信用风险管理

Credit Risk ManagementEnhancing Your Bottom Line,Credit Background,Thorough identification and accurate measurement of credit risk, supported by strong risk management can help improve the bottom line.An uncertain and volatile economic environment significantly impacts this ability.The desire to grow and turn in outstanding results has a tendency to put pressure on the checks and balances within businesses,Value Proposition,Credit plays a critical role in “selling” products and servicesExpands revenue opportunities with creditworthy, incremental customersUtilizes innovative structures to support business relationshipsEffective credit risk management limits credit losses and provides stable cash flows and earningsMarketplace rewards companies exhibiting earnings and cash flow stability with higher P/E multiplesMarketplace penalizes credit induced volatility and “surprises”Raises questions about quality of management,Corporate Credit Risk,Companies are exposed to significant levels of credit risk emanating from different sourcesAccounts Receivables Other Notes ReceivablesBuyer and Franchise FinancingWith Recourse FinancingProject FinanceStructured TransactionsLeases with RecourseDerivatives Exposures FX, Interest Rate Risk, Commodities etc.Collateral RiskParent or Third Party Guarantees Commercial and Standby Letters of CreditNote also that Critical Suppliers to the company may pose specific credit risk,DSO Impact an example,Credit as a Facilitator,Credit risk management is important Credit is a facilitator of business growth and performanceHigh business margins tend to attract lower quality clients and therefore higher risk profile to manageClients (buyers) may be concentrated in selected industries and provide limited portfolio diversification opportunityPoor credit risk management resulting in negative impact to bottom-line is heavily penalized by markets,Credit Strategy & Risk Tolerance,Specific Quantifiable ObjectivesManagement Review Methodology,Credit Strategy Statement and Risk ToleranceCoordination with Business Plan,The business strategies and objectives drive the establishment of creditpolicies 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 Risk Areas to Consider,Credit PolicyCredit Approval AuthorityLimit SettingPricing Terms and ConditionsDocumentation: Contracts and CovenantsCollateral and SecurityCollections, Delinquencies and Workouts,Exposure ManagementAggregationControlPeriodic Account ReviewsPayments/AgingCredit ConditionCompliance with Covenants, TermsTechnology/ReportsTransactions/ BookingsRisk-adjusted Return,Sales ChannelsRisk StrategyUnderwriting StandardsCredit ApplicationAnalysisBusiness/ IndustryFinancialCreditCredit Scoring and Ratings,Origination/Assessment,Administration,Monitoring/Control,RiskManagement,Portfolio ManagementConcentrationDiversificationAllowance for Bad DebtsRisk MitigationObjectivesType of ExposureInstruments or Methods,Value Creation,Business Performance Measures,Organizations need a rigorous set of measures to support continuous improvement,Performance-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 should support problem identification and correction.,Business StrategySystemsOperationsFinance,Performance Management,Sales channels,Contracts & Documentation,Credit analysis,Credit limit,Pricing & terms,Credit Analysis,Credit Decisions,Collections,CREDIT POLICY,Collateral acceptance,Portfolio management,Financial analysis,Disposal / Risk mitigation,Collateral management,Customer management,Exposure measurement,Management reporting,Exposure aggregation,Recoveries,Credit scoring,Risk rating,RISK MANAGEMENT,Credit Risk Managements Inter-related Activities,Compliance,Origination,Reporting,Transactions,Credit Policies & Procedures,Analysis & RiskManagement,Governance, Controland Implementation,MeasurementMethodologies,Technology & Data Integrity,Credit Strategy & Risk Tolerance,A complete and coherent risk management framework contains the following elements,Credit Risk Management,A New Paradigm,A new business paradigm had evolved: causing a lack of reliance on good fundamental analysisThe idea that stock market values would continue to go up indefinitelyIncreasingly competitive, complex and volatile market placeHigher than expected actual debt burdensExtensive reliance on unrealistic future cash flowsFailures in corporate governanceQuestionable personal and corporate ethics,Implications for Corporate Governance,Current organization structures to be revisitedClarity around roles and responsibilitiesNeed for honesty, integrity and independence (self-regulation)Technical expertise of people and strong management processesImproved disclosure requirementsImportance and implementation of sanctionsIncreased legislation and compliance requirements,Foundation: Credit Rating and Underwriting StandardsRisk Identification, Origination, Credit Administration, etc.,Short Term: Managing Expected LossRisk Identification, Transaction Structuring, Approval & Pricing Decisions, Reserving, etc.,Near Term: Managing Economic Capital / Credit VaRPortfolio Risk Concentration, Risk Based Limits, etc.,Vision: Managing Risk/ReturnPricing decisions,Performance measurement, business and customer segmentation, compensation, etc.,A business model view of Credit Risk Infrastructure components,Credit Risk Management Strategic Vision,Development Stages,Foundation Stage includes application of risk identification methodologies, risk scoring or rating systems and strong underwriting standards Basic Stage tends to include managing on a transactional basis by evaluating specific attributes such as structuring, collateral and pricing Advanced Stage represents managing on a portfolio basis including aspects such as concentrations, correlations and diversification The Sophisticated Stage includes application of highly developed measurement techniques for transactions and portfolios, supported by decision-making relating to segments or businesses against established hurdle rates.,Credit Risk Clarified,Credit risk is defined as the risk of loss or potential loss resulting from: Default in contractual obligations by a customerMigration in condition and ratingDeterioration in performance Credit risk includes both an expected (predictable) and unexpected (volatile) loss component.,Businesses have to contend with Expected and Unexpected Losses,Expected LossesAnticipatedCost of doing businessCharged to provisionsCaptured in pricingRelatively easier to measureAssessing expected loss includes determining exposure, default probability and severity,Unexpected LossesUnanticipated but inevitableMust be planned forCovered by reservesAllocated to businessesDifficult to measureAssessing unexpected loss requires making qualitative judgments around potential volatility of average losses,Credit Risk Management Explained,Although credit risk may be difficult to measure it is important to estimate and manage What does Credit Risk Management mean?It represents an institutions ability to properly identify and evaluate the potential risk of default in payment of obligations of customersIt incorporates the firms ability to effectively manage and control this exposure in a way that is consistent with the institutions business strategy, risk appetite and credit culture,Important Building Blocks,Effective Credit Risk Management requiresClear origination and underwriting standards A strong corporate and credit cultureHighly developed risk measurement techniques Ability to recognize and cover expected and unexpected lossesPricing commensurate with risks undertakenMethodologies to assess net profit contributions by customers and appropriate business segmentsProper allocation of capital and management resourcesIn order to:Improve overall corporate performance, measured by a higher EPS or P/E ratio (or market value),Credit Policy and Process,Credit Policy should be clear and conciseCredit Underwriting Standards must 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 respected,Risk Monitoring,Exposure must be complete and currentRegular reporting and updating of clients payment performance Minimum annual reviews of clients should be performedFinancial conditions should be regularly assessedRequired action must be initiated and follow up must take place,Contract Terms and Documentation,Contract negotiations must take place at the right level in the organizationAppropriate approvals must be obtainedInternal or external legal departments must document completelyTerms and conditions should be understood and compliance mechanism put in placeExceptions must be reported and managed urgently to resolution,Risk Rating System Effectiveness,Credit Scoring is generally used to “risk rate” homogeneous portfoliosHighest applicability is in consumer and retail portfoliosSome advanced scoring systems are being migrated for use in rating “middle market” clientsSuch models are only as good as the underlying assumptionsInternal credit rating systems are difficult to assess and are often not independently validatedClient relationship may interfere with objective assessment of risksRating criteria usually a matter of practice rather than written policyRatings are not consistent over timeQualitative credit assessments often lag current market informationInstitutions often assume a mapping with external ratings in order to quantify credit risk,Effective Risk Rating Systems,Sufficient granularity of risk rating categoriesAccurate and timely assignment of ratings Clear and consistent application of default definitionPeriodic calibration, triangulation and validation of risk ratings Accurate identification of migration of transactions and portfolios (as reflected by upgrades and downgrades in ratings),Credit Evaluation: Financial Factors,Get the information 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 models are difficult to pull offBe cognizant of delaying tacticsNumbers dont tell the whole story!,Credit Evaluation: Qualitative Factors,Evaluation of subjective 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, geography, competition etc. all influence results and must be properly assessedAnalysis-paralysis may lead to wrong decisions,Art and Science of Judgment,Getting access to 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 externally enhances the resultsOften the lack of the will to act is what causes high losses,Concluding Comments,Companies that measure and manage credit risk in a pro-active manner will benefit from a favorable risk profile resulting in Higher revenueLower lossesImproved efficienciesHigher EPS, P/E ratios and market values,Concluding Comments,Risk Assessment and Limit Management,Credit Infrastructure and Portfolio Management,Credit Analytics Support,Credit Technology Enablement,Credit QualityCredit UnderwritingRisk Rating System EffectivenessCounterparty and Portfolio Limits,Organizational Structure Policies and ProceduresTechnology Selection and ImplementationProblem Asset Management,Risk Rating CalibrationTransaction Pricing, Structure and SupportDefault Probability and Recovery Calibration,Credit Reserve MethodologyRisk Based Pricing ModelsRisk Adjusted Return AnalysisPortfolio Value Measurement,Credit Risk MeasurementCredit Performance Scorecards,Internal Software,External Vendor Software,Appendix: Business Proposal Checklist,Business Proposal SummaryCustomer, Rating, Legal Status, Line of BusinessGuarantor, if anysameCollateral, if anytrue value explainedOther Support, if any. Legal or moral onlyThe Transactionrisks and mitigationAmount, purpose, terms and conditionsSources of repayment clearly identifiedClient payment history and relationship,Appendix: Business Proposal Checklist,Rationale and AnalysisCustomer, Guarantor, Collateral, SupportFacility DescriptionAmount, purpose, tenor, pricing, terms, conditions, covenants, restrictions etc.Consider affect on above e.g. new leverageFacility Rating?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 Proposal Checklist,Client RelationshipBusines