

Our engagement team identified the following key challenges:

Latvia lacks overall strategic coordination of communication on financial distress matters.
There is a lack of collaboration in distributing information.
The informational content available to the target groups is sufficient yet fragmented.
A one-way (asymmetrical) communication with the public is mainly used.

Key activities in implementing the engagement

As part of this engagement, we carried out a wide range of activities in collaboration with stakeholders:

16 interviews with representatives of various agencies and organisations involved in communication on financial distress matters
3 focus-group discussions with individuals and businesses
10 co-creation workshops with stakeholders

A sociological survey of 1,000 individuals and 750 businesses

Our collaboration with stakeholders allowed us to secure efficient exchange of information, obtain objective feedback, and ensure our recommendations are suitable for solving the problem.

“Latvia’s business environment is made up of almost 98% small and medium-sized companies, most of them being small. These companies don’t have extensive administrative resources to study complex legislation in depth and to seek answers to questions about solving their problem efficiently. If we want these companies in the economic mainstream and not on the brink of insolvency, we need the government to offer a tool that’s straightforward and easy to use, so that businesses can restructure their income and expenses when they need to. This project will help us improve Latvia’s business environment in the future.”

Mihails Papsujevics, State Secretary at the Ministry of Justice

Our engagement team prepared the following recommendations:

Strengthen the governance mechanism in place for organising communication with individuals and businesses by appointing a coordinating ministry and setting up a cross-institutional council.
Set up a dedicated website for aggregating information on identifying and handling financial distress to improve the understanding and knowledge of how to respond to financial distress. The website prototype is designed as a road map for individuals and businesses to assess their situation and find relevant information.
Prepare printed matter summarising key information for individuals and businesses.

Launch an integrated, informational and educational communication campaign to popularise the brand and content of the website.

Carry out consultancy pilot projects to help individuals and businesses use the website and printed matter and to direct them to relevant agencies and organisations for any necessary personalised and competent support. Pilot projects are planned within the Ministry of Justice (at branches of the National Probation Service and at places of detention of the Prison Administration) and at joint customer service centres operated by central and local government. On completion of the pilot projects, we will consider providing advice on a wider scale.
Conduct regular opinion polls to identify the target groups’ needs for information of a new type or content.

The outcome

As a result of this engagement, we prepared important suggestions and recommendations for future action that will have the government agencies adopt a coordinated approach and will significantly improve the availability of information for individuals and businesses, raising awareness of financial distress matters and encouraging the necessary steps to avoid or resolve financial distress early.

As part of this engagement, we prepared recommendations as well as a detailed action plan for implementing those recommendations – a list of activities and an estimate of required human resources and funds.

We prepared prototypes for the communication materials being offered – samples for the website and printed matter, including an interactive guide for determining the user’s financial position and handling any identified financial distress with formal and informal solutions available to the user. The website is to offer at a single place the information put together by the government agencies on handling financial distress, available support and financial literacy improvements, as well as recommendations for reaching an agreement with creditors (this component was identified within the engagement as missing information that is relevant to individuals and businesses).

The prototypes and content will provide the Latvian agencies with consistency and sustainability going forward and help them implement a single strategy for information exchange aimed at developing and popularising the central website to communicate with stakeholders.

The project was implemented with funding from the European Union through the Technical Support Instrument and in cooperation with the European Commission’s Directorate-General for Structural Reform Support.