Ensuring not too many risks are being taken is not easy.
Although technology and a healthy manufacturing climate are helping
lessors to get it rights
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At a time when the UK lending market is under scrutiny amid
accusations of permitting over indebtedness, some risk managers in
the vendor leasing sector may well be re-examining the rule book.
With risk managers’ traditional balancing act between asset risk
and credit risk remaining as valid as ever, however, it may prove
useful to examine the asset marketplace.
Peter Singleton, a partner in charge of plant and machinery
(P&M) at King Sturge, the auction company, is bullish about the
correct setting of residual values and said the agency market for
used equipment at the present time is “fairly strong”.
“Much P&M involved in construction,” he says, “is buoyed up
in anticipation of the 2012 London Olympics and the planned
increase in house building in the south-east of England. Similarly,
engineering equipment and vehicles are all showing reasonable
strength in maintaining their residual values and risk managers are
not being caught out setting residuals incorrectly.”
Most lessors are rapidly progressing from relying on paper
identification methods – such as passports and driving licences –
to validate their customers. Graham Lund, product development
director at Callcredit, commented:” The biggest trend in
traditional credit risk management at the present time is in making
better use of transitional data and multi-bureau data. Lenders
traditionally take a credit view on a customer the day they accept
his application – and never look closely at him again.” New
technology allows lenders to verify that credit and debit cards
proffered for payment are not stolen or lost.
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By GlobalDataAlso, accurate registration of financed assets continues to be a
crucial part of risk management for lessors, largely because of the
obvious risks of fraudulent conversion. There are three main
agencies with which lessors can register their assets upon
acquisition: Experian, HPI and Trader Data Systems.
Paul Phillips, chairman of the Finance & Leasing
Association’s asset registration group, stressed it was
particularly crucial for lessors registering non-wheeled assets to
double check the validity of identification numbers with their
suppliers because duplication of identifier numbers with other
assets was not uncommon. This problem is exacerbated where lessors
fail to use the full 17-digit Vehicle Identification Number to
register against.
“It is important,” he said, “for lessors to have robust data
registration and deletion systems. Otherwise, they can become
inconvenienced by enquiries because they have not deleted their
interest when the goods are sold.This can be a problem for smaller
lessors – often because they have less automated processes.
He added: “Many companies also make use of the agencies’ timed
deletion’ facility to delete their interest in an asset once the
term of the agreement has ended. Recent developments made by all
three asset registration agencies ensure that unified data exchange
protocols have been adopted, which means, among other things, these
timed deletions are also harmonised across the
exchange.”
