My colleague, Prince Varma, Senior Client Partner — Portfolio Growth and Client Management, shares his advice on the best practices for portfolio risk management in these trying times.
Boy; this is an interesting time.
Banks today are at a critical threshold — the biggest question that they are trying to answer is, “How do we continue to grow — or at least avoid contracting — without sacrificing profitability or credit quality?”
The urge to overcompensate, or engage in ultra conservative lending practices, must be resisted. That said, we are already seeing a trend in which mid-sized and regional lenders are abandoning mid-tier credit.
This vacuum is being filled by community banks and credit unions which are implementing aggressive risk-based pricing programs in order to target the small business market.
These organizations are also introducing “safe and secure” campaigns that specifically target existing clients of banks in the news — and attempting to entice those clients to switch over.
We are strongly urging banks to engage in an analysis of their existing portfolios in order to pinpoint opportunities for expanding their relationships with existing key clients.
Many senior executives are expressing apprehension about undertaking new projects given current levels of uncertainty. Our best advice is two-fold.. First, focus on identifying those areas where process remediation will have long term and sustained value. Second, do not allow uncertainty to paralyze your internal improvement efforts. Strong business cases lead to good decisions; don’t let fear and apprehension cloud what you know needs to be done.