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Three Ways to Improve Your Risk Performance Through Data Technology

18 July 2019

Whether you’re evaluating risk at one of the biggest commercial lenders in the world or as an independent factor, you’re likely taking on more risk at a faster pace.

And that’s because both Asset-Based Lending (ABL) and factoring continue to grow at healthy rates in the US.  According to the recent Secured Finance Foundation Impact Study, in 2018 ABL commitments by US lenders grew by over 6% and the volume of receivables financed by factoring showed gains in excess of 3%.  So, with this growth, how can you keep risk in check whilst taking on more clients? 

Leigh Lones Leigh Lones Director, Equiniti Riskfactor

Risk-management technology can help you out pace your competitors in a way that reduces frustration and promotes growth. This is especially true as the US market continues to shift from referral-based to data-driven client acquisition. It creates clear oversite so you can spot trends and react promptly across your portfolio. 

By embracing technology, you can collect, analyze and respond quickly to easily accessible data that helps you accomplish three things simultaneously: mitigate risk, improve efficiency, and develop your organization’s talent.

1. Understanding your portfolio’s quality will help mitigate risk

Technology driven risk analytics tools help you better understand your portfolio’s quality.  Though with the automation of analytics, you can move quickly by applying algorithms to your existing data, which allows you to understand what’s working and what’s not.  It can identify what types of clients stay longer and monitor shifts in concentration in geography and by industry. It can also help you flag risk and compliance issues while they are still small and correctible. Additionally, it can provide a true cost analysis of which clients are most profitable, giving you a clear roadmap for where to invest your time and resources. 

For example, an invoice finance business uses our risk management software to pro-actively detect ‘risk flags’ across its entire portfolio. The company has created a Focus List that automatically populates with clients that are showing negative trends, immediately notifying management that further review and action is required.  

2. Improving your operational efficiency 

Risk analytics technology also improves your operational efficiency. Chances are you are now pulling static data from legacy systems despite the size of your company. This often creates multiple daily and weekly reports with redundant information.  While not everyone has the budget or buy-in to truly integrate and aggregate all their available data, there are ways it can help you work faster and more efficiently on any scale.

We all understand even the simplest, most mundane tasks can suck hours out of a day. Risk analytics tools can be programmed to populate forms or group information like annual client reviews, facility changes or the lender’s position on a new debtor, but it can also do much more. It offers new ways to view data with more insight than separate stand-alone resources can. It can also sift through incoming data around the clock, so you come to work better prepared to confidently take action.

Most US-based banks are in the process of shifting to more focused technology. They acknowledge it is critical to find the right partners, as they work through their digital transformation. Recently, a retail and commercial bank opened and built its systems with risk analytics tools in mind. This created greater efficiencies and monitoring so senior managers could make quick, informed decisions. They acknowledge that having instant access to data while managing a busy portfolio has been critical to their growth.

3. Developing your talent’s data IQ 

Another benefit of investing in technology is it gives risk and portfolio managers a greater understanding of how to use their data wisely. Nearly every conversation I have with a client eventually turns to their concerns about how to teach the next generation of talent to assess risk; spot compliance issues, and understand everything that data and risk analytics can do.

Risk-management technology can become an invaluable mentor who is always there. Our customers have found that digital natives increasingly use it in the early part of their decision-making. Their smartphones have trained them to rely on a machine instead of a person to answer a question. Data dashboards build on that well-practiced preference. For senior people, risk analytics technology can validate their thoughts and provides the hard data to support any changes.  

Wherever you are along your journey of using technology to assess risk and future-proof your company’s success, now is the time to take the next step forward. Set yourself up for success in 2020 by determining now the right suite of data-driven risk analytics tools for your organization. Your investment will give you an edge in mitigating risk, working more efficiently, and allow you to make data-informed decisions.

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