Getting Your Underwriting Team On The Same "Digital" Page

Article #1 in our series of commentaries on working remotely for underwriting teams.

Thursday 27 July 2023

Getting Your Underwriting Team On The Same

It is difficult to predict the long-term impact of the shift to remote work that has been necessitated and accelerated by the COVID-19 and related viruses pandemic. This trend within equipment leasing companies has also been exacerbated by numerous mergers and acquisitions, downsizing, as well as start-up teams coming together from various locations. Additionally, generational shifts and some leadership teams’ desire to have all employees back in the office, often leads to additional friction points. In the long term, the impact of the pandemic on remote work is still uncertain. What is certain is that companies must come to terms and find ways to remain effective, regardless of whether they are looking to permanently adjust to a remote worker model or find a balance that enables them to retain critical workers, recruit new talent and still meet business needs.

This article is the first in a series of commentaries on working remotely and how key functions in structured, commercial, and equipment financing can adapt. In this read, we focus more on underwriting but also highlight a broader set of functional area considerations when your teams are working from home.

Credit Teams Working Remotely

Many companies have had to quickly adapt to having staff work more regularly from home. Overall the transition remains challenging for many organizations and employees, as it requires a shift in how work is done and how people communicate and collaborate. There have also been technical challenges, such as the need to set up remote work infrastructure quickly and troubleshoot connectivity issues. A greater challenge lies with certain functions, like risk and credit, where the use of sensitive information as well as the adjudication process of deals hold unique challenges when your credit team is remote.

There are also numerous positives to having staff work remotely, such as it allows staff to have more flexibility in their schedules, often can lead to increased productivity, and offers cost savings as well as talent retention. For functions like Risk, however, it can be more difficult to communicate and collaborate on a deal credit memorandum, analyze financial statements, and even get into the details of a deal. Telling the deal story well is critical for all deals, trying to do this while working in different places often leads to missed information, lackluster deal presentation, lack of team unity when presenting to an Investment Committee, missed data analysis etc.

Lack of consistent in-person interaction also makes it very hard to train new underwriters, let alone reinforce common approaches to framing-up a deal.  This often leads to inconsistent analysis and missed risks, or opportunities, in a deal. Team relationships and connections with coworkers on a regular basis are very important within a risk team. Credit teams often must wear multiple hats, from gatekeeper to deal enabler. Not being easily available to sales or asset management, for example, can bring additional team stress as well as deal processing delays. It can also be harder for managers to supervise and provide support to remote staff, especially if they are not used to managing team members who are not in the office.

Quick Highlight: PerCina Report Underwriting Technology

PerCina Report is a credit tool technology that was specifically created to help multiple team members collaborate on the same deal, at the same time, from their own desk – regardless of where they are located. More importantly, the tool enables credit, originations and syndication teams to:

  1. Deliver a more compelling credit story or deal summary with deeper analysis.
  2. Generate more deal throughput and pre-screen deals faster using streamlined, digital tools and templates that replace manual, inconsistent processes with the push of a button.
  3. Leverage intuitive credit tools and a customizable underwriting system to work faster and more effectively, as a team, where credit analysts, sales reps, customers and syndicators can all work or provide input on the same credit report, at the same time. This is a very effective for getting customers to upload data directly or answer specific questions as part of the underwriting due diligence. Additionally, the collaboration feature allows risk team members to work together on a document ­–– for training, addressing specific questions, ensuring financials are analyzed consistently etc ––, driving greater consistency and overall better credit analysis.
  4. Gain market advantage by generating a world-class report and syndication package that stand out from the way transactions are presented in the market today by brokers and other firms that syndicate deals.
  5. PerCina Report is Cloud-based, secure and easy to use. In addition, some users use the tool to generate reports for their customers, which can lead to revenue-generating credit opportunities as well.
Technology Considerations For Functions Beyond Risk

While technologies like PerCina Report help remote underwriters, salespeople and syndications collaborate on deal pre-screens or investment memorandum creation more efficiently, numerous other functions and tasks can be challenged by remote working and come with their own technical challenges. Subscription-based tools, like Percina Report, are Cloud-based and the connection is easy through a subscription. Other technologies present their own challenges when working remotely, such as connectivity issues or the need to invest in additional equipment. Before you send your IT team out to find the latest app to solve an immediate problem, consider the following. There are technologies that provide end to end solutions for your entire team that are flexible enough to operate both in the office as well as when your team is operating at home. The majority of these are enterprise solutions and many companies already utilize these systems. There are alternative applications that can be more targeted functionally and may even work with your existing company system. Before either path is considered, a deeper understanding of the remote-working landscape is critical. While you may need only a specific technology solution at the present time, you would be well served to better understand where remote functional tech investment is being made as well as why.

Cloud Computing: Cloud-based platforms and services allow remote credit professionals to access critical data, applications, and tools from anywhere with an internet connection. This enables collaboration, file sharing, and real-time updates on credit-related tasks. These applications are both subscription-based as well as licensed solutions. They tend to be easy to use and quick to adopt.

Credit Scoring and Risk Assessment Software: Advanced credit scoring models and risk assessment tools use data analytics and machine learning to evaluate creditworthiness more accurately and efficiently. These technologies help remote workers make informed decisions on credit applications. These solutions are largely limited (today) from small to mid-sized transactions. While these are not new concepts, new applications are being developed and utilizing a wide range of machine learning and AI. These solutions are available both off the shelf and can be custom developed. It would be wise to keep an eye on these developments as the landscape is evolving quickly.

Digital Document Management and Storage: Cloud-based document management systems and electronic signature solutions streamline the storage, retrieval, and signing of credit-related documents. Remote workers can securely access and manage credit applications and supporting documents online. This is a well-known area and well-used. The key here is determining if your company wants to be in the “document retention business” or simply have access to the data you need when needed.

Video Conferencing Tools: This is another well-known area that provides a range of easy-to-access solutions. Video conferencing software like Zoom, Microsoft Teams, or Google Meet allows remote credit professionals to conduct virtual meetings, interviews, and client interactions.

Collaboration and Project Management Tools: These allow teams to communicate, share files, and track tasks. Collaboration tools enhance communication and teamwork.

Customer Relationship Management (CRM) Systems: Widely utilized with expanding services, including AI and machine learning integration. CRM systems help remote credit workers manage customer interactions, track leads, and maintain relationships with borrowers and clients. This ensures efficient customer management and personalized service.

Loan Origination Systems (LOS): LOS software streamlines the loan application process, from data collection to decision-making and approval. Remote credit workers can efficiently process credit applications and monitor loan status. Solutions in this category truly run the gamut. Understanding what your real business needs are and will be, and how they will change with remote workers, is critical.

Artificial Intelligence (AI) for Fraud Detection: AI-powered fraud detection tools help identify and prevent fraudulent credit applications or transactions, ensuring the security of financial institutions and borrowers. While not entirely new and varying, these solutions are starting to play a wider role in our business. Solutions here help small and medium size businesses protect themselves like larger financial institutions.

Compliance and Regulatory Technology: Similar to AI for fraud detection, RegTech solutions assist remote credit professionals in adhering to complex financial regulations and compliance requirements. These technologies automate compliance processes and reduce the risk of errors and penalties.

Data Analytics and Business Intelligence: This is an area of reasonably well-known, large and expanding solutions. Data analytics tools help remote credit workers gain insights into customer behavior, market trends, and credit performance. This information aids in better credit decision-making and risk management. Look for machine learning and AI to expand and permanently dominate this area.

Time Tracking and Productivity Software: These help teams track the time they spend on tasks and stay organized. More to come on this in the next article.

Virtual Private Networks (VPNs) and Cybersecurity Solutions: Standard, existing, and virtually used everywhere. Also critical for remote work. Remote credit workers must ensure the security and privacy of sensitive financial data. VPNs and cybersecurity measures protect against unauthorized access and data breaches.

Mobile Apps: Mobile applications provided by financial institutions or credit agencies enable remote credit professionals to access critical information, check credit scores, and manage credit-related tasks on the go. Expanding apps for B2B continue to be introduced. Smaller ticket flow businesses are the main users, but mobile apps exist in almost every functional area we care about. Security and use can be an issue, as well as practicality depending on your type of financing business.

Financial Education Platforms: Online financial education platforms allow remote credit workers to stay up-to-date with industry trends, regulations, and best practices, enhancing their knowledge and expertise. Look for this area to grow. Also consider creating your own using one or several applications available (e.g. PerCina Report offers a great way to train new credit analysts and drive knowledge across your entire team).

Actions Risk Leaders Can Take Today

As you consider having more of your team work remotely, as well as work on finding and deploying the necessary technologies to make remote work successful, here are immediate steps team leaders can take to reinforce priorities and get remote credit analysts on the same page and underwriting consistently:

  1. Establish clear underwriting guidelines and have all underwriters acknowledge policies: Develop clear guidelines and standards for underwriting that all credit analysts can follow. These should include guidelines for evaluating creditworthiness, risk assessment, and loan terms.
  2. Provide training and ongoing education: Make sure all credit analysts have the necessary training and resources to perform their jobs effectively. Consider offering ongoing education and professional development opportunities to help them stay up-to-date on industry best practices.
  3. Use a centralized system for storing and sharing information: There are numerous choices here (see above). If you don’t already, deploy a centralized system, such as a CRM or loan origination system, to store and share information about loans and borrowers. This can help ensure that all credit analysts have access to the same information and can make consistent underwriting decisions.
  4. Encourage, and monitor, collaboration and communication: Encourage credit analysts to collaborate and communicate with one another, especially when working on complex or high-risk loans. This can help ensure that all analysts are on the same page and that all relevant information is taken into account when underwriting. Instituting a formal or informal “buddy system” can create a better work environment and reinforce all of the points above.
  5. Implement quality control measures: Implement quality control measures, such as peer review or quality assurance checks, to ensure that all underwriting decisions are consistent and accurate. Deal reviews are common and usually mandatory, but do you review credit report writing and analyses regularly?
  6. Foster a culture of continuous improvement: Encourage credit analysts to continually assess and improve their underwriting processes and practices. This can help ensure that the team is consistently underwriting loans in the most effective and efficient manner possible. Risk teams are not just gatekeepers, they are critical to enabling growth. Continuous improvement is paramount.

Credit-related technologies continue to evolve, and there will be more advanced technologies to consider in the near future. As technology progresses, remote workers in credit can expect further innovations to streamline processes, improve accuracy, and enhance customer experiences. It's important to choose the right tools for your team's needs and to provide training and support to ensure that everyone knows how to use them effectively. In our next installment, we will address more specific solutions and technologies.

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