Post by registerme on Aug 27, 2015 21:18:31 GMT
Slightly prompted by the net asset and P2P polls below (the results of which both surprised me) I thought it was worth starting a discussion about this. We (ie at least the people who read this forum, even if they aren't registered) are presumably aware of the fact that platform risk is one of the largest risks we, as investors, face. For a start we know we are not covered by the FSCS. We talk in generalities about diversifying across platforms to reduce said risk, but we don't talk about quantifying it, or how that can really be factored into our overall risk / return expectations.
That is assuming we are "allowed" to. And I honestly don't know the answer to this. Now I am very wary of saying anything that could be construed as defamatory (hence the self-reported mod ask), I also note that I have little to no insight into the following, I just suggest it as a starting "structure" to talk about and quantify platform risk.....
* Balance sheet - how much backing do they have, how long can they support continued (and expanded) operations, how long can they run at a loss or absorb losses (assuming that there are any)
* P&L account - subject to the old late nineties / early noughties "scale is everything, profit comes later" argument, black good, red bad
* Products (success / failure) - some products are vanilla, some are more complex, some have failed, some have succeeded beyond the expectations of the platform managers)
* Infrastructure (success / failure) - some platforms are reliable, some are less so, some are simple, some are complex
* Product functionality - as with infrastructure above
* Potential market size - consumer loans aren't equal to SME loans aren't equal to briding loans..........
* Competitor (whether P2P or incumbent bank etc) risk - as with Potential market size above
* Potential platform exit strategy -
* Regulatory risk -
* Legal / cross border risk -
* Conduct risk -
* Liquidity risk (and how it's handled, to us, investors)? -
I could have just opened a "which is the riskiest platform to invest on" poll (and there still might be some value in that), but I don't think it's good enough. We need a way to discuss this, and a way to try to quantify it. Equally, we need a way not to open ourselves to criticism (or legal action), and whilst I would welcome input from platform representatives, I can well understand why they might be reluctant (or constrained) to be involved.
One final thought, equity analysts at IBs aren't (or are at least rarely?) subject to the kind of "publication" risk I am talking about, so I don't know why I am so twitchy about it but....
RM
That is assuming we are "allowed" to. And I honestly don't know the answer to this. Now I am very wary of saying anything that could be construed as defamatory (hence the self-reported mod ask), I also note that I have little to no insight into the following, I just suggest it as a starting "structure" to talk about and quantify platform risk.....
* Balance sheet - how much backing do they have, how long can they support continued (and expanded) operations, how long can they run at a loss or absorb losses (assuming that there are any)
* P&L account - subject to the old late nineties / early noughties "scale is everything, profit comes later" argument, black good, red bad
* Products (success / failure) - some products are vanilla, some are more complex, some have failed, some have succeeded beyond the expectations of the platform managers)
* Infrastructure (success / failure) - some platforms are reliable, some are less so, some are simple, some are complex
* Product functionality - as with infrastructure above
* Potential market size - consumer loans aren't equal to SME loans aren't equal to briding loans..........
* Competitor (whether P2P or incumbent bank etc) risk - as with Potential market size above
* Potential platform exit strategy -
* Regulatory risk -
* Legal / cross border risk -
* Conduct risk -
* Liquidity risk (and how it's handled, to us, investors)? -
I could have just opened a "which is the riskiest platform to invest on" poll (and there still might be some value in that), but I don't think it's good enough. We need a way to discuss this, and a way to try to quantify it. Equally, we need a way not to open ourselves to criticism (or legal action), and whilst I would welcome input from platform representatives, I can well understand why they might be reluctant (or constrained) to be involved.
One final thought, equity analysts at IBs aren't (or are at least rarely?) subject to the kind of "publication" risk I am talking about, so I don't know why I am so twitchy about it but....
RM
