It is hard to believe that another year has come and gone, but as we welcome 2019, we have an opportunity to start fresh, set clear goals and prioritize for the year ahead. Here are a few things to keep in mind as a busy risk management professional in the banking industry.
First, the credit administration team is primarily responsible for the risk management efforts of the organization. I would argue that this responsibility is shared across everyone in your organization, but credit administration is in place to focus heavily in this area. This time of year presents an opportunity to review how your organization’s credit administration team lines up with the goals of the organization. Do you have the right people on the team? Do you have an appropriate level of staffing based on the goals and objectives of the organization? Are there areas of expertise that need to be filled? People make the difference in banking. It’s important to have the right people in the right areas.
Second, the start of the new year is an opportunity to get your loan policy update scheduled. This is an expectation in well run financial institutions, and for good reason. Loan policies should include enough material to set clear expectations within the organization and guide the management of the loan portfolio, but not so much information that it causes logistical challenges when trying to police the portfolio. Also, get everyone in the organization to sign on and be a part of the process.
Third, your borrowers are starting to think about providing information to accounting professionals to get their taxes prepared. This is a perfect time to connect with your borrowers, talk about how last year went and ask what they expect for the year ahead. It’s also a good time to remind your borrower of the expectations to provide certain information. April starts the mad rush of collecting and analyzing financial statements. Get a head start on the process.
Fourth, annual reviews are an important function when maintaining current risk ratings. However, it’s impossible to clear through all of the reviews within a very short period of time. Take this time to set priorities for these annual reviews. You’ll need updated financial information much of the time when completing an annual review, but there are instances where updated financial information may not be necessary to complete a sufficient review. Regardless of your method, January is the perfect time to get the process organized and moving forward.
Finally, get your loan review on the calendar. Senior management and board members are expected to monitor the organization’s adherence to policy and implementation of best practices in risk management efforts. There’s no better opportunity than with an independent loan review, which not only provides feedback on the organization’s risk management practices, but also provides feedback as to what examiners are looking for and best practices in the industry.
Of course, you’re not walking this path alone! We’re here to help you reach your goals! Best wishes for a successful 2019!
Peter Nugent is Director and founder of Enlighten Financial, a specialized consulting firm that focuses on providing loan review and risk management services to community banks and credit unions. Peter guides the company’s service offerings, which include in-depth loan reviews, commercial and personal underwriting/analysis, internal process improvement and workout services. To talk to Peter directly, please call: (920) 354-6797.