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22 The Exchange Gagan Sharma acquired BSI Financial Services from a bank in 2006. Prior to BSI, Sharma founded a global outsourcing company serving the financial services and technology industries. He raised institutional equity financing and increased the company's labor force to more than 1,200 people before selling it. Before that, Sharma was a consultant with Deloitte, advising clients on matters of strategy and operations in the financial services and high-tech industries. He was recently a finalist in the EY Entrepreneur of the Year for the Southwest Region. Sharma has an MBA from the Wharton School at the University of Pennsylvania and a B Tech from the Indian Institute of Technology, Delhi. While speaking with DS News, Sharma said that embracing innovation in 2020 will require learning critical lessons from 2019 and knowing how to grow amidst the ongoing low- default environment. An industry expert on technology within mortgage servicing, Sharma spoke with DS News about his "ree C's" of balancing servicing, and how his company is utilizing the latest digital tech to improve. What are the key challenges facing lenders and servicers, and how do you see them changing this year? As a servicer, you have the "ree Cs." ere is the customer experience, there is compliance, and there is cost. It was probably true 30 years ago, and it'll be true 30 years from now as well. Servicers have to look at all of those things. From there, then you get more into questions such as, "What is the economy doing, and what does that do to us as servicers?" Similar things can be said about the lending segment. What are the things that impact the performance of the portfolio? Rates have a huge impact. Natural disasters have a huge impact. Credit quality has a huge impact. ose are three things that jump up to the top of my mind. Depending on where we are in the economic cycle, what may be happening to the economy, those three things—or natural disasters, we can't forecast those. How can servicers control and mitigate costs? Servicing is effectively the manufacturing part of the business, so there are lessons that can be taken away from the manufacturing business. We can look at the manufacturers who've been doing it for over 100 years and ask, "What lessons can be learned?" ere are three key things that every servicer should be thinking about. One is the whole category of digital. A second is what I call "lean manufacturing." How can we bring lean manufacturing process philosophy into servicing? Finally, servicers need to look at the global delivery model. Every manufacturer in every other industry uses a global delivery model. Every services company has to use the global delivery model. One of the things that we feel particularly proud of at BSI is our view that servicing is effectively what I call a "needle in a haystack" problem. If you service 100,000 loans, you know that most of your risk lies in the 20 or 50 loans where something wrong may have happened. Most servicers are running at a level of quality where 99% of the loans are working just fine. It is the last 1% that causes issues. What we have spent a lot of time, effort, and money on is in using technology to identify those high-risk assets and then put corrective measures in place. If somebody or some process made a mistake on the loan, if we look at the data on the loan, we should be able to identify a large number of exceptions, whether that is in the "Servicing is effectively what I call a 'needle in a haystack' problem. If you service 100,000 loans, you know that most of your risk lies in the 20 or 50 loans where something wrong may have happened. Most servicers are running at a level of quality where 99% of the loans are working just fine. It is the last 1% that causes issues." Gagan Sharma President & CEO, BSI Financial Get to Know Industry Executives Beyond the Boardroom