From Economic Uncertainty to the Need to Identify the Risk Factors of Non-payments Following COVID-19

Press Release

GDS Modellica

28/12/2021

The overall effect of the COVID-19 pandemic on financial markets is economic uncertainty, leaving behind an unbalanced financial system where it is important to manage risk.

For sustainable growth, credit applications need to be processed in a smart, consistent and profitable way. DataView360 from GDS Modellica identifies risk factors and establishes the measures to take upfront.

As the world finally starts to recover from the pandemic, low vaccination rates in developing countries have become just further proof that the existing strengths and weaknesses around the world have only increased and that gaps, both internationally and domestically, have widened. As the pandemic seems to be drawing to a close, financial markets are currently strongly influenced by COVID-19, changes in business revenues and emerging pressures brought about by inflation.

According to the Quarterly Economic Gazette 3/2021 published by the Bank of Spain, the global economy maintained great momentum over the summer and is now showing signs of slowing down. Furthermore, it seems that the inflation pressures seen around the world were merely temporary. In the short term, at least, the current situation seems to suggest a continuing positive trend despite greater uncertainty in the medium-to-long term.

At present, the market needs greater liquidity and more lines of finance to meet its obligations. Some of the existing obstacles include a deterioration in credit quality, where automatic ratings are generally getting worse; institutional uncertainty when defining defaults and stage 2 migration under IFRS9; and the different levels of exposure for different sectors, with hospitality, tourism and the automotive industry being the most affected by COVID-19. In response to this situation, credit managers have intensified debtor monitoring, implemented new technologies like AI or Blockchain, created specific charts with daily information and revised and modified their loan restructuring strategy.

According to GDS Modellica, the main risk factors when it comes to credit, the market and liquidity in the financial system are:

Absence of continuous communication between regulators and financial institutions to request stress tests and test their liquidity buffers;
Lack of contingency plans for situations of low liquidity;
Lack of early warning indicators;
Worsening of liquidity risk KPIs;
Deterioration in short-term liquidity due to greater volatility and reduced market liquidity;
Increase in available lines of credit;
Increased daily volatility due to unusual payment patterns;
Lack of support from regulatory agencies for banks in order to mitigate market limitations.

In the wake of COVID-19, crisis managers have been watching over transactions and managing risks by establishing priorities within institutions and making an inventory of actions, such as identifying people who are able to respond, gathering information and communicating different financial transactions. For sustainable growth, it is important to process credit applications in a smart, consistent and profitable way. One potentially fast, robust and profitable originations solution, that can be used by any company, is DataView360.

Developed by GDS Modellica, DataView360 is a highly effective and flexible tool for processing and managing applications on a large scale. It takes care of the whole process, from account review and fraud mitigation to origination to collections. This case management interface automates processes using queues, workflows, prioritisation, exception management and cross-selling. This is a preconfigured application that GDS Modellica can personalise to offer companies a system that satisfies all of their specific needs regardless of complexity.

GDS Modellica claims that being able to identify and establish emergency measures, as well as implement existing systems appropriately, allows financial institutions to mitigate both financial and non-financial risks by ensuring operational continuity of the various providers that are subject to different stresses, regulations, tasks and technology that can all compromise operations. Using DataView360 helps improve uptime, increase revenue derived from interest, increase sales, reduce capital expenditure and decrease late payments.