IAS 39 has been around in its current form since 2005, so you may be nervous about the transition to IFRS 9. However, as All Blacks legend Brad Thorn discovered, switching from one system to another can bring huge rewards:
Brad Thorn started his professional career playing Rugby League in Australia. When he returned to New Zealand he made a highly successful transition to Rugby Union, winning the Super Rugby title in 2008 and the World Cup in 2011.
So what can this tell us about migrating to IFRS 9?
Well, the move from League to Union required Thorn to adapt to a different ‘code’, adapting skills from one to the other whilst also developing new abilities and expertise.
Implemented well, a good IFRS 9 solution not only satisfies your regulatory requirements but also offers a powerful strategic planning tool, which can be used across the business.
A more granular approach to Loss Forecasting can, for example, inform your collections team of the likely performance of specific groups and play a role in decisions around which collections strategy to allocate to these groups, ensuring that you treat those individuals as fairly as you can throughout the process.
Moreover, a good Loss Forecasting model can help with the management of your portfolios. It can link into areas of ‘Risk Best Practice’, such as the stress testing of customer segments under economic and lending scenarios and help in the understanding of the impact of concentration risks within your portfolio .
But the benefits don’t stop there – once you’ve developed a really robust Loss Forecasting tool, you can use it to provide feedback into your acquisitions strategy.
By understanding loss emergence from sub-sets of a portfolio under a variety of future macro-economic scenarios may be used to tailor acquisition strategies in order to strengthen performance and mitigate emerging exposure risks. In this way, the investment you make in your IFRS 9 solution can be effectively leveraged to help your organisation gain a competitive advantage and drive profitable growth
For more guidance on how Experian can help you successfully transition from IAS 39 to IFRS 9, read our more detailed ‘Loss forecasting under IFRS 9’ paper.