Top 4 Major Challenges of Credit Risk Management in Banks
How to Measure Credit Risk
With the global financial crisis still recent, credit risk management is still the focus of intense regulatory scrutiny. While stricter credit requirements as a “top-down” approach has helped mitigate some economic risk, it has left many companies struggling to overhaul their approach to credit risk assessment.
In the scramble to implement risk strategies to improve overall performance and secure a competitive advantage, a company must overcome significant credit risk management challenges, such as:
1. Inefficient Data Management
Credit risk management solutions require the ability to securely store, categorize and search data based on a variety of criteria. Any database needs to be updated in real time to avoid potentially outdated information, as well as be keyword optimized to ensure easy location of information.
2. Limited Group-Wide Risk Modeling Infrastructure
Sometimes it’s not enough to examine the risk qualities posed by a single entity—a broad, comprehensive view of all risk measures as seen from above is key to understanding the risk posed by a new borrower to the group. Robust stress-testing capabilities and model management that spans the entire modeling life cycle is key to ensuring accurate risk assessment.
3. Lacking Risk Tools
Identifying portfolio concentrations or re-grade portfolios is essential to ensuring you’re seeing the big picture. A comprehensive risk assessment scorecard should be able to quickly and clearly identify strengths and weaknesses associated with a loan.
4. Less-than-intuitive Reporting and Visualization
Forget cumbersome spreadsheet-based processes—to glean the most valuable insights, data and analysis must be presented in an intuitive, clean and clearly visualized way. Stripping away irrelevant data that overburdens analysts and IT can help zero in on the most pertinent information.
The credit risk management software offered by GDS Link is state of the art and provides the most accurate assessment of risk possible. Contact us today to find out how we can add value and security to your investments.