How to Succeed in Syndications: The People, Process, and Technology Answers

Syndicated lending has been getting the spotlight increasingly in the past few years. I don’t think we’ve spoken to one financial institution in the past several years that hasn’t asked how we can help them either break into the space or meet ambitious growth goals. It seems that most if not all financial institutions—from smaller regional banks to those with an international footprint—are focusing on syndicated lending as a critical piece of their strategic growth plans. Which makes sense since it allows financial institutions the opportunity to generate higher fee income, build stronger relationships with large corporate clients, and diversify their loan portfolios.

Several weeks ago, I came across an interesting presentation from PwC (Syndicated Loan Ops: Industry Perspectives and PwC Solutions) on the current state of syndicated lending and the challenges financial institutions are facing in this area—whether they were trying to break into the line of business or meet ambitious growth goals. What struck me is how their perspectives and solutions aligned with what we’re not only hearing from our clients, but the solutions AFS is providing to the industry to overcome the challenges. As the presentation pointed out, by helping our clients overcome major challenges around the people, processes, and technology syndicated deals require we help ensure they’ll be able to capitalize on this lucrative market.

The People Issue: Lack of appropriate resources and tools.

Syndicated lending is complex, so the level of knowledge, skill, and coordination for anyone managing this process can be a tall order. For banks that want to grow in this area, the people that are equipped with the knowledge and/or experience required to achieve that growth can be a rare internal commodity. As PwC highlighted (and we’ve seen firsthand with clients), the concentration of knowledge within a small number of employees/subject matter professionals isn’t only risky in the terms of potential loss of all institutional knowledge but can also lead to uncoordinated allocation of team members across deals and ambiguous roles and responsibilities across front and back offices. None of which is a good foundation for growth.

The People Answer: Give your people the tools they need to succeed.

AFSVision was designed with the end-user experience in mind, with a modern, intuitive UI, Job Lists, workflow notifications, online help, and more. And AFS was built on a foundation of excellence in client support. We provide all clients comprehensive training on the system as part of implementation and beyond, with a “train the trainer” approach that enables bank users to train other users, which helps with both protecting institutional knowledge and better coordination between different work groups. AFSVision’s automated workflows and task management features also help here, by enabling efficient and coordinated assignment of team members across deals, mitigating the challenges of uncoordinated team allocation.

The Process Issue: Lack of process automation.

Challenges with internal processes aren’t exclusive to syndicated lending. Across the board in commercial lending, clunky, manual, error-riddled processes lead to inefficiencies and operational risks. An example from the PwC presentation was late payments or missing agent notices disrupting the reconciliation process, causing delays and potential discrepancies. Additionally, the limited communication channels between lead agent banks and participant lenders hinder seamless information exchange and coordination. The processing procedures are often complicated, uncoordinated, and lack clear workflows, resulting in a highly manual and burdensome control environment for reconciling loan payments. This manual approach not only increases the workload for banks but also heightens the risk of errors and inconsistencies.

The Process Answer: Enable end-to-end workflows throughout the lending lifecycle.

Just like this challenge isn’t unique to syndicated lending, neither is the solution: automate your processes. Of course, you need the right technology to enable that (more on that in the next section), but by implementing a system that enables end-to-end integration and straight-through processing, you can solve the majority of your issues—from keying errors to complicated, inefficient processes. With AFSVision’s automated workflows, we’ve helped our clients streamline and automate processing by replacing complicated, risky, and often uncoordinated processes. With end-to-end integration capabilities, they are able to facilitate seamless information sharing and overcoming limited communication issues while reducing manual activities, increasing efficiency, and reducing risk.

The Technology Issue: Banks that fail to prioritize modernizing their technology face significant challenges in the syndicated lending space.

“We don’t have the budget for that this year.” We’ve all heard it, and also had to say it to others. But in the commercial lending space, and especially for syndications, modernizing your technology has to be made a priority. As PwC pointed out, legacy systems often require multiple manual steps and calculations, increasing the risk of errors and inefficiencies. Data quality issues arise due to a lack of integration across various systems, like loan accounting systems and notice intake platforms. And, the absence of robust executive reporting and escalation mechanisms for emerging risks in the reconciliation process can hinder effective risk management and decision-making.

Embracing technological advancements, streamlining processes through automation, and fostering seamless data integration across platforms are crucial steps banks must make to remain competitive and mitigate operational risks in the syndicated lending market.

The Technology Answer: Bring your technology into the modern, digital age.

We’ve helped all our clients overcome these “legacy system challenges” PwC discussed—data quality issues, and lack of reporting—and more. As a next-generation platform offering end-to-end integration, AFSVision has eliminated the need for multiple manual steps and calculations, providing a centralized data repository and seamless integrations of digitized data across key systems. The modern design addresses data quality concerns with automated workflows and offers comprehensive, automated reporting and dashboards, providing visibility into emerging risks and operational performance.

In the end? You need to embrace innovative, modern technology.

The syndicated lending market presents significant growth and diversification opportunities. But to capitalize on them you have to prioritize modernizing your technology. We’ve seen AFSVision transform clients’ syndicated lending operations by providing intuitive tools and automated workflows. With end-to-end integration and streamlined processes, they get seamless information exchange and reduce manual activities, increasing efficiency and mitigating risks—which translates into success and growth. So, if you’re still on the fence about whether you need to invest in technology this year, you shouldn’t be, give us a call, we can help.