A “fasten your seatbelts” moment could soon be here. If history is any guide, and depending on the severity of a downturn, large enterprises with weaker balance sheets that have sailed under the radar due to their strong in-year performance could hit the ropes. The current economic climate suggests we are here for a long haul! It’s time to make all data actionable.

By contrast, more agile enterprises, who are improving their early warning systems using advanced analytics, creating mechanisms to be able to increase the resilience of their balance sheet may have a better chance to emerge as winners.

Advanced analytics focused on Asset Quality and capital adequacy could prove as valuable guideposts as BFSI enterprises prepare for a turn in profitability.

A closer look at problem loans, loan loss provisions as a percentage of gross loans might play an important role as large and medium-size banks take steps to access their preparedness.

Normally, the approach to problem loans has always been via some mixture of loan workout programs or in worse cases a foreclosure on the underlying collateral.

Loan workout processes during slower economic cycles can take be structured as simple renewal or extension of loan terms, restructuring of loan terms based on simple concessions, or more complex TDRs (Troubled debt restructurings).

A prudent approach in preparing for a downturn will need to focus on developing strategies to:

• Recognize deterioration of credit quality early enough for efficient response.
• Build structures that will signal a decline on time.
• Develop ongoing systems to deal with problem credits as they arise.
• Create an effective plan of action to address troubled situations and maximize recovery.

Banks today have extensive processes and mature capabilities to address some of these issues.

The challenge with these existing processes is that they have not been overhauled to be more efficient with the availability of additional information.

Customers conducting businesses with Banks have expedited the use of information and now process transactions over numerous channels. Some of the new brands for example manage a majority of their transactions via sophisticated online marketplaces while others have dedicated chatbots in place to guide customers.

Does your IT support have processes in place to get a pulse around this new information? Do your early warning systems have the right intelligence to access declining asset qualities and sound an alarm?

Cognino specializes in utilizing explainable AI to augment your existing enterprise analytics. We provide rapid assessment work surrounding critical FISB scenarios and can work hand-in-hand with your existing resources to bring forth impactful insights that will better prepare you in the case of a bad downturn.

Our intelligent CORE platform can easily ingest large volumes of data sets from diverse enterprise systems, monitor social media noise to signal quality of economically impacted customers, provide rapid benchmarking of problem loan metrics with established industry studies, and can help you formulate strategies to mitigate troubled situations and maximize recovery.

Reach out to Cognino.ai and learn how we can augment your core analytics work by pursuing a simple yet sophisticated artificial intelligence strategy to get you prepared and ready to deal better with any potential business outcomes. Let’s make our data actionable.