Tom Wallace is the Director of Risk & Project Management at Volvo Financial Services. He has extensive experience working in various banking and financial institutions and has been involved in modernizing and improving operational processes. He specializes in credit and risk management, financial modeling, process review and re-design, performance analysis and training.
In an interview with Financial Services Review APAC, Wallace sheds light on the trends and challenges impacting the financial industry.
Can you share insights on your current roles and responsibilities?
I am responsible for eliminating traditional and manual processes and introducing technology-focused efficient practices that help manage the risk side of the business better with the limited resources we have. This includes leveraging cutting-edge technologies to adopt fast-track assessment and automated processes for credit scoring.
What are some of the significant challenges impacting the finance industry?
The adoption of usage-based payment structures is gaining momentum in the finance industry. However, many customers often struggle to grasp the concept of usage-based financing due to the prevailing perception of higher costs with such structures. These structures carry the risk of accelerated asset depreciation if overused, complicating the balance between customer expectation and risk management. While there is growing interest among manufacturers and manufacturing-based finance companies to adopt these financing methods, the majority of customer's demands remain low. This suggests a prolonged period of education before widespread understanding occurs.
Another aspect is that it has become crucial to understand the importance of asset values, especially as they serve as a secondary mode of repayment in financing arrangements. Amidst the pandemic and supply chain disruptions, asset values soared. This led to a period of unusually low-risk rates. However, recently, there has been a decline in secondary asset values, necessitating a reassessment of risks. Since the failure to accurately anticipate future asset values can leave both customers and financiers in insecure situations, there is a need to restructure the agreements beforehand.
Customers who benefited from the tax incentives of 2020 and 2021 now find themselves facing a substantial tax bill upon disposing of these needs. This underscores the complexity of contract creation and modification. So, staying updated on changes in deal structures and tax liabilities can significantly impact financial outcomes. To navigate the fluctuating market conditions it is necessary to employ comprehensive asset valuation and risk management strategies.
What are some of the new trends and technologies emerging in the lending management space that help mitigate these challenges?
Flexibility is key in unregulated finance markets, especially when dealing with higher-risk clientele with limited financial options. Implementing fast-track assessment processes and exploring automated credit scoring are integral to our strategy of balancing efficiency with risk mitigation.
“Implementing fast-track assessment processes and exploring automated credit scoring are integral to our strategy of balancing efficiency with risk mitigation.”
Over the last ten years, credit scores have gained paramount importance in the financial industry. Focusing on key financial indicators has now become imperative for organizations to assess credits. This allows the inspection of credit particulars without committing to a full financial statement analysis. It is crucial to redefine models continuously to identify future default indicators accurately. In addition, aligning repayment structures with the cash flows of our clients' businesses has proven effective in reducing delinquencies and losses.
What is your sage advice for young, budding professionals and peers in the industry?
Understanding your client's cash flows and tailoring financing solutions accordingly is essential. Whether assessing future default risks or evaluating asset values, thorough review at every stage of the contract is essential. I advise professionals in the field to prioritize this fundamental understanding in their endeavors, as it can serve as a cornerstone for success in commercial lending.
