Highly Flexible Workflow Engines and Decision-Making Machines as Growth Guarantors

Limit decision processes in receivables finance have a significant influence on business success. A fast and appropriate response to changing conditions and the adaptation of risk mitigation strategies is essential for scaling the business volume. The question is how corporates, banks and financial institutions can react to this in the decision-making processes in such a way that rating, and limit adjustments or purchase decisions are made quickly and effectively in times on uncertainty.

The receivables finance industry and credit insurers are positioning themselves according to current geopolitical challenges, supply chain disruptions, energy and commodity price increases and related high inflation. The need for adjustment in their business decisions arises from sanctions, price increases, higher default risks in industries or with certain customer/debtor groups with problems in the supply chains. There is a need for adjustment in the alignment of processes for risk hedging through hedging measures or with trade credit insurance.

Modern credit risk management systems enable rapid adaptation to changing business environments. For example, an increase in insolvency and default risks in certain industries, which are currently heavily burdened by rising energy prices, or late or extended payments can be detected through the application of data science methods. Data science is significantly supported by modern AI solutions and used in onboarding processes to detect fraud or default risks in debtor monitoring, e.g., in the monitoring of payment experiences. An automatically updated risk assessment based on updated data can directly influence the limit decision.

The adjustment of the decision-making processes follows the credit policy, how much risk appetite is accepted in a specific economic situation and with which hedging measures the business can be financed. Decision-making systems must be able to be flexibly adjusted to request and value required collateral based on an adjusted credit policy. This is especially true for trade credit insurance and the mapping of policies or renewals in the limit decision processes. It is crucial to adapt processes quickly in order to react directly to the market and to make decisions in response to a changed risk situation, opportunities for good business and to use appropriate hedging measure.

IT-supported rating and limit decisions have long been maintained by IT developers, who have made necessary adjustments to the systems in response to changes in credit policy. Major problems arose with the availability of IT resources. Capacities were often not available in time. Quick reactions to new market conditions or in the adaptation of hedging measures were not possible.

To solve this problem, highly flexible workflow engines and decision-making machines enable so-called self-services, which allow the business to make adjustments to sets of rules for rating systems, limit decisions and the associated management of collateral without IT capacities. If such a path is to be followed, then this requires a clear management decision that the business should take over this task and that the processes for adapting a decision-making machine must be reorganized.

It is essential that the business is trained to be able to use the software correctly for rule, calculation, or parameter changes and to go through testing and approval procedures correctly until the system adaptation goes live.

The suppliers of software that allow self-services have an understanding of the adaptation requirements from the business. Especially in the period of transferring self-services to the business, close cooperation with the supplier is of great advantage. It is about merging system competence with business competence in enriching the tasks of the business and enabling them to implement this confidently.

Time to market in responding to market changes is very important. So far, we have looked at the issue of self-services from the perspective of credit risk. But you could also look at it from the perspective of taking advantage of opportunities. So, if there are opportunities in the market to offer adapted financial services and financial products, the time to market is very important. A time of uncertainty and a volatile economic situation requires bold, but prudent, and quick decisions. Now is the chance and you must seize it. Otherwise, competitors will take over.

This article was first published on trfnews.