No single strategy is enough to protect portfolios from all the possible risks in the fast-paced world of asset-based lending. But there are a variety of approaches that combine to significantly reduce your exposure to loss or liability.
Asset Compliant Solution has over two decades of successful partnerships with banks, captives, and independent lenders throughout our industry, so we understand all the major pieces on a fundamental level. For lenders, our recommended philosophy centers upon implementing multiple strategies that target the most common and costly issues.
If you’d like to learn more about managing lender risk, click below for a full breakdown within our e-book, Navigating the Minefield: Essential Risk Management Strategies for Asset-Based Lenders, and see further detail about why the strategies outlined below are so effective.
1. Accurately Assess Borrower’s Credit Risk
The ability to assess a borrower’s likelihood of defaulting is an invaluable insight for lenders. However, it’s only as good as the information gathered and considered.
As programmers say, “Garbage in, garbage out,” so if your credit assessment systems aren’t based upon relevant, impactful data, their assessments won’t hold much weight.
At ACS, we don’t just skim surface-level metrics but dive deeper into the true indicators of a potential borrower’s credit history. We consider alternative data sources, AI algorithms, and traditional due diligence to ensure lenders understand borrowers’ credit risk.
2. Proactive Management Options for Accounts at Default Risk
At ACS, we implement proactive management of accounts on the threshold for default risk with a two-pronged strategy:
- Connect with Early Engagement
- Empower Your Collections Team
By adhering to these two strategic guidelines, borrowers can stay informed and a step ahead of situations as they develop. We recommend that clients set certain thresholds, schedules, and training sessions, all of which are available in further detail in our free ebook.
3. Effectively Navigate Local Compliance Laws
Attention to detail is a must when navigating the compliance maze to avoid costly fines and protect critical trust between borrowers and lenders.
Our industry becomes more regulated with each passing year, and the details of compliance vary from state to state. Our team keeps a finger on the pulse of all the significant moves occurring year after year, and our systematic approach to compliance protects portfolios from falling out of sync with local laws.
4. Enhance Organizational and Operational Abilities
As a business grows, it’s common for operational tangles to creep into an organization and slow down its efficiency and performance.
At ACS, we view our clients as true partners. We’ve worked with lenders of countless sizes and industries, and we know what to look for in terms of process improvement. Within our knowledge base, we have technologies, documentation strategies, and compliance certifications that can quickly streamline your organization while also removing potential barriers to continued growth.
5. Maintain High Level of Reputation
The most valuable asset of any brand is its reputation. It cannot be bought outright but must be earned over time based on how you conduct business with every interaction, decision, and policy.
Even with the best prevention strategies in place, on a long enough time scale within the asset-based lending industry, crises will inevitably occur. How this moment is met will speak volumes about your business for current and future clients, and by developing a strong ethical policy and playbook, your team will know exactly how to react.
At ACS, we help clients cultivate their brand’s culture and response plan down to the last detail, so their reputation emerges from potential volatile conflicts pristine and stronger than ever.
6. Align External Relationships with Internal Values
External partnerships are a powerful force multiplier but do come with their own set of inherent risks.
Lenders must thoroughly vet potential partners so they can be assured their internal values are a good fit. This requires a rigorous screening process, agreements, training, monitoring and communication channels, and more.
We advise lenders on how to approach these partnerships strategically and with all the most important variables identified, understood and managed.
While all these strategies are proven to work, to understand and implement them fully, you’ll need to dig further into the details of the processes and reasoning behind them. We created our new e-book, Navigating the Minefield: Essential Risk Management Strategies for Asset-Based Lenders, to provide this information, and if you’re interested in learning even more about how best to protect your portfolio for this year and those to come, sign up now for our free e-book download.