Credit Risk Management Enhancing Your Bottom Line. The AFP 23 rd Annual Conference New Orleans November 3-6, 2002. Ebrahim Shabudin Managing Director Deloitte & Touche LLP. Credit Background.
The AFP 23rd Annual Conference
November 3-6, 2002
Deloitte & Touche LLP
The business strategies and objectives drive the establishment of credit
policies and procedures. Measurement and reporting as well as the use of current technologies enhance credit decision-making and improve risk
management. The entire process is continually re-evaluated and improved.
Credit Approval Authority
Pricing Terms and Conditions
Documentation: Contracts and Covenants
Collateral and Security
Collections, Delinquencies and Workouts
Periodic Account Reviews
Compliance with Covenants, Terms
Risk-adjusted ReturnCredit Risk Areas to Consider
Performance-based management utilizes metrics that measure actual
performance against predetermined thresholds. The thresholds are
established taking into account the organization’s strategy, operating
environment and process controls.
Business Performance Measures
Organizations need a rigorous set of measures to support continuous improvement
The measures drive value creation and should support problem identification and correction.
Disposal / Risk mitigation
Pricing & terms
Contracts & Documentation
A complete and coherent risk management framework contains the following elements
Credit Strategy & Risk Tolerance
Credit Policies & Procedures
A business model view of Credit Risk Infrastructure components
Near Term: Managing Economic Capital / Credit VaR
Portfolio Risk Concentration, Risk Based Limits, etc.
Unanticipated but inevitable
Must be planned for
Covered by reserves
Allocated to businesses
Difficult to measure
Assessing unexpected loss requires making qualitative judgments around potential volatility of average lossesBusinesses have to contend with Expected and Unexpected Losses
Risk Assessment and Limit Management
Credit Infrastructure and Portfolio Management
Credit Analytics Support
Credit Technology Enablement