Whichever route to market is taken, asset managers are often taking the largest share of the risk when their capital is deployed to fund invoice finance programmes. Even when an insurance policy is in place, the asset manager still faces a number of risks. For example, the portfolio profile might change, the borrower may not have complied sufficiently with the insurance or programme requirements, or there could be an element of fraud.
Traditionally, these risks have been mitigated by periodic reporting from the borrower and management of the assets’ performance by a third party. However, this method has often failed to spot movements in this dynamic asset class.
HOW ARONOVA WORKS
Aronova’s service to our asset management partners is simple: we systematically and comprehensively protect their investments. We help asset managers to grow their capability by employing an approach trusted by many across the industry:
Our first critical intervention is to help our partners choose the right portfolios for their appetite. Through detailed consultation, we establish their funding criteria and configure these into our solution. The eligibility rules enable pre-testing of new portfolios so that new funding opportunities may clearly and reliably be seen.
Whether the file is being uploaded by a third party or an in-house team, we are able to provide immediate analysis of the portfolio’s performance and assess its conformity to requirements. During this process, we run algorithms that automatically validate the data, spotting anomalies and highlighting them for review. This file is also checked automatically against Dun & Bradstreet.
Our strategic partnership with Dun & Bradstreet enables us to match the underlying obligors or suppliers to a DUNS number through a live link to their system. This confirms the exact legal entities in the programme and identifies their associated group structures, helping to mitigate the risk of ‘fresh-air invoicing’ as well as providing information such as sector, date of incorporation and legal form.
This analysis means that our partners can make quick go/no-go decisions with the certainty that the portfolio is what they expect and need.
This early-stage evaluation of the portfolio, and up-front testing of eligibility, means that structuring the programme can be done quickly and effectively. This protects the interests of our asset management partners and fits the borrower’s needs, increasing the likelihood that this will be the funding programme they choose.
Once the client has given the go-ahead, we set up feeds of invoice data directly to Aronova from the borrower’s accounting system, either daily or at intervals agreed for the programme. This live data feed enables whoever is structuring the opportunity and putting the legal agreements in place to refine the programme criteria.
When the final eligibility parameters have been confirmed and written into the system, we run the programme as if live, testing every part of the company and the invoice data. This ensures that only the assets which fall within the defined parameters are allowed through for funding.
Our process for setting up the programme creates the structure to effectively protect the investments of our asset management partners. Once live, our solution continues to test all new data the instant it is uploaded to ensure its ongoing compliance with the eligibility rules. We also run proprietary algorithms that identify anomalies, such as potentially fraudulent behaviour or changes in the programme profile that could present a risk. Problems are thereby avoided prior to funding, and all parties in the programme alerted.
Furthermore, we continue to monitor the status of every invoice in the portfolio to identify changes to invoice data post-funding, something that is nearly impossible to do using traditional reporting methods.
The result is that asset managers are no longer reliant on reports provided by the programme manager. Instead, they have direct access to live reporting on the underlying assets and periodic reports can be delivered as required.
This effective, systematic approach controls the risk profile of the portfolio effectively and significantly reduces the amount of time and effort spent setting up and managing programmes.
“These guys really know what they’re talking about and have never let us down.”