March 3, 2022 — We’re still in the early days of 2022, but it’s apparent that transparency, or its absence, underpins many core discussions happening across the financial lending sector.
Every few years, a scandal-ridden company inevitably makes headlines through a lack of reporting transparency. The ensuing portfolio wind-down affects thousands of retail investors and costs hundreds of millions of dollars.
While each case presents a sobering example for the markets to learn from, they’re also indicative of a longer trend in the financial industry—and the tech sector more broadly—toward regulation and transparency.
As Tim Kiladze and Greg McArthur note in a recent feature story for the Globe and Mail, gaps in reporting and accountability often substantially contribute to a company’s collapse.
Stricter vetting protocols and more stringent due diligence are standard responses to any scandal or failure, as Leo Almazora notes in a similar feature for WealthProfessional.ca.
Transparency and the Automation Era
And, in the era of automated tools, reporting prompts, and streamlined intake forms, a significant leap toward financial transparency is coming faster than you think.
FlowPoint’s platform makes it easy for lenders and borrowers to have shared and transparent conversations about financial performance. Monitoring changes in field-specific data allows both parties to have timely conversations about emerging shifts in key performance indicators.
Instead, companies can establish a shared source of truth by giving both parties access to the same time-series data room. This change opens new possibilities for analysis while reducing the errors and headaches of manual reporting. Dashboards monitor trends and flag emerging risks and opportunities, freeing up account managers, compliance officers and risk analysts. They in turn gain more time to focus on growth over the logistics of reporting compliance.
Does that mean the financial industry will ever fully eliminate risky investments?
After a decade of low interest rates, private lenders and private debt have a crucial role to play for investors willing to entertain reasonable risk in exchange for a reasonable return. But the cycle works best when lenders have the tools they need to spot and address risk as it emerges—not six months to a year after the fact.
At FlowPoint, we foresee a different world. Automated reporting systems, coupled with intuitive, easy-to-understand dashboards, will help private lending to flourish within the financial sector.
We believe building a reporting score and transparency rating will be a big part of what gives new investors the confidence to invest in lender portfolios knowing that their money is being well managed.