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Downturn Readiness Programs: An Ounce of Preparation Is Worth a Pound of Cure

Image Showing Downturn Readiness Programs

Paul Sy, Head of Market Planning for Canada and Latin America at TransUnion, shares how innovative firms use downturn readiness programs to balance risk and customer experience, strengthen brand affinity and remain open for business through tough times.

Positive economic momentum is slowing, according to a recent TransUnion analysis, and at some point the pendulum will begin to swing back and alter the economic landscape. For lenders, the exact timing and duration of a downturn matter less than being ready to seize the moment early, when they have more options. Getting ahead of the curve helps avoid the painful alternative—being forced to react hastily in a crisis.

It makes sense to prepare by analyzing the unique characteristics and challenges of downturns and developing a strategic program appropriate for the new environment. This is precisely what downturn readiness programs do and why they are essential to long-term business success.

But few lenders have in place strategic programs expressly designed for the sensitivities, risks and concerns arising during downturns. As a result, managers are often confronted with troubling, difficult questions during downturns, to which they have few answers: How can we better manage our business in this new environment? Are we doing all we can?

Image showing lenders placing strategic programs during downturns

Managing through the cycle

During downturns, lenders typically either: 1) over-correct and close the taps, or 2) wait for the storm to pass, viewing businesses losses as beyond their control. There may be a better course of action available. Some firms look at downturns as opportunities to differentiate themselves, leverage their expertise and gain competitive advantages.

Image showing strong downturn readiness program

By preparing a comprehensive downturn readiness program, you can better respond to the challenges you face for a more positive outcome that can strengthen your business and brand. Downturn readiness programs help you appropriately adjust your risk strategy, operational capacity and customer service approach; they look at key moments in downturns as jump-off opportunities for competitive differentiation and future growth.

Key elements of a downturn readiness framework

A robust, well-designed downturn readiness framework should include:

  • A cross-functional committee to coordinate efforts across the enterprise.
  • Early warning and monitoring to measure and respond to trends before, during and after the downturn.
  • A balanced mitigation approach that incorporates both proactive and reactive strategies and operational tactics for the front book (acquisition) and back book (account management).
  • Reinvestment and acceleration plans for removing exclusions used for crisis management, identifying safe havens and reinvesting loss savings.

While you should manage core principles during a downturn, you can simultaneously look to differentiate between a customer going through a rough time and a bad customer. You also need to prepare for coming out of a downturn and have strategies to ramp up ahead of others to help capture market share. Winning lenders will look for early signs of expansion and opportunity for early market reentry, while many of their peers continue to keep strict unilateral policies in place and wait for the cycle to clear.

Role of solutions in supporting your strategy

Data-driven solutions play pivotal roles in downturn readiness strategies by helping you:

  • Improve collections
  • Identify potential pre-delinquencies
  • Assess willingness and ability to pay
  • Implement targeted campaigns to help customers manage their credit
  • Recognize opportunities
Learn how to better manage through the cycle

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