UK’s largest credit risk firm highlights biggest changes in credit risk over last 10 years
The UK’s largest risk analytics consultancy, 4most, is celebrating 10 years in credit risk analytics this month. Working with many of the UK’s mainstream banks, building societies and lenders, the company, which was named in the Financial Times as one of Europe’s Fastest Growing Companies in 2019 and 2020 and has been listed multiple times as a Sunday Times Fast Track 100 company, having grown from four to almost 200 employees since it was first established in 2011.
Mark Somers, chairman, who co-founded 4most in 2011, reflected on the most notable changes in credit risk over the last decade, “Ten years ago banks were more reliant on legacy IT systems for credit risk and were generally constrained by computing capability. This along with the arrival of cloud computing and the emergence of a vast number of challenger banks and fintech lenders, has significantly challenged the status quo. The evolving regulatory landscape with IFRS9 and the numerous changes to IRB in terms of default definition and the approach to PD cyclicality, has also kept us on our toes as a business and has provided an opportunity for us to support a wider array of clients.”
The city-based firm is also predicting a consolidation of lenders in the UK over the next 10 years based on the notion that the number of retail and SME banks for the scale of the UK economy feels somewhat inefficient.
Managing director at 4most, Rob McDowell explained, “We are already seeing some new models of lending coming to the fore, including ‘buy now pay later’ and open banking-based offerings, which present a real challenge to credit card providers who have been relying on revolving credit balances at expensive interest rates. Perhaps more interestingly, we are anticipating the established tech giants in the UK to launch banking platforms in the not-too-distant future, possibly linked to the roll out of digital currencies. It is a market these players have left alone for some time, but it is likely only to be a matter of time before that changes.”
4most has also predicted that credit risk will be revolutionised in the next 10 years by climate change, suggesting that the accelerating climate emergency will lead to a re-assessment in the assumptions around what is considered to be a safe investment for businesses.
Somers highlighted that “Physical risks will need to be monitored more carefully over coming years and credit policy will be increasingly used by central banks to drive households and industry to transition to a greener economy. As a result, credit risk decisions based on climate factors could indeed become one of the key drivers for change that accelerates the green revolution.”
The move towards a greener economy has also had an impact on future plans and areas of expansion for 4most as it looks to support more lenders and investors on climate change risk in the future. Historically, the firm has operated in credit risk, analytics and regulation in the financial services sector, but has also revealed it will look to grow its services into a range of new sectors including general insurance, open banking and decisioning platform implementation and support.
4most has also experienced further growth over the last 10 years across Europe and also the Middle East via its joint venture with partner 4pi. Part of the 4most Group, 4pi also comprises a team of credit risk analytics experts supporting banks and financial institutions.
McDowell added, “Being an employee-owned business we are very proud of our journey to date; our people have always been our biggest asset and all of our consultants are permanent employees. It is certainly an exciting time for the business right now as we look to consolidate our services and expand into new sectors across the UK, Europe and the Middle East.”