Understanding Credit Risk Management as a Lifecycle

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Question:

I was asked to identify improvements to our credit risk assessment process. The more I researched, the more overwhelming the task became. Analysts want me to dive into every minute detail of stress testing and spreading while the executives want me to focus on how to maintain healthy margins and credit quality. Where is the best place to start?

Answer:

We understand that this is a daunting and difficult task. That’s why we advise our customers to first understand that credit risk management is really a lifecycle and not a string of standalone events. Credit risk management is a never-ending series of interconnected processes that are all interdependent. Based upon priority, you may be required to review different components located anywhere along the lifecycle including:

Underwriting Consistency
Credit Risk Assessment & Loan Approval
Information Capture & Spreading
Analytics & Modeling
Process Refinement
Operational efficiency
Portfolio Analysis & Compliance
Relationship Management & Upselling
Customer Advisement & Retention

The best place to start is to define your goals and objectives in quantifiable measures and put a stake in the ground. Once your starting point is defined, you can progressively make your way around the rest of the lifecycle.

First published on BankersOnline.com 3/09/09