In a systemic event such as the ongoing economic shock caused by the widespread COVID-19 lockdown, the question is always to determine which losses are permanent and which losses are tied to deterioration in collateral due to temporary loss of liquidity. Which assets must be written off and which assets can be preserved and brought back to health. In the former the losses need to be taken rapidly and balance sheets recapitalized in order to not consume liquidity on spent assets. In the latter liquidity must be provided by lenders and creditors working together. Inaction or treating all assets alike will drive disastrous value destruction.
The key to making the right decisions and for lenders and creditors to be able to work together is data. The key to data is having the right tools to unlock it. Those creditors which can provide ready data regarding their assets, former cash flows and future cash flows to those lenders who can process that data and make reasoned decisions about the strength of the underlying business and its ability to rejuvenate, will allocate precious liquidity in the form of forbearance and bridge financing where there is value to be preserved.
Data services that can analyze bank statements, payment records, CRA and CCDS data, supply chains and customer links rapidly, accurately and flexibly will drive economic survival initially and wealth generation in the long run. What was once the province of canned credit scores and binary underwriting decisions must now be redeployed to drive dynamic ongoing allocation of liquidity in the form of credit support based on economic models of business viability. Data is fuel, but it only has power if it can be ingested, digitized and analyzed in real-time. Conversely if policy makers provide liquidity to the system, but data analysis is not applied to allocate the liquidity properly, then value destruction will be driven by the application of precious liquidity to dead assets, prolonging the crisis and starving viable assets of resource.
Rapid, accurate and flexible data analysis is the key, time is of the essence.
At AMP, we are seeking to help clients to better understand their portfolio’s health relative to the original assessments upon which they were onboarded, for faster remedial action. Anyone interested should contact us for immediate assistance.
Chief Operating Officer | Director of Data Sciences
AMP Credit Technologies