266德勤--信用風(fēng)險管理

1、Credit Risk ManagementEnhancing Your Bottom Line,Ebrahim ShabudinManaging Director Deloitte & Touche LLP,The AFP 23rd Annual Conference New OrleansNovember 3-6, 2002,Credit Background,Thorough identification and

2、 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 t

3、urn 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 wit

4、h creditworthy, incremental customersUtilizes innovative structures to support business relationshipsEffective credit risk management limits credit losses and provides stable cash flows and earningsMarketplace reward

5、s 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,Compani

6、es are exposed to significant levels of credit risk emanating from different sourcesAccounts Receivables Other Notes ReceivablesBuyer and Franchise FinancingWith Recourse FinancingProject FinanceStructured Transact

7、ionsLeases 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 th

8、e 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 attrac

9、t 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 result

10、ing 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 ToleranceCoo

11、rdination 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-

12、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 ConditionsDocumenta

13、tion: Contracts and CovenantsCollateral and SecurityCollections, Delinquencies and Workouts,Exposure ManagementAggregationControlPeriodic Account ReviewsPayments/AgingCredit ConditionCompliance with Covena

14、nts, TermsTechnology/ReportsTransactions/ BookingsRisk-adjusted Return,Sales ChannelsRisk StrategyUnderwriting StandardsCredit ApplicationAnalysisBusiness/ IndustryFinancialCreditCredit Scoring and Ratings,,,,

15、,Origination/Assessment,Administration,Monitoring/Control,RiskManagement,Portfolio ManagementConcentrationDiversificationAllowance for Bad DebtsRisk MitigationObjectivesType of ExposureInstruments or Methods,V

16、alue 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 predete

17、rmined thresholds. The thresholds are established taking into account the organization’s strategy, operatingenvironment and process controls.,The measures drive value creation and should support problem identification

18、 and correction.,Business StrategySystemsOperationsFinance,Performance Management,,,,,,,Sales channels,Contracts & Documentation,Credit analysis,Credit limit,Pricing & terms,Credit Analysis,Credit Decisions,Co

19、llections,CREDIT POLICY,Collateral acceptance,Portfolio management,Financial analysis,Disposal / Risk mitigation,Collateral management,Customer management,Exposure measurement,Management reporting,Exposure aggregation,R

20、ecoveries,,,,,Credit scoring,Risk rating,RISK MANAGEMENT,Credit Risk Management’s Inter-related Activities,Compliance,,Origination,Reporting,Transactions,,Credit Policies & Procedures,,,Analysis & RiskManagem

21、ent,,,Governance, Controland Implementation,,,MeasurementMethodologies,,,,,,,Technology & Data Integrity,Credit Strategy & Risk Tolerance,A complete and coherent risk management framework contains the followin

22、g 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 indefinitelyIncrea

23、singly competitive, complex and volatile market placeHigher than expected actual debt burdensExtensive reliance on unrealistic future cash flowsFailures in corporate governanceQuestionable personal and corporate ethi

24、cs,Implications for Corporate Governance,Current organization structures to be revisitedClarity around roles and responsibilitiesNeed for honesty, integrity and independence (self-regulation)Technical expertise of peo

25、ple and strong management processesImproved disclosure requirementsImportance and implementation of sanctionsIncreased legislation and compliance requirements,Foundation: Credit Rating and Underwriting StandardsRisk

26、 Identification, Origination, Credit Administration, etc.,Short Term: Managing Expected LossRisk Identification, Transaction Structuring, Approval & Pricing Decisions, Reserving, etc.,Near Term: Managing Economic

27、Capital / Credit VaRPortfolio Risk Concentration, Risk Based Limits, etc.,,Vision: Managing Risk/ReturnPricing decisions,Performance measurement, business and customer segmentation, compensation, etc.,A business mod

28、el 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

29、 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 port

30、folio basis including aspects such as concentrations, correlations and diversification The Sophisticated Stage includes application of highly developed measurement techniques for transactions and portfolios, supported

31、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 obligati

32、ons 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 Expecte

33、d and Unexpected Losses,Expected LossesAnticipatedCost of doing businessCharged to provisionsCaptured in pricingRelatively easier to measureAssessing expected loss includes determining exposure, default probabilit

34、y and severity,Unexpected LossesUnanticipated but inevitableMust be planned forCovered by reservesAllocated to businessesDifficult to measureAssessing unexpected loss requires making qualitative judgments around p

35、otential 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 ins

36、titution’s ability to properly identify and evaluate the potential risk of default in payment of obligations of customersIt incorporates the firm’s ability to effectively manage and control this exposure in a way that

37、is consistent with the institution’s business strategy, risk appetite and credit culture,Important Building Blocks,Effective Credit Risk Management requiresClear origination and underwriting standards A strong corporat

38、e 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

39、 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 Pol

40、icy 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 b

41、etween 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 shoul

42、d 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 i

43、n 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

44、 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 advanc

45、ed 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 indepe

46、ndently 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 asse

47、ssments 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 categoriesAccu

48、rate 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

49、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

50、 a regular and timely basisBe constructively cynical: new business models are difficult to pull offBe cognizant of delaying tacticsNumbers don’t tell the whole story!,Credit Evaluation: Qualitative Factors,Evaluation

51、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,

52、 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 ch

53、allengeEnsuring 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,

54、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 rati

55、os and market values,Concluding Comments,Risk Assessment and Limit Management,Credit Infrastructure and Portfolio Management,Credit Analytics Support,Credit Technology Enablement,Credit QualityCredit UnderwritingRisk R

56、ating System EffectivenessCounterparty and Portfolio Limits,Organizational Structure Policies and ProceduresTechnology Selection and ImplementationProblem Asset Management,Risk Rating CalibrationTransaction Pricing,

57、 Structure and SupportDefault Probability and Recovery Calibration,Credit Reserve MethodologyRisk Based Pricing ModelsRisk Adjusted Return AnalysisPortfolio Value Measurement,Credit Risk MeasurementCredit Performanc

58、e Scorecards,,,,,,,Internal Software,External Vendor Software,Appendix: Business Proposal Checklist,Business Proposal SummaryCustomer, Rating, Legal Status, Line of BusinessGuarantor, if any…sameCollateral, if any…tru

59、e value explainedOther Support, if any... Legal or moral onlyThe Transaction…risks and mitigationAmount, purpose, terms and conditionsSources of repayment… clearly identifiedClient payment history and relationship,A

60、ppendix: Business Proposal Checklist,Rationale and AnalysisCustomer, Guarantor, Collateral, SupportFacility DescriptionAmount, purpose, tenor, pricing, terms, conditions, covenants, restrictions etc.Consider affect o

61、n 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

62、, or processRisk adjusted return acceptability,Appendix: Business Proposal Checklist,Client RelationshipBusiness strategy: increase, maintain or decrease exposure or exit relationshipConsider relation to rating, lates

63、t risk profile and payment performanceCustomer profitability: risk adjusted return, revenue, fees, direct and allocated costs etc.Any conflicts of interest or special concerns,Appendix: Business Proposal Checklist,Macr

64、o AnalysisBusiness Environment ReviewCustomer’s competitive market position and future industry prospects: size, cycle, volatility, new entrantsStrength of customer’s business and financial strategiesManagement Evalu

65、ation: competency, experience and effectiveness,Appendix: Business Proposal Checklist,Customer AnalysisCompany history, background, objectives and performanceRelevance and strength of future business plansConsider sea

66、sonality and scenario analysisPrimary and secondary sources of repaymentHistorical financial capacity and analysis of future performance: sales, profitability, working capital, liquidity, cash flow, leverage, tangible

67、net worth etc. Quality of earnings Absolute and ratio analysisPeer comparisons,Appendix: Business Proposal Checklist,Strengths, Weaknesses and RecommendationKey factors that could jeopardize collection: environment o

68、r company specificAny mitigating factors Consider probability and impactConsider all sources of repayment: primary, secondary and tertiary, including access to capital markets, refinancing etc.Summarize strengths and