Creating Opportunity From Change

Good: Invest in Technology; Best: Integrate and Optimize

Systems investment is necessary to reduce operating cost, saving time and effort through automation. In recent years, forward-thinking equipment finance organizations have driven the purchase of lending and lease origination systems from a risk and regulatory perspective, in addition to one of operational efficiency, due to the necessity of creating a repeatable, sustainable and transparent risk management process. In light of this increased focus on risk management in today's environment, organizations should consider the following points to guide their technology investments:

• Consider solutions that offer more integrated workflow than traditionally found in siloed risk and regulatory management arenas; investing in a solution that automates and manages both risk, regulatory compliance and origination activities will increase operational effectiveness and reduce operational risk.
• Understand how features such as proactive system alerts, workflow engines, business rules, and online validation can help enforce standardization that will demonstrate consistency and safety to regulators.
• Look for embedded tools that promote early awareness of risk.
• Find technology that you can adopt instead of adapt, allowing you to more easily implement new features and meet new regulatory requirements.

Equipment finance institutions have an opportunity to leverage their technology investments to reduce the traditional organizational and technology silos. Finance organizations have found great success in a strategic and comprehensive approach to systems by implementing platforms that integrate origination, portfolio management, financial spreading, compliance, risk management, covenant monitoring, post-origination activities, and analytics across multiple lending lines of business.

Consolidating a system ecology offers a number of advantages:

• Lower overall IT costs.
• Upgrades, changes and future requirements can be done once, impacting multiple functions.
• Lower training on new employee onboarding costs with only one system to learn.

Real-World Examples

To better illustrate the impact in a real-world lending environment, one of our large equipment finance customers recently embarked upon an initiative to streamline operations, meet regulatory requirements, and enforce a consistent credit policy across multiple affiliate business lines and geographies with an integrated technical solution. Project sponsors included IT, Risk and heads of multiple business lines.

This holistic approach allowed our customer to consolidate multiple disparate systems, reduce cost, and implement consistent and comprehensive risk management to support their regulatory compliance requirements. At the same time, they automated lease and loan origination for better customer responsiveness and have been able to enforce consistent operational and credit risk policies with enough flexibility to support the unique requirements each business line and geography needs to thrive in its local market. Without an enterprise solution, they would have been required to implement multiple projects with multiple systems while managing competing objectives leading to an inferior solution, a longer return on technology investment, and a high cost of adapting to changing requirements in the future. Instead, they are able to support the highest level organizational objectives with less cost and effort.

Good: Embrace the New Normal; Best: Anticipate Change

It is becoming increasingly more important for lending institutions to adopt a consolidated approach to its solutions. It has been proven that taking shortcuts is risky and leads to increased cost. For example, one CCAR bank has recently announced that it is expecting to spend an additional $4 billion to clean up risk and compliance problems in the wake of last year's stress testing. As a result, staff must be increased and the bank must recalibrate its business.

If equipment finance lenders are going to learn from their peers in lending, they need to embrace the new normal. They should take the time to holistically rethink the ways that they approach risk management and operations. Technology considerations are a critical part of the solution because processes and tools can be used to meet compliance more quickly, focusing instead on growing their business with strong customer relationships and diverse product offerings.

To turn “good enough to survive” into the ability to thrive, you need to go beyond accepting and responding to the new normal. We have every reason to believe that financial services industry regulation will continue to increase. Organizations can get ahead of the curve by selecting systems that allow them to respond proactively to new regulations, and monitor and change credit policies as quickly as the market.

After committing to the tools and processes needed for growth, not just for basic survival, organizations will find that they have more time to consider and respond to macroeconomic trends. They can leverage technology and human capital to forecast, plan, and identify business patterns for ongoing process optimization that reduce both risk and cost, offset the impact of financial burden more significantly, and identify new opportunities for growth.

Good: Solve the Data Problem; Best: Put Your Data to Use

Data and data management are critical to the overall success or failure of an organization when it comes to evaluating their credit policies and to meet their compliance obligations. The Federal Reserve expects banks to have robust and comprehensive internal data collection methods with hundreds of fields across call reports. Better and more complete data can have a material impact on establishing capital requirements.

One key benefit of single lending origination, compliance and risk management solutions is that they impact overall data governance through both risk and process enforcement. Creating a hub of centralized data and a clear flow of information that is governed by standardization and common rules leads to better upstream data collection and quality, and ultimately reducing cost, time and effort of compliance. Strong practices and systems for data also enable organizations to quickly respond to new requirements and apply information for more sophisticated analytics over time.

If an organization has taken the steps to solve its data problem, it has created a tremendous opportunity. Centralizing and standardizing data leads to vast quantities of useful information that can drive business decisions and reveal trends that will help proactively reduce risk and improve operations.

For example, using business intelligence can enable organizations to view trends in volume to eliminate bottlenecks and understand the impacts of their credit policies and how they were applied. To do so, organizations must treat analytics as a key component of core infrastructure and practices by systematically committing to gather, mine, analyze, and present data in visual ways that meet the need for insight and strategic planning across all levels of the organization on an ongoing basis.

“Big data” is a buzzword for good reason; Your data is a powerful tool. The challenge of analytics for many organizations is in the expense and expertise required to aggregate and make vast quantities of data actionable on an ongoing basis. The investment in the right technology partner that facilitates analytics can help reduce effort and ensure that the data obtained can be leveraged for highest impact with minimal resources.

Good: Process Improvement; Best: Cultural Change

Implementing new technologies is always an opportunity to review and improve process. As you consider process improvement, do not underestimate the power of the “human factor.” Consider how culture and leadership will impact every aspect of compliance and operational effectiveness. Utilizing a system that embeds and applies risk management into every aspect of an organization and its processes will greater awareness and consistency of its application.

Organizations should consider the following to successfully leverage a technology implementation:

• When implementing new technology, review workflows, policies and objectives. Work with a technology partner to maximize the impact of the system by understanding the aspects of human behavior and technology that will drive consistent policy enforcement.
• Put into place an ongoing review of operations and activities using reports and business intelligence tools, so that data-driven decisions can be made for process improvement and greater risk reduction.
• Maximize ROI by considering adoption and alignment of a technology platform. This means practical planning that considers all levels of the organization and users of the system. Training and ease-of-use must also be considered.

Conclusion

According to the lessons of our own external world, if change is inevitable, then opportunity is abundant. If we can commit to using technology to solve short-term problems, as well as address long-term trends, we will be in an excellent position to meet whatever challenges the future brings.

Bill Kramer is senior vice president, product management at Linedata Lending & Leasing. Mr. Kramer manages Linedata Capitalstream, a lending and leasing business automation platform.

The rate of change is noticeably more rapid than ever. Industry analysts, customer surveys and market assessments all highlight the immediate impact of increased regulatory scrutiny, the need to service your customers more quickly, and emerging competition. As a result, the cost of doing business is increasing and the market is showing less stability. These factors are shifting the equipment finance market and changing how we do business.

Thankfully, another key trend in the marketplace ' leveraging technology to address business challenges ' creates opportunity. While you are doing the necessary work to select and implement critical systems to meet today's challenges, it is important that you take advantage of the opportunity to position yourself for a successful future.

There are a number of considerations for ensuring that your technology investment maximizes your chances of success.

Good: Invest in Technology; Best: Integrate and Optimize

Systems investment is necessary to reduce operating cost, saving time and effort through automation. In recent years, forward-thinking equipment finance organizations have driven the purchase of lending and lease origination systems from a risk and regulatory perspective, in addition to one of operational efficiency, due to the necessity of creating a repeatable, sustainable and transparent risk management process. In light of this increased focus on risk management in today's environment, organizations should consider the following points to guide their technology investments:

• Consider solutions that offer more integrated workflow than traditionally found in siloed risk and regulatory management arenas; investing in a solution that automates and manages both risk, regulatory compliance and origination activities will increase operational effectiveness and reduce operational risk.
• Understand how features such as proactive system alerts, workflow engines, business rules, and online validation can help enforce standardization that will demonstrate consistency and safety to regulators.
• Look for embedded tools that promote early awareness of risk.
• Find technology that you can adopt instead of adapt, allowing you to more easily implement new features and meet new regulatory requirements.

Equipment finance institutions have an opportunity to leverage their technology investments to reduce the traditional organizational and technology silos. Finance organizations have found great success in a strategic and comprehensive approach to systems by implementing platforms that integrate origination, portfolio management, financial spreading, compliance, risk management, covenant monitoring, post-origination activities, and analytics across multiple lending lines of business.

Consolidating a system ecology offers a number of advantages:

• Lower overall IT costs.
• Upgrades, changes and future requirements can be done once, impacting multiple functions.
• Lower training on new employee onboarding costs with only one system to learn.

Real-World Examples

To better illustrate the impact in a real-world lending environment, one of our large equipment finance customers recently embarked upon an initiative to streamline operations, meet regulatory requirements, and enforce a consistent credit policy across multiple affiliate business lines and geographies with an integrated technical solution. Project sponsors included IT, Risk and heads of multiple business lines.

This holistic approach allowed our customer to consolidate multiple disparate systems, reduce cost, and implement consistent and comprehensive risk management to support their regulatory compliance requirements. At the same time, they automated lease and loan origination for better customer responsiveness and have been able to enforce consistent operational and credit risk policies with enough flexibility to support the unique requirements each business line and geography needs to thrive in its local market. Without an enterprise solution, they would have been required to implement multiple projects with multiple systems while managing competing objectives leading to an inferior solution, a longer return on technology investment, and a high cost of adapting to changing requirements in the future. Instead, they are able to support the highest level organizational objectives with less cost and effort.

Good: Embrace the New Normal; Best: Anticipate Change

It is becoming increasingly more important for lending institutions to adopt a consolidated approach to its solutions. It has been proven that taking shortcuts is risky and leads to increased cost. For example, one CCAR bank has recently announced that it is expecting to spend an additional $4 billion to clean up risk and compliance problems in the wake of last year's stress testing. As a result, staff must be increased and the bank must recalibrate its business.

If equipment finance lenders are going to learn from their peers in lending, they need to embrace the new normal. They should take the time to holistically rethink the ways that they approach risk management and operations. Technology considerations are a critical part of the solution because processes and tools can be used to meet compliance more quickly, focusing instead on growing their business with strong customer relationships and diverse product offerings.

To turn “good enough to survive” into the ability to thrive, you need to go beyond accepting and responding to the new normal. We have every reason to believe that financial services industry regulation will continue to increase. Organizations can get ahead of the curve by selecting systems that allow them to respond proactively to new regulations, and monitor and change credit policies as quickly as the market.

After committing to the tools and processes needed for growth, not just for basic survival, organizations will find that they have more time to consider and respond to macroeconomic trends. They can leverage technology and human capital to forecast, plan, and identify business patterns for ongoing process optimization that reduce both risk and cost, offset the impact of financial burden more significantly, and identify new opportunities for growth.

Good: Solve the Data Problem; Best: Put Your Data to Use

Data and data management are critical to the overall success or failure of an organization when it comes to evaluating their credit policies and to meet their compliance obligations. The Federal Reserve expects banks to have robust and comprehensive internal data collection methods with hundreds of fields across call reports. Better and more complete data can have a material impact on establishing capital requirements.

One key benefit of single lending origination, compliance and risk management solutions is that they impact overall data governance through both risk and process enforcement. Creating a hub of centralized data and a clear flow of information that is governed by standardization and common rules leads to better upstream data collection and quality, and ultimately reducing cost, time and effort of compliance. Strong practices and systems for data also enable organizations to quickly respond to new requirements and apply information for more sophisticated analytics over time.

If an organization has taken the steps to solve its data problem, it has created a tremendous opportunity. Centralizing and standardizing data leads to vast quantities of useful information that can drive business decisions and reveal trends that will help proactively reduce risk and improve operations.

For example, using business intelligence can enable organizations to view trends in volume to eliminate bottlenecks and understand the impacts of their credit policies and how they were applied. To do so, organizations must treat analytics as a key component of core infrastructure and practices by systematically committing to gather, mine, analyze, and present data in visual ways that meet the need for insight and strategic planning across all levels of the organization on an ongoing basis.

“Big data” is a buzzword for good reason; Your data is a powerful tool. The challenge of analytics for many organizations is in the expense and expertise required to aggregate and make vast quantities of data actionable on an ongoing basis. The investment in the right technology partner that facilitates analytics can help reduce effort and ensure that the data obtained can be leveraged for highest impact with minimal resources.

Good: Process Improvement; Best: Cultural Change

Implementing new technologies is always an opportunity to review and improve process. As you consider process improvement, do not underestimate the power of the “human factor.” Consider how culture and leadership will impact every aspect of compliance and operational effectiveness. Utilizing a system that embeds and applies risk management into every aspect of an organization and its processes will greater awareness and consistency of its application.

Organizations should consider the following to successfully leverage a technology implementation:

• When implementing new technology, review workflows, policies and objectives. Work with a technology partner to maximize the impact of the system by understanding the aspects of human behavior and technology that will drive consistent policy enforcement.
• Put into place an ongoing review of operations and activities using reports and business intelligence tools, so that data-driven decisions can be made for process improvement and greater risk reduction.
• Maximize ROI by considering adoption and alignment of a technology platform. This means practical planning that considers all levels of the organization and users of the system. Training and ease-of-use must also be considered.

Conclusion

According to the lessons of our own external world, if change is inevitable, then opportunity is abundant. If we can commit to using technology to solve short-term problems, as well as address long-term trends, we will be in an excellent position to meet whatever challenges the future brings.

Bill Kramer is senior vice president, product management at Linedata Lending & Leasing. Mr. Kramer manages Linedata Capitalstream, a lending and leasing business automation platform.