1、Credit BaValue ProuSpecific Quantifiable ObjectivesuManagement Review MethodologyuCredit Strategy Statement and Risk ToleranceuCoordination with Business PlanThe business strategies and objectives drive the establishment of creditpolicies and procedures.Measurement and reporting as well as the use o
2、f current technologies enhance credit decision-making and improve risk management.The entire process is continually re-evaluated and improved.Origination/AssessmentAdministrationMonitoring/ControlRiskManagementValue CreationBusiness Performance MeasuresOrganizations need a rigorous set of measures t
3、o support continuous improvementPerformance-based management utilizes metrics that measure actual performance against predetermined thresholds.The thresholds are established taking into account the organizations strategy,operatingenvironment and process controls.The measures drive value creation and
4、 should support problem identification and correction.nBusiness StrategySystemsOperationsFinancePerformance ManagementSales channelsContracts&DocumentationCredit analysisCredit limitPricing&termsCredit AnalysisCredit DecisionsCollectionsCREDIT POLICYCollateral acceptancePortfolio managementFinancial
5、 analysisDisposal/Risk mitigationCollateral managementCustomer managementExposure measurementManagement reportingExposure aggregationRecoveriesCredit scoringRisk ratingRISK MANAGEMENTCredit Risk Managements Inter-related ActivitiesComplianceOriginationReportingTransactionsCredit Policies&Procedures
6、Analysis&RiskManagementGovernance,Controland ImplementationMeasurementMethodologiesTechnology&Data IntegrityCredit Strategy&Risk ToleranceReassessment Credit Strategy&Risk Tolerancen structures to be revisitedClarity around roles and responsibilitiesNeed for honesty,integrity and independence(self-r
7、egulation)Technical expertise of people and strong management processesImproved disclosure requirementsImportance and implementation of sanctionsIncreased legislation and compliance requirementsRisk Identification,Origination,Credit Administration,etc.Risk Identification,Transaction Structuring,Appr
8、oval&Pricing Decisions,Reserving,etc.Portfolio Risk Concentration,Risk Based Limits,etc.Pricing decisions,Performance measurement,business and customer segmentation,compensation,etc.A business model view of Credit Risk Infrastructure componentsould be clear and conciseCredit Underwriting Standards m
9、ust be developed and included in policyCredit Processes should be reasonable and allow quick response to clientsHealthy balance between sales and credit approval should exist and be respectedmplete and currentRegular reporting and updating of clients payment performance Minimum annual reviews of cli
10、ents should be performedFinancial conditions should be regularly assessedRequired action must be initiated and follow up must take placeions must take place at the right level in the organizationAppropriate approvals must be obtainedInternal or external legal departments must document completelyTerm
11、s and conditions should be understood and compliance mechanism put in placeExceptions must be reported and managed urgently to resolutionn you need to make a full analysisSome information will need to be cross-checked and obtained on a regular and timely basisBe constructively cynical:new business m
12、odels are difficult to pull offBe cognizant of delaying tacticsNumbers dont tell the whole story!ective factors is often times more important than the numerical analysisPeople make a business:visions,values and strategies are only words unless people implement themManagement,industry,product,geograp
13、hy,competition etc.all influence results and must be properly assessedAnalysis-paralysis may lead to wrong decisionso the best clients and all the relevant information is a challengeEnsuring proper analysis is done requires a strong corporate cultureUtilizing qualified resources both internally and
14、externally enhances the resultsOften the lack of the will to act is what causes high lossesRisk Assessment and Limit ManagementCredit Infrastructure and Portfolio ManagementCredit Analytics SupportCredit Technology Enablement Credit Quality Credit Underwriting Risk Rating System Effectiveness Counte
15、rparty and Portfolio Limits Organizational Structure Policies and Procedures Technology Selection and Implementation Problem Asset Management Risk Rating Calibration Transaction Pricing,Structure and Support Default Probability and Recovery Calibration Credit Reserve Methodology Risk Based Pricing M
16、odels Risk Adjusted Return Analysis Portfolio Value Measurement Credit Risk Measurement Credit Performance ScorecardsSummaryCustomer,Rating,Legal Status,Line of BusinessGuarantor,if anysameCollateral,if anytrue value explainedOther Support,if any.Legal or moral onlyThe Transactionrisks and mitigatio
17、nAmount,purpose,terms and conditionsSources of repayment clearly identifiedClient payment history and relationshipCustomer,Guarantor,Collateral,SupportFacility DescriptionAmount,purpose,tenor,pricing,terms,conditions,covenants,restrictions etc.Consider affect on above e.g.new leverageFacility Rating
18、?Repayment CapacityFuture cash flow,conversion of assets etc.Consistency with Credit Strategy and PolicyConfirm,and identify any exceptions to policy,underwriting standards,or processRisk adjusted return acceptability Appendix:Business listshipBusiness strategy:increase,maintain or decrease exposure
19、 or exit relationshipConsider relation to rating,latest risk profile and payment performanceCustomer profitability:risk adjusted return,revenue,fees,direct and allocated costs etc.Any conflicts of interest or special concernsAppendix:Business listusiness Environment ReviewCustomers competitive marke
20、t position and future industry prospects:size,cycle,volatility,new entrantsStrength of customers business and financial strategiesManagement Evaluation:competency,experience and effectivenessAppendix:Business listmpany history,background,objectives and performanceRelevance and strength of future bus
21、iness plansConsider seasonality and scenario analysisPrimary and secondary sources of repaymentHistorical financial capacity and analysis of future performance:sales,profitability,working capital,liquidity,cash flow,leverage,tangible net worth etc.Quality of earnings Absolute and ratio analysisPeer comparisonsAppendix:Business list
