Getting a Handle on Credit Risk
March 4, 2010 Leave a comment
Many financial institutions have found themselves flat-footed as the current credit cycle continues to play itself out. Since the recent economic downturn was so severe and relatively quick, these banks could not easily predict or sort through the mounting customer defaults. Much of this had more to do with the banks risk management structure and supporting technology rather than the sheer volume of losses. Tom Johnson of Zoot Enterprises discussed his view in a recent article in Payments Source Magazine.
Credit risk needs to be handled across the entire lifecycle so banks have a better view of the customer as a whole and all areas that can benefit from enhanced data and intelligence. In doing so, banks can minimize the risk of default and loss while improving service and retaining their best customers.
Historically, banks have been organized in silos by lines of business. This can exacerbate the banks’ ability to deal with their customers from a holistic point of view. Breaking down silos has not only been a problem politically, but system limitations and legacy technology reinforce boundaries between departments. Because a bank’s structure is a multi-dimensional matrix, this adds even more complexity.
Providing a holistic view through a well-designed Enterprise Risk Management (“ERM”) program can improve a company’s ability to manage risks and at the same time improve customer service. Wheelhouse Advisors can help your company achieve better results through ERM. Visit www.WheelhouseAdvisors.com to learn more.