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Credit Risk Management: Fuel for Companies

Credit Risk Management: Fuel for Companies

Traditionally, businesses have managed credit risk using a combination of standard due diligence measures, research and common sense. Nevertheless, this approach has proved somewhat problematic over recent years, particularly given the higher levels of risk that businesses are now facing. For this reason, many companies, banks and organisations have established departments solely responsible for assessing credit risks arising from relationships with their current and potential customers, clients and associates.

Prof. Valentino Pediroda is the co-founder and CEO of the European Fintech Rating Agency, modeFinance and a specialist in Artificial Intelligence and Big Data Analysis for Credit Risk evaluation. He will be addressing next month’s Credit Risk Management Forum in Nicosia and here, he speaks exclusively to GOLD about how credit risk analysis and management can help a company grow and how technology has helped in the evolution of this concept.

 

GOLD: What exactly does credit risk management entail? What is its purpose and importance?

Valentino Pediroda: Every company manages commercial credits and debts: credit risk management means understanding how probable it is that credits return as cash, and debts are repaid, and managing that risk. It has a fundamental importance inside any business’ cash cycle, considering that all the corporates worldwide need to convert credit into cash, and pay their debts, to stay safe from bankruptcy and failure.

 

GOLD: How does credit risk analysis and management help the performance and sustainability of companies and organisations?

V.P.: Credit risk analysis and management help companies grow. As they are able to reduce their credit risk and lower their financial exposure, they have more opportunities to invest in new products and new technologies, expanding their activities. It is simply the ‘fuel’ for any company in the world.

 

GOLD: How has credit risk analysis and management developed over the years? What techniques are currently being used?

V.P.: The evolution of credit risk analysis has intensified in the last few years, thanks to high-level technologies: once, analysts would focus on the financials of a company, studying the public data one by one, which required a huge effort and an enormous amount of time and money spent. Now, analysts are facilitated by using complex algorithms – put into simple and effective cloud-based platforms – completely integrated into the companies’ systems (such as CRMs, etc.), and are able to integrate all the public, internal, quantitative and qualitative data, for the most advanced and efficient evaluations.

 

GOLD: In what way can Artificial Intelligence assist in enhancing efficiency in credit risk analysis and management?

V.P.: Today the amount of information available is increasing exponentially: it is undoubtedly crucial for any company to adopt new technologies, integrating all its information into a single, fast and easy-to-use solution to improve the assessment quality. AI is mandatory, helping facilitate all the complex interactions among data (i.e. forecasting results, stress-testing, etc.) in a significant move to improve credit risk management.

 

GOLD: What are the main challenges involved in credit risk analysis and management?

V.P.: Many challenges lie ahead: raising the quality of financial evaluations, selecting and exploiting the most useful data available to gain a ‘utopian’ real-time credit risk management, adopting robot advisors, able to take the right decision in zero time, and developing NLG to simulate and forecast human comments. To us, as a native Fintech team that develops new tech solutions to simplify credit risk management daily, this is such a nice, fast-growing and challenging time!

 

GOLD: You will be speaking at the Credit Risk Management Forum on September 25. What will your presentation focus on and who is it addressed to?

V.P.: I will be speaking about the development of a credit risk model, able to adapt to the international market, based on Artificial Intelligence and Big Data analysis. I chose this topic because it is a really challenging one: you have to take into account many different factors, from fiscal accounts to industries and sectors, from available public data to missing information, and AI helps us in this. After understanding the basics of the topic, the audience – ideally CFOs, CTOs and high-level Risk Managers from corporates and financial institutions – will be able to adopt AI solutions more freely, with a deeper sense of their potential, and to automate all their internal current procedures, thereby saving time and resources.

 

CREDIT RISK MANAGEMENTN FORUM

Wednesday 25 September 2019, 08:30-13:30

The Landmark Nicosia (formerly Hilton Cyprus)

Organizer: Infocredit Group

Gold Sponsor: Euler Hermes Hellas

Silver Sponsors: Eurivex Trade Finance, First Cyprus Credit Bureau (FCCB), FlexFin Ltd, Stylianos N. Christoforou & Co. LLC

Supporters: The Institute of Certified Public Accountants of Cyprus (ICPAC), Cyprus Fiduciary Association (CYFA), Cyprus Employers and Industrialists Federation (OEB), UCLan Cyprus, Nicosia Chamber of Commerce and Industry (NCCI), Junior Chamber International (JCI)

Software Sponsor: Powersoft

Coordinator: IMH

Media Sponsors: INBusiness Magazine, Gold Magazine

For further information regarding the event and registrations please contact IMH: Tel.: 22505555, Fax: 22679820, e-mail events@imhbusiness.com

Website: www.imhbusiness.com

 

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