Credit risk management

Evaluating, pricing and managing credit risks remains one of the most important core business areas of financial institutions - with a still limited range of instruments for active credit risk management. On the other hand, new competitors, services and business models are pushing into established markets, such as peer-to-peer platforms (P2P), crowdfunding and mobile banks. High regulatory costs, stricter capital adequacy rules and low interest rates are also putting pressure on achievable net margins.

As a result, banks are being forced to create new, attractive banking channels and customer experiences, increase agility and quality in customer service, product development and process design and ultimately reduce costs. Increasing quality and efficiency and reducing costs affects the entire value chain in the credit context, e.g. in addition to credit application and processing, the content, processes and organisation of credit risk controlling and management, as well as customer relationship management (CRM).

Financial institutions that want to achieve these goals should proceed as follows - always taking regulatory compliance into account, of course:

• Reduction to technically necessary content and its standardisation and modularisation
• Optimisation, standardisation and automation of processes, including their digitalisation without media/system breaks, supported by intermediary robotics where necessary
• Identification of new, innovative sources of information and utilisation of advanced data analytics methods (machine learning/AI, text mining, etc.) to increase the quality of results and speed of execution in a targeted manner while reducing the need for experts
• Integration of targeted and proactive CRM, agile and paperless credit assessment as well as efficient and fast credit processes for positive customer experiences and high customer satisfaction while maximising efficiency for the financial institution

In addition, financial institutions must implement new external standards such as the "Future of IRB", Basel IV, NPL guidance/guideline and IFRS 9 Impairment in an overall optimised manner. The integrative harmonisation of these requirements is a necessary prerequisite for redundancy-free, efficient credit processes and consistent credit risk information in risk management. In-depth rating modelling expertise is also necessary in order to implement the specific CRR requirements resulting from the "Future of IRB" together with the Basel IV rules in a way that protects equity and is compliant.