In our last blog, we talked about how digital data helps lenders increase the frequency with which they monitor their counterparties and stay up to date with risk events that could affect the business health of their borrowers. If you didn’t get the chance to read that, you can catch up on it here. In part 2 of this series, we are showcasing how TRaiCE uses digital data to uncover hidden risks in auto dealership portfolios with some real-world examples. Be it a line of credit, floor-plan lending, or indirect lending, TRaiCE can prove to be of immense value to lenders that take on direct or indirect exposure with auto dealerships. Here’s how that is.
A bit about TRaiCE
TRaiCE is an AI-augmented, automated third-party risk monitoring and financial Early Warning System that is designed to ensure that lenders can monitor entire portfolios comprehensively and daily. Importantly, it includes near real-time information in its risk calculations so lenders always have a current view of the creditworthiness of all their counterparties. The platform’s proprietary algorithms collect digital data using world data/third-party APIs. It then organizes and analyzes this data in combination with financial information to compute risk indices. This end-to-end automation helps risk teams do away with time-consuming risk data collection and analysis. In addition, the objective indices produced by the platform ensure that every entity is analyzed in a bias-free manner. By removing subjective analysis and monitoring non-financial data, TRaiCE effectively adds another dimension of protection to your third-party monitoring.
Use case analysis - How TRaiCE helps uncover hidden risks
To showcase this, we’re looking at two auto dealerships monitored by the TRaiCE platform. For legal and data protection purposes, we will not be using real names.
Company A is a Florida-based auto dealership. It is a public company with a large digital footprint. Company B is a New York-based private auto dealership with a minimal digital footprint. Both companies have been in the news for all the wrong reasons in the recent past.
Florida-based Company A was hit with a class action lawsuit in May 2022. This was followed by a delay in disclosing its financial results, stock exchange delisting, and reports of increasing store closures. As shown below, all of this was picked up by the TRaiCE Digital Risk Index which shows the company’s business health decline progressively (index scores go from positive to negative values or from green to red) from April 2022 onwards.
Company B was charged with engaging in deceptive trade practices by New York City’s Department of Consumer and Worker Protection in May 2022. Thereafter, the auto dealership had its license revoked temporarily and had to pay fines in excess of $750,000. Despite its limited digital footprint, the TRaiCE platform picked up signs of business distress with this particular auto dealership well before these risk events occurred (see below). This is reflective of the many negative customer reviews and complaints that the company had against its name prior to its eventual distress.
As you can see from the above use-case analysis, the TRaiCE platform, with its use of near-real-time data in its risk calculations, can alert lenders to counterparty risks in their auto dealership portfolios in advance. This is the case irrespective of the size of the auto dealership’s digital footprint. By monitoring entities on a 24/7/365 basis, TRaiCE ensures risk coverage that is ongoing. In this way, lenders never miss an event, adverse or otherwise, in connection with its third parties. This can be especially valuable in times of financial stress.
Want to stay ahead of unwanted counterparty risks with daily, AI-powered alerts? Why not try out TRaiCE free for 2 weeks, no strings attached? Sign up here for a taste of simplified third-party risk monitoring!