Credit Risk Policy Management In Practice
Credit Risk Policy Management across multiple vectors can be as hard as it sounds. Whether lines of business, product sets, or channel partners, credit policy operations can quickly be overburdened if channels aren’t managed correctly. Here is a story about how it can be done well.
Imagine it is 1996 and your industry has just undergone a massive restructuring. Inch by inch, acquisition by acquisition, your market starts to consolidate and by the early 2000’s you appear as one of the largest players in your industry. You have multiple product lines spread across multiple acquisitions and risk operations are on a tight budget. A technological imperative presents itself. How can you manage risk across different acquisitions, across product lines, through multiple channels?
The solution is a credit risk decisioning system built on rules technology. While overall strategy determines that product line will be the chief driver of policy, risk managers from each of the different acquisitions will want to be able to control risk policies individually, test out new policies, and have free reign over their territory within the product structure.
In this instance, we built a rules system so that acquisitions could be added as technology was integrated, with minimal effort from the client. Rule tables could be added for score cuts, attribution, and testing. For example, this telecommunication industry heavyweight’s test of Acquisition A’s product line showed it had no effect on any other acquisition or product line. So, instead of trying to integrate 15 policy management systems, the company switched to one platform and saved time both in deployment and in maintenance.
The lesson for integration is easy – remove the complication. Create one system of record and management for credit policy. It saves money and, if robust, doesn’t require an IT change for every attribute, product, or channel partner you want to add.
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