Why We Put ‘Performance’ Into Our Summit

  • JJ Hornblass
  • February 12, 2018
  • 0

© Can Stock Photo / gina_sanders

What’s behind the addition of “Performance” to the Auto Finance Performance & Compliance Summit? Why has the event, which will take place May 9-10 in Dallas, been changed?

To answer these questions, we need to take you back to 2008. It was then, as the credit crisis was taking hold, that the profound weaknesses in risk management in auto finance surfaced. The central problem was a disconnect between risk management and, well, every other aspect of auto finance. Whether it was underwriting, training or collections, risk management largely operated in a vacuum. There was not enough consideration of the risks to, say, collections when underwriting criteria changed. There was too little acknowledgment that, for example, training needed to consider risk management, as well as operational skills and realities. This concept of “Enterprise Risk Management” was just developing in auto finance, and it was urgent that the industry embrace it as the credit crisis started to bite into the US economy.

I recall we sent out an email introducing the Auto Finance Risk Summit in early 2008. A lender sent me a note that day saying it was a fortuitous announcement. He had been literally, at the moment when our email crossed his inbox, discussing a need for an event on risk management.

But above that, the Auto Finance Risk Summit was mainly about addressing the deepest operational challenges of the day, and in 2008 that was risk management. That’s also why in 2014, we added a focus on compliance. It was then that the Consumer Financial Protection Bureau started to target auto finance. Examinations of auto finance companies were upcoming, and this Summit was there to help lenders understand the CFPB’s actions and prepare for greater compliance demands. Since then, the Auto Finance Risk & Compliance Summit was the leading annual event that explored solutions to the thorniest operational challenges facing the industry.

As we prepared for the 2018 event, we came to a realization: the industry has largely mastered enterprise risk management. Of course, there are outliers, but it just is not the case that the industry, as a whole, is ignorant of enterprise risk management and its unique requirements. Lenders without Chief Risk Officers today are the exception, not the norm. This led us to think about the credit cycle and the state of auto finance companies, not just in the US, but around the world. Our view was that while risk management might not be the “challenge of the day,” the challenge of hitting performance targets was. With interest rates on the rise and competition remaining sprightly, not to mention the spats of recent global financial turmoil, it is has become increasingly difficult for lenders to hit the types of aggressive growth targets many investors demand.

“Performance,” to us, goes to the heart of the auto finance operation and to the heart of the effort to overcome these great challenges of the day. It sums up all the various elements of auto finance operations, and, as such, the Auto Finance Performance & Compliance Summit will explore “next level performance,” as we call it: ideas and insights that will improve your operations and compliance. We will delve into the entire credit process, from dealers relations to underwriting to credit models to servicing to collateral values to fighting fraud. Certainly, the stakes are high. Just a few weeks ago operational failure led a bank to abandon its auto finance business because of low yields and a high volume of charge-offs — an unsavory combination, to be sure. We anticipate more of the same.

This event has always been for the doers of auto finance, and by focusing squarely on performance, we are giving industry executives a better chance of success. We have traveled quite far since 2008, but our 11th Auto Finance Performance & Compliance Summit in May will continue leading the industry on the path to more exemplary operational performance. I hope to see you there.

JJ Hornblass

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