Policies formally communicate the board’s risk appetites, tolerances and limits to management and personnel, as well as convey other requirements, expectations and guidelines for taking and managing credit risk. When policies do not effectively communicate these expectations, they leave room for misinterpretation and inhibit the ability of independent control functions to evaluate their appropriateness, assess management’s compliance, and detect deviations that could result in unwarranted risk. Procedures must be sufficient to ensure that policies are implemented as intended. They should ensure a common language and a homogeneous implementation across the organisation.
We evaluate lending and credit risk management policies and procedures by benchmarking them against sound industry standards and regulatory expectations. We ensure that our clients’ policies cover all aspects of lending and credit risk management, appropriate to their risk-taking activities, and that procedures are sufficiently detailed and descriptive to be implemented.
We also advise and assist in the development and drafting of new risk management policies and procedures or rationalisation of existing ones. A burning area of concern for distressed economies are the high non performing loan ratios. Financial institutions are required to come up with innovative restructuring solutions and re-engineer their arrears management processes, and demonstrate that are able to assess the effectiveness of such solutions through the monitoring of restructuring key performance indicators. We have experience in putting together an arrears management framework and making it work in practice. We can also evaluate existing frameworks and recommend improvements that may include new data capturing, data mining and process re-engineering.