Stephanie Butler, manager of Process Architects, in Advisory Services at Baker Hill, a part of Experian continues from her last post by adding how to get back to the risk management basics.
With all that said, what is next? You’ve learned the lessons and are ready to begin 2009 fresh. How do you make sure that history does not repeat itself? Simply get back to the basics by:
• Refocusing your lenders
The lenders are your first line of defense. Make sure they understand the importance of accurate, complete information. Through their incentives, hold them accountable for credit quality. Retrain them, if necessary, on credit policy, financial analysis, business development, etc.
• Creating or enhancing your loan review staff
A strong, internal loan review staff is crucial. They are your second line of defense. By sampling the entire portfolio on a regular basis, loan review can see trends that an individual loan officer cannot. Loan review can aid in the portfolio management concentrations, policy adherence and portfolio growth. By reporting to either the holding company or credit administration, loan policy review can give an unbiased opinion on the quality of lending and the portfolio.
• Bring back the credit department and formally-trained credit analysts
For larger commercial loan underwriting requests, it is important to bring back the use of credit analysts and the credit department for in-depth financial analysis, loan write-ups and the discussion of strengths and weaknesses. Don’t forget to train the credit analysts! If you don’t feel you have the skill set within your institution for training, there are many good courses that your credit analysts can take. Remember, this is your bench for future lenders.
• Bring accountability back
Everyone in your organization is accountable for a specific job or task. You must hold your entire team, including senior management, accountable for their tasks, roles and the process of risk management.
Remember, a lot of lessons were learned in 2008. The key is not to waste this knowledge going forward. Don’t keep doing what you have been doing! Embrace the potential to improve your lending practices, financial risk management, training opportunities and customer satisfaction. 2009 is a new year!