Community
Nick Frazer | December 2020
Changing data usage and significantly increased portfolio risk posed great challenges for risk and procurement professionals during 2020. Now, as businesses reopen and we move into 2021, we will start to see credit providers shifting gears from firefighting to addressing the aftermath of COVID-19.
2021 is expected to see heightened risks (particularly credit risks) and interplay between risk types for a long while. For lenders across the globe, S&P Global forecasts credit losses of about $2.1 trillion for 2020 and 2021 spurred by the pandemic, with $1.3 trillion this year--more than double the 2019 level.
Potential losses of this scale make the goal of significant cost savings a necessity. It’s key that risk and procurement managers build the dexterity now to both address the fast-moving environment and lay the groundwork for the future.
Substantial cost savings are a necessity
To emerge from the crisis intact, risk and procurement professionals must use the next few months as an opportunity to accelerate transformation agendas and develop new business models. Crucial to this change is a much-needed focus on how to achieve substantial, yet sustainable, cost reduction improvements.
One way to quickly achieve substantial savings is by proactively reviewing all existing supplier contracts and re-evaluating their terms and conditions in light of COVID-19.
An area we repeatedly see major contract variations is in how much credit providers pay for access to the same bureau data. With prices (per search) often varying by up to 1,500%. This is due to a lack of objective, evidence-based insight into how each bureau measures up against each other, and the variations that different credit providers pay.
Are your contracts fit for purpose in 2021?
Moreover, current uncertainty is exposing the weakness of fixed data contracts and commitments to search volumes. Going forwards, risk and procurement managers will need to conduct regular reviews of data contracts on an ongoing basis.
But to adapt to these changes, you’ll need a high-level understanding of how your data measures up. You may want to look at measures you previously felt were too extreme – such as search volumes, tightening terms, or removing contract limits.
What you can do now:
The expertise of an external partner can bridge the gap between data pricing, quality and accuracy and open up the door to even greater savings and transparency.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
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