Vahe Andonians: Moody’s grows more interested in Armenia

31.10.2017 | 09:58 Home / News / Interviews /
#Vahe Andonians #Moody's #SCDM
Banks.am talked with SCDM Managing Partner Vahe Andonians.

- SCDM doesn’t have an analogue in Armenia from the point of services it provides. What motivated you to found a company here? What challenges did you face in the beginning?

- In the beginning, SCDM was providing data management services for investors in Structured Credit products. Regarding market participants, that is such a niche market that it would be hard to find any location where you could get staff skilled in that area. We tried to hire by character and not skills. We have always been looking for energetic and out-of-the-box thinking problem solvers - traits that you can easily find in Armenia. The primary challenge was infrastructure, Internet connection in particular. That is evidently much better now, but still needs improvement.

- What are the global trends in risk management? Is there a demand for that service among Armenian companies?  What are the risks you help companies to eliminate?

- We are not trying to eliminate risk at all. On the contrary, risk-taking is what our clients and any company for that matter is paid for. What we’re trying to do is to help understand the taken risk better and thus put our clients in the position to know if the earned reward is enough.

Risk management service is a broad field. We’ve been in the Structured Credit market traditionally and entered the valuation of any financial instrument some years ago. Structured Credit essentially doesn’t exist in Armenia, while valuation of financial instruments does to some extent at this stage of the economy, but cannot be regarded as a real market. Our clients are mostly large multinational corporations such as BNP Paribas or HSBC, as well as central banks such as the Deutsche Bundesbank.  

- Moody’s recently purchased a part of SCDM. Can you tell us about the deal? Which functions did Moody’s take? Can this deal promote Moody’s entry to Armenian market as a rating company?

- Well, Moody’s Analytics did an Asset Purchase Agreement with SCDM and took over our Intellectual Property in our Structured Credit related products, as well as our clients in that field. At the same time, they liked our capabilities in data management and entered into a contract to purchase this service from us. To my knowledge, they are traditionally outsourcing such services to India. Although I have only rudimentary knowledge about India and the outsourcing market there, I am confident that SCDM and Armenia in general have an excellent value proposition for companies such as Moody’s Analytics.

We have the relationship with Moody’s since February 2017, when we closed the transaction and started exploring other areas to cooperate, including Artificial Intelligence. In that field, we already built a successful concept and are now working on a minimum viable product. This cooperation will soon be put into a more formal and also a closer relationship, but I can’t talk about that yet.

Moody’s Investor Services, the company that is providing ratings, is very well aware of the transaction with Moody’s Analytics and SCDM. I’m sure that given a continuing successful relationship with Moody’s Analytics, there will be interest from Moody’s Investor Services as well.

- Financial technologies are taking over the world. What are the global trends in this area? Does Armenian financial market keep up with the world?

- At least in my professional life, it’s never been so easy to answer this question on a very high level: Blockchain and AI. Of course, both aren’t limited to the financial sector but will most certainly revolutionize the way we organize our lives in future.

The application of AI (currently in the stage of machine learning) in the financial industry will lead to a much more efficient industry overall. In a bit oversimplified description, financial sector just reallocates money from money holders to money seekers. A service that cannot be worth over 10% of the GDP, which is the average in industrialized countries. Artificial Intelligence can help in many areas, from processing documents up to robo advice.

Blockchain, on the other hand, has at the very least the potential to revolutionize the financial industry from its core.

Cryptocurrencies successfully show that we don’t need a centralized trust system for money to work and consequently raise the question, should a country have its currency? Personally, I think Bitcoin is more money than 30 fiat currencies I know.

In a distributed system, the money would not need to be redistributed through taxes, but could originate at the bottom and go up through economic activity. Countries like Armenia that have difficulties in redistribution and the creation of a healthy middle class could explore these new possibilities.

Moreover, all larger banks are exploring blockchain technology to streamline the settlement of financial transactions.

- Let’s talk about SCDM as an employer. What are your criteria for selecting the staff? Do you consider the knowledge of Armenian universities’ graduates to be sufficient? How competitive are the wages you pay as compared to other companies?

- If you look at employees as a long-term asset rather than necessary cost, skills get less significant in contrast to the character of people. Mostly because whatever one’s current skills are, they become outdated in a couple of years, whereas one’s character will hardly change within the same timeframe.

Hence, we try to hire by character. We also think the role of universities can’t be limited to providing skills but rather to creating an environment where students are encouraged to study something at depth and fundamentally.

It’s not the content that is relevant, but the process. Unfortunately, universities worldwide are more and more school-like, removing the individual responsibility of the student by forcing attendance and a strict curriculum.

Additionally, universities encourage students to think in terms of right and wrong rather than promotecreative thought and challenge current beliefs. This is not only an Armenian problem, of course, but I do believe that thinking in categories is more dominant here than in many other countries.

Regarding wages, I cannot be the judge of how our salaries compare to other companies’, nor do I think it is important as long as employees earn enough for their basic needs.

- You invested in Armenia by founding SCDM. How attractive is Armenia’s financial services sector to foreign investors? Which issues and opportunities would you point out?

- I am lucky to be part of a team of people that put their soul into what they create on a daily basis for many years now. As a result, we have not only survived the biggest financial crises in history, but also grown through building trusting relationships with our clients.

For me Armenia was an excellent choice, and I would assume the same holds true for other investors. There are difficulties too, of course. Infrastructure is not at a level where it should ultimately be, and the same is true for logistics.

- SCDM provides services to foreign organizations. How likely is it that you start providing services to Armenian companies?  Why don’t they have a demand for your services yet? What do you think could lead to development of that demand?

- Demand is not there because the financial market is in an entirely different stage compared to Europe/US. It is even questionable if it will go through the same evolution. After all, being behind is not always a disadvantage. Armenia could and frankly should leapfrog, jumping over several steps. As a consequence, our current products might be unnecessary for Armenia not only temporarily, but in general.

I would wish for Armenia to be bolder in its path and embrace new technologies and structures such as distributed trust in a fundamental way. For example, Estonia is pushing much harder on cryptocurrencies compared to Armenia, although their position, being part of the Eurozone, is much harder. In the space of regulation, Armenia could embrace new technologies and strategies much easier compared to other countries, based on its independence and size.

Siranush Simonyan talked to Vahe Andonians
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