Technology’s Potential To Redefine ‘The Art Of The Possible’ In Property Risk Management

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Perhaps nowhere is this more exciting than in technology’s potential to tie together data points that support property risk management. What excites me is the extraordinary potential of leveraging data in the property space in new ways that fuel smarter decision making by real estate risk managers. One thing that motivates my work in this space is that with all the data, analytics and technology availability, property owners, lenders and other risk-takers are only scratching the surface in terms of harnessing data to fuel more efficient, smarter decision making.

Evolving Access To Data

Lenders collect a growing universe of data points on a property during the underwriting process that precedes a loan origination, and then more post-origination. The data is stored in different formats, and not in a cohesive way that allows this intelligence to be accessed, harnessed and used to support broader decision making.

If all of that data could be married into one consistent format that would allow for more holistic views of a property– and even an entire real estate portfolio, imagine. The excitement is that we as an industry are on the cusp of bringing life to property data that just hasn’t been readily accessible in the past.

Think about commercial property appraisals. Approximately one million appraisals are conducted on commercial properties annually, but the output isn’t in a form that makes the data readily available to be harnessed beyond the individual transaction. The sophistication of a commercial real estate appraisal is so impressive, and yet the data is typically only used once.

The Exciting ‘What Ifs’ Of Tomorrow

There are countless untapped opportunities for using data analysis to drive investment decisions and get a handle on a bank’s commercial real estate risk exposure from a holistic portfolio-wide level, rather than the traditional property-specific one.

The first hurdle is to focus on structuring data in a common standardized format, including data like appraisals that are currently locked in thousands of PDFs. Artificial intelligence is already in early stages of extracting information from other commercial real estate documents such as rent rolls and trailing 12-month financials, but a structured format would cost less and reduce the risk of disenfranchising the smaller participants.

The next stage of evolution will involve tying those thousands of data points together to allow for new levels of risk management. The technologies already making big waves this year– artificial intelligence and the internet of things– are all innovative methods of collecting, storing and analyzing information. There are literally oceans of data on commercial properties inviting us to make sense of it all.

Lenders today are facing business challenges to effective operational risk management– challenges that demand new solutions. Data acquisition and management is the most resource-dependent aspect of lending.

Data is at the core of our industry’s digital transformation, and technology has already reshaped how data is collected. The net will only widen to include more and more data.

What if a risk manager at a large financial institution could look back at all the originations on commercial properties and view a dashboard summarizing the bank’s vulnerability or greatest risk exposure?

After banks get comfortable centralizing their own internal data, the next stage in the evolution will be to layer on third-party and public data sets to further advance more robust property risk management. A major challenge to overcome will be tying these data sets together at the individual property level on a large-scale basis.

What if an investor could look at transactions with a particular institution over time or in a particular geographic region?

That’s where the excitement lies: in going to a greater depth of understanding not just into a property’s risk, but a bank’s entire portfolio risk, or risk in a particular geographic area. There is no easy way to do that now, but a few years down the road, the impossible becomes possible. Maybe even seamless.

The Power Of Collaboration

Perhaps nowhere is this more exciting than in technology’s potential to tie together data points that support property risk management. One thing that motivates my work in this space is that with all the data, analytics and technology availability, property owners, lenders and other risk-takers are only scratching the surface in terms of harnessing data to fuel more efficient, smarter decision making. Data is at the core of our industry’s digital transformation, and technology has already reshaped how data is collected. After banks get comfortable centralizing their own internal data, the next stage in the evolution will be to layer on third-party and public data sets to further advance more robust property risk management. And the opportunities for revolutionizing how commercial property risk data is managed and made easily accessible for smarter decision making are endless as data sets on properties– that until now were distinct and separate– are brought together to unleash the power of that information.

There is tremendous power in bringing together as many different constituencies in the ecosystem as possible and sharing data in mutually beneficial and new ways. And the opportunities for revolutionizing how commercial property risk data is managed and made easily accessible for smarter decision making are endless as data sets on properties– that until now were distinct and separate– are brought together to unleash the power of that information.

Property technology is transforming our industry, not disrupting it. Integrating state-of-the-art platforms with analytics and data aligned with what risk professionals need will allow them to do the jobs they’re doing better, smarter and faster. It’s time to embrace the art of the possible.

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