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
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