Leasing

Modelling-Approach

Arium’s Residual Value Risk Evaluator is designed to help banks, leasing companies, and residual value insurers articulate and justify the decisions associated with residual value risks. When a company provides an operating lease for an asset, the company may retain a significant asset risk relating to the asset’s value at the end of the lease. Some variables affecting the asset’s value might be obvious – the way the asset is used or the length of the lease – but many variables are not. Demand for large containerised ships, for example, may diminish in favour of smaller ships due to declining cargo volume from recessionary or environmental pressures or from an insufficient number of ports able to handle these very large ships.

Arium’s model enables companies to take all these variables into account as they calculate the asset risk. Using our model, leasing companies can have a structured approach to measuring risk for a single asset or asset portfolio, measure sensitivity to risk factors, and benchmark risks of different asset types. And, by running a range of “what-if” scenarios, companies can see how shifting circumstances and priorities could affect their investment over the long term. Leasing companies have used our model to assess the risks associated with assets such as railroad rolling stock, container ships, and medical equipment.