The COVID-19 pandemic is having a far greater impact on the region’s economy as the months progress. S&P Global’s ratings for the financial institutions in the region is tilted firmly towards the negative.
The ratings agency added that recovery expectations in Asia-Pacific are for a flattish U-shape with activity returning to pre-outbreak levels, if at all, in 2023. If unemployment surges, we may be facing an elongated L-shape.
The COVID-19 response by banks has uncovered the crucial need of banks to have an accurate view of their risk exposures amid the quickly shifting trends in 2020. This is giving rise to what we can refer to as Crisis Analytics, essentially the best-response analytics to the unique features of the current systemic shock, and the surrounding liquidity and credit implications for financial institutions.
Crisis analytics brings together several capabilities that may already be in place in banks but will need tuning for current adverse conditions. These capabilities include predictive analytics, use of new data, enterprise-wide data management, and model risk management.
Figure 1: Crisis Analytics Components
“Crisis Analytics will be the best-response analytics to the unique features of the current systemic shock, and the surrounding liquidity and credit implications for financial institutions. Crisis Analytics brings together several capabilities that may already be in place within banks but will need tuning for current adverse conditions,” said Michael Araneta, associate vice president at IDC Financial Insights Asia/Pacific.
Crisis Analytics is really a call to arms for analysts and anyone who depends on analytics – in other words, basically everyone.
“For example, all banks' predictive models are predicated on the usual, and the typical, for which we have lots of data. In crisis situations, these models fail, and creative combinations of human judgement and analytical insights are needed to plug the gaps and make the organization ready for the 'new normal',” said Dr Christopher Lee Marshall, associate vice president at IDC Asia/Pacific.