Covid19 is here to stay and we have to learn to lead our lives around this, till a vaccine is discovered. Every business has to identify its inherent risk factors, assess the risk factors and take steps to mitigate them, to reduce automobile dealers compliance, fraud risk by daily audit and to achieve their business goals. Covid19 #SOP has to be followed to restart the business.
Let’s now focus on risk factors (other than Covid19) associated with the automobile dealerships
1. Decreasing growth rate, intense competition, policy changes, monetary tightening, and over-expanding dealer network all indicate that the Era of 20%+ growth is in the past.
2. Dealers are exposed to a variety of risks in daily operations, especially those lacking operational competence or rely heavily on external financing. The accumulation of risks may cause the breaking of capital chain and finally paralyse the dealer.
3. Change in technology is one of the major factors impacting traditional dealerships. Electric cars require much lower maintenance and shop floor returns, impacting after sales services.
4. Businesses are not prepared to face adversity with a business continuity plan (BCP) ready; so that they can deal with unexpected situations.
a. All accounts should be moved to the cloud
b. E-docs and Document management systems should be implemented
Dealers have 3 options to deal with the future:
OEMs have a critical role to play in handling the change. Dealers are still a unique party in the distribution channel, supporting OEMs in sales and representing them and reaching out to the customers. Their transformation would require change at the OEM level in how they manage their network. The following are to be considered
a. OEMs should define a channel strategy for the future,
Not bringing in new dealer partners in the area without considering survival options of current partners
Modularised dealership format should be considered as per city size
Flexible format, with options like multi-brand stores, fast service outlet etc as per customer segment
Customised to have more customer friendly and unique features
b. Data driven operation monitoring – OEMs should implement big data analysis in sales and service areas from the industry and share insights with the dealer partners to enable them. Data accuracy, timely availability, automated, with analytics and tools. This should lead to:
Standard Dealer Report Templates
Dealer Financial Management Handbook
DMS System improvements
Data Quality Monitoring and Improvement
Monthly Analysis Reports
Experience Data and Model Construction
Business Insight Systems
Investor Database
c. Overall network Risk Management. OEMs should understand and assess the risks associated with the network and work on mitigating them
A Risk Management Model has to be created to promote sustainability and stability in the network of dealers.
Risk Warning:
Risk Warning Model should be used to identify potential risk and send out early warnings
Risk Assessment:
Analyse the operation and finance position, with focus on the dealer partner’s financial capability and intention and his cash-flow pressure test.
Risk Mitigation:
Develop a model for risk mitigation, with active participation between OEM and dealer and a plan should be prepared with implementation schedule
For automobile dealers daily audit, compliance, fraud risk reduction, please contact us.
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