CubeLogic Sees Five Trends in Credit Risk
Natallia Hunik, Chief Revenue Officer with CubeLogic, spent some time this week telling me what she hears from the frontline in terms of what clients are looking for these days in the credit area. She classifies these as five important trends in credit risk given the volatility and uncertainty amid the geopolitical moves that are currently impacting commodities.
Overall, she sees a desire to drive increased efficiency with workflows and business process at the core. Firms want to understand their credit and risk exposures at multiple levels and how they are impacted by events in the market.
A specific area where this applies is increasingly credit scoring, she told me. “Many mid-sized entities that have very diverse portfolios and mixture of public and private counterparties struggle to get the financial data or have no way to score them,” she told me. Credit scoring has also been a very manually intensive process grabbing annual financials and other data to score and rescore counterparties. “Clients want to streamline the scoring process and optimize it,” she explained. So, CubeLogic has spent time expanding its reach with the various data providers like S&P, Moody’s, Credit Safe, Credit Risk Monitor and so on to automate much of the process. “We pull in the data automatically and we have logically sequenced the onboarding steps for any energy company,” she said. “For example, we integrated with multiple S&P products and integrated methodologies for scoring companies both public and private.”
A second trend is in KYC – something handled for years in the financial side where it is well orchestrated but is less well developed in energy and commodities. However, it is becoming increasingly important. “Sometimes, it is even unclear where the function belongs organizationally and being very manually intensive, it can be unclear when a counterparty is approved. The KYC people ask for documentation from the counterparty but sometimes do not share those documents internally meaning that credit asks for them again,” she explained. Here again, CubeLogic, had worked hard to integrate with data providers and power the process with workflow helping ease the burden and ensure better communication cross-functionally.
A third trend is something that ComTech often talks about as well. With many disruptive events in the industry, historical price trends often break down and there is a stronger need for stress testing. This was very relevant after the Russian invasion of Ukraine; she told me and is again in demand because of uncertainties around tariffs and so on. CubeLogic had responded by providing a stressing, sensivities and valuation tool to allow users to shock their portfolio in up to ten different scenarios – allowing users to prepare for the unexpected.
Credit insurance was another trend that Natallia has observed being of interest to clients. “We have seen increased use of credit insurance on both sides of the Atlantic. Historically, Europeans had been more experienced with it but now its use is accelerating in North America too,” she said. “Things move fast and there is an increased risk of default, so companies are trying to increase their protection against that.” Moreover, insurance companies are entering the credit insurance specialty market and need tools to help them manage that, she observed. CubeLogic had added an improved ability to enter credit policies and factor it in where needed, she said, to keep track of everything. It had also developed a specific flavor of the platform for insurance companies – an underwriting platform.
An emerging trend, particularly among major market participants, has been the increasing adoption of invoice factoring and discounting to enhance liquidity and transfer credit risk. CubeLogic has responded by embedding functionality to capture, manage, and report on these structures – enabling clients to optimize cash flow, maintain financial stability, and streamline risk operations.
These are interesting times in commodities and energy and new requirements and needs can emerge very rapidly as firms react and respond to market conditions and regulations. By engaging with its customers, CubeLogic has been able to respond proactively to many of these new trends, she told me.
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