Michael Ellis, Head of Commercial, Equiniti Riskfactor, talks to TRF News about the new partnership with Codat, and what advantages this cooperation will bring to financial institutions and SMEs.
TRF News: You have recently announced an exclusive partnership with the accounting integration API provider, Codat. Why is this cooperation important for Equiniti Riskfactor?
Michael Ellis: Lenders around the world trust EQ Riskfactor to guide their risk management processes each day. This partnership means that we can further improve the unique risk metrics with a full picture, without placing an increased burden of provision on the SME customer.
TRF News: We are passing a difficult crisis created by coronavirus and we expect risks to increase dramatically. Under the new cooperation, can you please explain how your clients (financial institutions) will be able to manage better the risks in these difficult times?
Michael Ellis: These are certainly unprecedented times, with lenders balancing their traditional lending and moral principles. This is made even harder when considering their requirements to protect employee wellbeing and home working on mass. With employees working remotely, consistency of process will be even more important than ever.
We've released a number of support measures and guides to assist lenders over the last couple of weeks. This Codat partnership is of particular value in the current climate as it improves our remote audit and survey offering through the import of accounting data in to prepopulated templates. These templates allow for remote audits to be completed more quickly and completely in an environment where face to face meetings are not possible.
TRF News: You said that the‘SME customer will no longer have to spend time on manual processes’, can you please detail what you mean?
Michael Ellis: SME customers will no longer need to spend time each month manually submitting information for the invoice finance reconciliation such as the sales ledger and purchase ledger. With Codat this can be provided in a much more secure way than e mail or mail, the benefits will also apply when providing financial data for management accounts. This in turn gives benefits to the lender as the information will be provided in a consistent format without time being spent on chasing information and deadlines being missed.
TRF News: Can you please indicate what kind of information is now available ‘real time’ which was not available before?
Michael Ellis: EQ Riskfactor receives invoice and payment data from a range of invoice finance operating platforms. Some lenders will only receive ledgers for reconciliation on a monthly basis creating a potential lag between issue, identification and action. Taking invoice data, supplemented with management accounts and bank transaction data from the SMEs trading bank account allows for risk management in real time.
TRF News: You mentioned about a ‘dynamic risk assessment’, can you please describe it?
Michael Ellis: When providing revolving facilities, the ongoing monitoring is equally important as the initial assessment of a new client. Day by day availability calculations are maintained by monitoring cash and ledger movements.
Whilst this principle remains un-challenged, we commonly find that the level of diligence during credit assessment is not maintained in life and often. Using our full range of solutions lenders can move from a static snapshot of data to full trend analysis as if a longstanding client and also maintain this assessment in life.
TRF News: Information is important in order to take good decisions, and technique is there to help. Is technique going to replace the human being in taking decisions based on this new partnership? Can you estimate how much of the decision will be done automatically and how much will still rely on a human being?
Michael Ellis: The provision of traditional and alternate data sets will put a lender decision maker in a position of greater informed choice. I believe good people will always remain the biggest asset to any successful lender.
The real value of EQ Riskfactor comes in presenting the most important data in a digestible format, not only at the initial point of lending, but through the life of the client, drawing prioritised focus of decision makers, in the event of anomalies or trend deterioration. EQ Riskfactor is further developing its utilisation of this information to enable decision makers to apply their policies and processes on mass through automation. This will enable consistency across an organisation and empower even the most junior employees with the knowledge and experience of its senior business leaders.