Page 9 - Doing Data Together by The Scotsman

Innovation and renewal
The Data-Driven Innovation programme funds
a range of projects examining the impacts of DCovid-19. David Lee spoke to six project leaders
ata has played a very The Data-Driven Innovation significant role in programme has supported responding to Covid-19 – University of Edinburgh experts but data innovation across a wide range of fields to
will arguably be even carry out research projects looking
more significant in supporting the at specific issues arising from recovery from the pandemic, and Covid-19, through a £250,000 fund. learning lessons for future crises. All of the projects were designed
to support a particular area to emerge with greater resilience from Covid-19 and to learn positive lessons for the future.
A total of 36 proposals were considered by a panel of ten, with 19 of the innovative projects allocated funds of between £4,500 and almost £23,000.
The projects include everything from modelling lockdown exit strategies to tourism recovery and rebuilding the hospitality sector
– and from examining how food
The impact of Covid-19 on tourism and hospitality businesses has been severe. Picture: Shutterstock
and drink businesses have coped with the pandemic to safe blood pressure monitoring at home for pregnant women and new ways of predicting demand for health services to make future planning more effective.
Many of the projects involved collaboration and partnership with the public and private sector, including the Scottish Government, NHS Lothian, Sopra Steria,
Inbest, The List, Breadshare and many others.
DOINGDATATOGETHER
GALINA ANDREEVA Day job Senior lecturer in management science, University of Edinburgh Business School Project Lessons from past crises for the Scottish hospitality sector and implications for Covid-19
What was the specific aim of the project?
Hospitality was the worst affected sector of the economy due to travel restrictions and lockdown. There are concerns that many companies will not recover, and many jobs will be lost.
The project aims to develop quantitative forecasts for the effect of the Covid-19 lockdown on Scottish tourism and hospitality under several scenarios, in partnership with Wiserfunding, a fintech start-up.
It provides risk management and modelling services to business lenders, including alternative and non-bank lenders. This is based on the Z-score model, pioneered by Wiserfunding co-founder Edward Altman.
I am working in close collaboration with Dr Gabriele Sabato, Wiserfunding co-founder and chief executive.
Two Wiserfunding consultants directly assisting the project are my former students Chenjun Zhang and Meiqin Chen, MSc banking and risk graduates of the University of Edinburgh Business School.
What have you achieved?
We have finished the first phase of the project – selecting data for analysis, determining and preparing inputs for different scenarios.
Outcomes will include the estimates of probability of default for Scottish tourism and hospitality companies under three scenarios: baseline, mild downturn and severe downturn.
We need to understand how the situation might develop to select values for financial ratios that will go into the risk models and have investigated the last 20 years of financial accounts, covering
previous epidemics – Sars-1, avian and swine flu – and financial crises. We take these as estimates for the mild downturn scenario. For our severe scenario, we use the latest government estimates.
We need to make adjustments based on the expert judgment, because the current crisis is very different to anything we had in the recent past.
The next step will be running the risk models.
How might your findings assist future work?
Hospitality and travel has never experienced anything like this, with impacts felt by lenders, investors, owners, operators, employees, supply chains and adjacent sectors.
As the global lockdown ends, people will arguably be less interested in spending money on possessions and instead are
likely to spend on experiences. The medium-term prospects of the hotel and leisure sector are, therefore, good.
Despite this, many firms will inevitably default. This industry was already characterised by low capitalisation and excessive debt. This financial structure cannot deal with long periods of negative cashflow.
Ability to adapt business models to the change in environment and reduce variable costs will be key to success.
SMEs – traditionally more flexible and lean – will have competitive advantages and might bounce back faster.
We hope our study will be useful to government and business to decide where to focus support during the next phase. Our estimates should provide an idea of the required intervention to assist the industry.
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