According to Christine Lagarde, a French politician, businessperson, and lawyer serving as President of the European Central Bank, at the 2021 World Economic Forum, this year will be the “year of recovery”. This will not happen overnight, however, and the first part of the year will continue to be plagued by uncertainties. In line with what it has been doing since the beginning of the pandemic, the European Central Bank’s (ECB) goal is to ensure support to “all sectors of the economy and make sure that financing conditions remain favorable”, still according to Lagarde.
The idea is to be able to cross the bridge to recovery and a “reopening economy”. When that happens – likely midway through the year – COVID-19 relief money will no longer be relevant. When these broad range emergency support measures expire, they will likely be replaced by more “targeted schemes” and more conventional state support programs. This means some companies will benefit from these programs and continue to get outside support, and others will not. As an EU official put it, “Companies that are fundamentally unviable should be allowed to fail at some point.” In other words, ailing companies should no longer receive a financial lifeline to hold on to if the reason of their ailment is unrelated to the pandemic.
European member states’ governments will face the daunting task of differentiating between financially stable and failing companies. How will they know which is which? Figuring that out may – and should – involve private sector specialists to assist governments in the task of separating the good from the bad: Which business is too far gone, and which one will gradually recover?
Christine Lagarde talks about a 7-year leap in digitalization in 2020, particularly in Europe. AI and software companies could prove useful in the task that awaits them. Payment patterns, for example, can be taken into account to understand the actual risk of any given company. With AI, our software solution AiVidens PRIM (Predictive Risk Management) enables businesses to assess the health of their debt portfolio in real time by using payment and risk predictions. The tool can be used to show which companies are actually financially stable and which are not. It can contribute to determining the long-term viability of a company. If businesses can anticipate which of their clients are likely to end up failing, they can adapt their strategy and protect themselves. On a more positive note, our solution can also enable a CSR-oriented strategy within business ecosystems. A client’s payment patterns could reflect that late payments or a currently higher risk level are only due to current circumstances.
The pandemic has left many companies unable to pay off their debts. They will need time and support to get back on their feet. Should these companies be excluded from post-pandemic support schemes, they could very well not survive. In a solidarity effort, some businesses are already supporting their clients by adapting collection strategy. This could give them the break they need to keep going and hopefully get back on their feet once the pandemic is over.
If you want to know more about AiVidens’ solution and its connection to SAP, its CEO Edouard Beauvois sat down for an interview with E-3 Magazine to explain what the company has to offer.