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NAVIGATING UNCERTAINTY WITH ACCURATE MACHINE LEARNING

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James Johnston, Regional VP at Cloudera

 

2020 will undoubtedly prove to be an unforgettable year. The pandemic has been unforgiving, plunging the UK into a recession, and many industries have faced closure and untold disruption. In the Financial Services sector in particular, 86% of profit warnings in the first seven months of 2020 cited Covid-19. But Covid-19 is not the only thing on the sector’s mind – another sizable challenge looms large on the horizon: Brexit. Individually both are highly disruptive events, together they create a double shock wave with a long tail of unknowns: how long the COVID-19 pandemic will last? What the fallout from Brexit will be? How resilient is the UK economy in the longer term? A key topic for discussion is therefore, how will we adapt to these seismic events and how can technology help?

 

Predicting the unpredictable

When it comes to planning, Machine Learning (ML) models have become an integral part of how most financial institutions operate, because of its ability to improve the financial performance for both businesses, and their consumers, through data. United Overseas Bank is a key example of a business that has used ML to make it’s customers’ banking experience simpler, safer and more reliable. Through analysing the thousands of files that are uploaded to the platform everyday, the ML models have a more comprehensive view of customer and transaction data to optimize their business processes, design distinctive customer experiences, and to improve detection of financial crimes.

However, in these circumstances of heightened uncertainty, the accuracy of ML models come into question. This is because the majority of ML models that are in use today have been built using large volumes and long histories of extremely granular data. With the world being as unpredictable as it is right now, it will take some time for ML models to catch up and adjust to this year’s events. The most recent example of such complications and abnormalities, at a global scale, was the impact on risk and forecasting models during the 2008 financial crisis. Re-adjusting these models is by no means a simple task and there are a number of questions to be taken into consideration when trying to navigate this uncertainty.

 

Adjusting to the ‘new normal’

The first step is to determine whether the disruption we are facing right now can be defined as a ‘Structural Change’ or a once in a blue moon ‘Tail Risk Event’. A structural change would represent a situation where the COVID-19 pandemic has had a seismic impact on how the world as a whole, and financial institutions in particular, operates. This would result in the world settling into a ‘new normal’, one that is fundamentally different from the pre-COVID-19 world. This shift would require institutions to develop entirely new ML models that rely on sufficient data to capture this new and evolving environment. On the other hand, if the COVID-19 pandemic is perceived to be a one-off ‘tail risk’ event, then as the world recovers and businesses, financial markets and the global economy return to some sort of normality, they should operate in a similar way to the pre-COVID-19 days. The challenge for ML models in this situation is to avoid becoming influenced and biased by a rare, and hopefully, once-in-a-lifetime event.

 

Readjust and reinvest

There’s no one size fits all solution for businesses, however there are some key steps financial institutions can take to them navigate today’s current climate:

  • Modify existing models: This is where all data science teams should start. Modifying models can range from using the latest data elements while creating scenario-based projections adjusted for various levels of model bias. There are a range of alternative ML-based approaches that can be used to revamp existing models.  One of the more innovative approaches to the lack of rich relevant data is a meta-learning approach. From a deep learning perspective, meta-learning is particularly exciting and adoptable for three reasons: the ability to learn from a handful of examples, learning or adapting to novel tasks quickly, and the capability to build more generalizable systems. These are also some of the reasons why meta-learning is successful in applications that require data-efficient approaches; for example, robots are tasked with learning new skills in the real world, and are often faced with new environments.
  • Stress testing: This is a fundamental step as it helps businesses gain a clearer understanding of their vulnerabilities before it’s too late. This isn’t just the job for one team, cross collaboration from finance leaders to Chief Risk Officers is required to set up multiple, dynamic stress testing scenarios. The learnings from these tests should then be implemented and then retested, to ensure businesses are in the best position possible.
  • Industrialisation of ML: If businesses haven’t already done so, now is the perfect time to invest in a platform that supports the entire ML lifecycle, from building and validating processes, to managing and monitoring all of their models across the entire enterprise. Nowadays, enterprises are faced with increasing amounts of data on their customers, entering the organisation from a range of different sources, from the customer service team to social media platforms. For ML models to work at their best, they need to take every stream of data into account, while being able to understand what the different data is saying, and quickly. This can only be achieved with a unified enterprise data cloud platform.
  • Prescriptive Analytics: This approach is complementary to ML and uses simulations for more accurate decision-making for different scenarios, brought on by shocks or market changes. One common approach is Agent-Based Modeling (ABM), a bottom-up simulation for modelling of complex and adaptive systems. ABMs help businesses project thousands of future scenarios without having to depend upon the limitations of historical data.

 

Businesses have had to cope with a lot this year and those that have survived have faced a steep learning curve. When faced with such a crisis, they need to look inwards, towards the technology they have invested in, review whether it’s working in the new circumstances, and whether crucial tools such as ML models are being deployed in the best way possible. Financial institutions shouldn’t look at the issue as a one-off, but instead as a chance to implement longer-term strategies that enable them to prepare and tackle the next crisis head on. Businesses that invest the time now to re-evaluate their ML models are the ones that will set themselves up for success, now and into the future.

Business

What Every Small Business Should Do

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The majority of the difficulties associated with establishing a business stem from failing to accomplish the small things correctly. The basics will lead you to the top, as any competent instructor has stated at some time.

If you’re thinking of starting a small business, make sure you follow these 10 small business rules:

1. You must keep track of your finances.

Lack of capital, is the leading cause of small business failure. You must undertake proper financial planning and fully comprehend the business levers that might affect your cash flow.

Do you purchase stock?

  • What amount of cash should you have on hand?
  • Do you have a system in place to collect money from clients?
  • How long do you have to wait for them to pay you?
  • Do you have any loans that you need to repay?
  • Do you rely on suppliers whose prices fluctuate according to market conditions?

 

2. You must create a data-driven culture.

The better your business decisions are, the more data you can track and utilize to make them. Business often necessitates certain “intuition feel” judgments, but it’s preferable to provide your instincts with as much knowledge as possible.
Tracking your company’s key performance indicators (KPIs) and understanding why they rise or fall may help you make decisions that will help you develop and stay on track.

 

3. You must participate in Lean Planning.

Rather of creating a long-written document that you utilize once and then file away, it’s critical to create a strategic and financial plan and track it on a frequent basis.

Planning is a continuous tool that should be used to understand the assumptions you have about your business and whether or not those assumptions are valid, or whether you need to make changes and adapt your assumptions.
60 percent of small companies in America fail due to a lack of cash, not a lack of profits—by utilizing Lean Planning, you can rapidly determine if you have made any financial assumptions that will have a negative impact on your cash. Maybe you assumed you’d get paid every 30 days on the dot.

By engaging in ongoing planning and then tracking the actual results of your business against your plans, you can quickly determine if you are getting paid every 45 days, and if so, you can increase your credit line quickly and appropriately, keeping your business cash healthy—before you get into trouble.

4. You must have a strategy in place for attracting and keeping top employees.

We are continuously on the lookout for top talent in our industry, therefore we make it a point to follow talent in our region on a regular basis and design outstanding retention programs and rewards.

Take some time to consider your company’s culture and what you want it to be, and make sure that culture is factored into your recruiting selections. We utilize LinkedIn on a daily basis to follow and acquire talent.

5. Every day, you must listen online.

Even if you just operate from 9 a.m. to 5 p.m. Monday through Friday, your business is “always on.” Every company should set up internet alerts to monitor what their customers are saying about them, their rivals, and the market in general.

Google Alerts is a fantastic (and free) tool for “listening” to what’s going on online. Be the first to know when a consumer leaves a negative review or when someone praises your company online. Use these methods to remain ahead of the conversation and capitalize on it. You need to get a business phone number too.

6. You must engage in marketing that generates a return on investment.

Small companies frequently tell us that they have no idea what marketing is. What should they spend their money on? Is it effective? Is it better to promote on the radio or on the internet? Should they believe the Groupon or Comcast salesperson who tries to persuade them to distribute discounts to the general public or buy local TV ads? What is it that works?

What does not work?

Small company operators should begin in venues that are both free and simple to access. Begin by forming relationships with local companies and company owners. Find out what it is that they do that is effective. Find out how visitors find your website and where they come from by using Google Analytics and your website.
Customers should be questioned about how they learned about you. And if you do decide to promote, make sure you know how to track it. Make a unique offer and keep track of it. Only provide one type of service or product. Repeat your successful marketing efforts after learning what works and what doesn’t. If you won’t be able to measure the results, don’t invest the money.

 

8. You must communicate with your clients.
Every company should communicate with its clients as frequently as feasible. If you own a retail store, talk to your customers at least once a week (if not every day). Discover what they enjoy—and what they despise.

If you own an online business, send a brief survey to your consumers or ask a few survey questions after they check out. Make a call to them. People enjoy talking and being asked for their viewpoint. Negative feedback might be difficult to hear, but it’s important to hear it and understand how you can improve your business for your consumers.

9. You need to know your competitors.

Both your direct and indirect rivals must be known and understood. You should always be aware of your rivals’ activities, including what they are doing, how they promote, and how they price their products.

You may be the only one of your kind in your town or sector, but that doesn’t mean you don’t have indirect competition. In my town, a small do-it-yourself tie-dye store has no direct competition.

They do, however, provide activity-based events and compete with all of the other businesses who host birthday parties and group activities. They also compete with other tie-dye merchants at Saturday Fairs and Markets. Even if they don’t have direct competition, they need to know how to position themselves against all of their indirect competitors.

10. You must have a larger goal in mind: a mission.

People like to work for companies that are more than simply a money-making machine. That isn’t to say that you can’t set sales or profit targets; it only means that if your employees believe they are part of a larger purpose, they will work harder and be more loyal.

 

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5 Ways That Businesses Can Get the Most Out of Their Digital Marketing

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Everyone knows that the world of marketing has been changing for the last two or three decades. The days of traditional marketing through billboards, radio ads and television commercials are still around, but something new is taking the world by storm. Digital marketing is the way of the future and has proven to be more beneficial for businesses everywhere. It’s not that traditional, offline marketing is completely dead, but it is difficult for business owners to deny the power of digital marketing and what it can do for their businesses.

Because the world has changed so much, people have now moved online, so a business owner needs to learn how to market their products and services digitally. If they do not, there is a huge risk that they will not be around much longer. However, the problem is that most business owners do not understand digital marketing. To begin, most owners do not fully understand marketing altogether, and they go for hiring a marketing agency to do this for them. But now, when you add a digital aspect to this scenario, it makes it even more confusing to the owners. If a business owner starts with simply knowing what digital marketing can do for their business and how to get the most out of it, this is a great place to start.

 

  1. Utilize Email

If your business is not using email marketing yet, you should be. It is far from being dead, and many people are just beginning to tap into what it can actually do for their business. To make the most out of your digital marketing efforts, advertising your company through email is essential. It could very well be the foundation of your marketing online. Email is all about keeping the channel open to your customer who you might not have seen in a long time or being available to someone who is simply interested in what you have to offer. Send occasional, nurturing emails to your following and customers to keep the dream alive.

 

  1. Build a List

Next, you have to build a list. Many marketers and business owners will tell you that you must have a list in order to survive. Now, the list is nothing more than a collection of information from your customers that includes their names, numbers and email addresses. You need this valuable information so you can email them and get in touch with them when things are dry. To get the most out of digital marketing, you should always be gathering this information from them and storing it for future use. Gather this information by running online advertising to generate leads.

 

  1. Do More Videos

To be the absolute best at digital marketing, your business should be using more video. This is because research shows that consumers want to see videos above anything else online. They don’t want to see still images and text, but they want to see you rock it through the camera. The good news is that this isn’t hard to do with modern innovations. Use your smartphone to record simple videos of your business and use these clever videos as the creative part of your digital marketing to catch their eyes and stop them from scrolling. The other great thing is that you will feel more like a movie star for creating videos.

 

  1. Build a Following

Now, it’s also important to build your online following. These days, it’s all about how many people you have “following” you online. These people are your audience, which is one of your valuable assets online. Don’t think that these are just virtual people that offer you known value. They are actual people who follow your company because they might be interested in what you have. It’s important to always build your following online. Increase your page likes and your audience, and your products and services will practically sell themselves. YOu can run specific campaigns to increase your following.

 

  1. Learn How To Target

To get even more out of your digital marketing, learn how to target the right people. Remember, you are doing all of this online marketing in order to reach people in hopes that they will make a purchase with you. To do this, you have to put yourself in front of the right people, not just anyone. But be happy, because online marketing makes it easier to find your customers. Learn how to navigate with digital marketing to find your right audience, and this will also make you stronger as a whole in your company. You will know your customer’s pain points, what they need and what they’re saying.

If you put a bit more effort into your marketing effort by learning how to do it digitally, you can definitely increase your profit and get the most out of it. With the right strategies and a little education, you can make anything happen online.

 

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