信用风险管理-德勤.ppt

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1、2023/6/11信用风险管理信用风险管理-德勤德勤Credit BackgroundThorough identification and 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 turn in outstanding

2、 results has a tendency to put pressure on the checks and balances within businessesValue PropositionCredit plays a critical role in“selling”products and servicesExpands revenue opportunities with creditworthy,incremental customersUtilizes innovative structures to support business relationshipsEffec

3、tive credit risk management limits credit losses and provides stable cash flows and earningsMarketplace rewards companies exhibiting earnings and cash flow stability with higher P/E multiplesMarketplace penalizes credit induced volatility and“surprises”Raises questions about quality of managementCor

4、porate Credit RiskCompanies are exposed to significant levels of credit risk emanating from different sourcesAccounts Receivables Other Notes ReceivablesBuyer and Franchise FinancingWith Recourse FinancingProject FinanceStructured TransactionsLeases with RecourseDerivatives Exposures FX,Interest Rat

5、e Risk,Commodities etc.Collateral RiskParent or Third Party Guarantees Commercial and Standby Letters of CreditNote also that Critical Suppliers to the company may pose specific credit riskDSO Impact an exampleActualActualCompany ACompany APeer AveragePeer AverageQ3 A/RQ3 A/R$295,396,000$295,396,000

6、Q3 SalesQ3 Sales$261,201,000$261,201,000 DSOs=DSOs=124*124*51.351.3HypotheticalHypotheticalD D CashCashDSOsDSOs51.351.3Q3 SalesQ3 Sales$261,201,000$261,201,000 Q3 A/R=Q3 A/R=$122,002,230$122,002,230+$173,393,770+$173,393,770*Equals 295.4M/261.2M x 90(or number of days in sales period)*Equals 295.4M/

7、261.2M x 90(or number of days in sales period)Credit as a FacilitatorCredit risk management is important Credit is a facilitator of business growth and performanceHigh business margins tend to attract lower quality clients and therefore higher risk profile to manageClients(buyers)may be concentrated

8、 in selected industries and provide limited portfolio diversification opportunityPoor credit risk management resulting in negative impact to bottom-line is heavily penalized by marketsCredit Strategy&Risk ToleranceuSpecific Quantifiable ObjectivesuManagement Review MethodologyuCredit Strategy Statem

9、ent and Risk ToleranceuCoordination with Business PlanThe 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-making and improve risk management.The entire process is

10、continually re-evaluated and improved.Credit Risk Areas to ConsiderCredit PolicyCredit Approval AuthorityLimit SettingPricing Terms and ConditionsDocumentation:Contracts and CovenantsCollateral and SecurityCollections,Delinquencies and WorkoutsExposure ManagementAggregationControlPeriodic Account Re

11、viewsPayments/AgingCredit ConditionCompliance with Covenants,TermsTechnology/ReportsTransactions/BookingsRisk-adjusted Returnn nSales Sales ChannelsChannelsn nRisk StrategyRisk Strategyn nUnderwriting Underwriting StandardsStandardsn nCredit Credit ApplicationApplicationn nAnalysisAnalysisuuBusiness

12、/Business/IndustryIndustryuuFinancialFinancialuuCreditCreditn nCredit Scoring Credit Scoring and Ratingsand RatingsOrigination/AssessmentAdministrationMonitoring/ControlRiskManagementn nPortfolio Portfolio ManagementManagementn nConcentrationConcentrationn nDiversificationDiversificationn nAllowance

13、 for Allowance for Bad DebtsBad Debtsn nRisk Risk MitigationMitigationn nObjectivesObjectivesn nType of Type of ExposureExposuren nInstruments or Instruments or MethodsMethodsValue CreationBusiness Performance MeasuresPerformance-based management utilizes metrics that measure actual performance agai

14、nst predetermined thresholds.The thresholds are established taking into account the organizations strategy,operatingenvironment and process controls.The measures drive value creation and should support problem identification and correction.nBusiness StrategySystemsOperationsFinancePerformance Manage

15、mentCredit AnalysisCredit DecisionsCollectionsCREDIT POLICYRISK MANAGEMENTCredit Risk Managements Inter-related ActivitiesComplianceOriginationReportingCredit Policies&Procedures Analysis&RiskManagementGovernance,Controland ImplementationMeasurementMethodologiesTechnology&Data IntegrityCredit Strate

16、gy&Risk ToleranceA complete and coherent risk management framework contains the following elementsCredit Risk ManagementCredit Risk ManagementA New ParadigmA new business paradigm had evolved:causing a lack of reliance on good fundamental analysisThe idea that stock market values would continue to g

17、o up indefinitelyIncreasingly competitive,complex and volatile market placeHigher than expected actual debt burdensExtensive reliance on unrealistic future cash flowsFailures in corporate governanceQuestionable personal and corporate ethicsImplications for Corporate GovernanceCurrent organization st

18、ructures to be revisitedClarity around roles and responsibilitiesNeed for honesty,integrity and independence(self-regulation)Technical expertise of people and strong management processesImproved disclosure requirementsImportance and implementation of sanctionsIncreased legislation and compliance req

19、uirements Vision:Vision:Managing Risk/ReturnManaging Risk/ReturnPricing decisions,Performance measurement,business and customer segmentation,compensation,etc.A business model view of Credit Risk Infrastructure componentsCredit Risk Management Strategic VisionDevelopment StagesFoundation Stage includ

20、es application of risk identification methodologies,risk scoring or rating systems and 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 por

21、tfolio basis including aspects such as concentrations,correlations and diversification The Sophisticated Stage includes application of highly developed measurement techniques for transactions and portfolios,supported by decision-making relating to segments or businesses against established hurdle ra

22、tes.Credit Risk ClarifiedCredit risk is defined as the risk of loss or potential Credit risk is defined as the risk of loss or potential loss resulting from:loss resulting from:Default in contractual obligations by a customerDefault in contractual obligations by a customer Migration in condition and

23、 ratingMigration in condition and rating Deterioration in performance Deterioration in performance Credit risk includes both an expected(predictable)Credit risk includes both an expected(predictable)and unexpected(volatile)loss component.and unexpected(volatile)loss component.Businesses have to cont

24、end with Expected and Unexpected LossesExpected LossesAnticipatedCost of doing businessCharged to provisionsCaptured in pricingRelatively easier to measureAssessing expected loss includes determining exposure,default probability and severityUnexpected LossesUnanticipated but inevitableMust be planne

25、d forCovered by reservesAllocated to businessesDifficult to measureAssessing unexpected loss requires making qualitative judgments around potential volatility of average lossesCredit Risk Management ExplainedAlthough credit risk may be difficult to measure it is important to estimate and manage What

26、 does Credit Risk Management mean?It represents an institutions ability to properly identify and evaluate the potential risk of default in payment of obligations of customersIt incorporates the firms ability to effectively manage and control this exposure in a way that is consistent with the institu

27、tions business strategy,risk appetite and credit cultureImportant Building BlocksEffective Credit Risk Management requiresClear origination and underwriting standards A strong corporate and credit cultureHighly developed risk measurement techniques Ability to recognize and cover expected and unexpec

28、ted lossesPricing commensurate with risks undertakenMethodologies to assess net profit contributions 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 va

29、lue)Credit Policy and ProcessCredit 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 between sales and credit approval should exist and be respectedRisk Mon

30、itoringExposure must be complete and currentRegular reporting and updating of clients payment performance Minimum annual reviews of clients should be performedFinancial conditions should be regularly assessedRequired action must be initiated and follow up must take placeContract Terms and Documentat

31、ionContract negotiations must take place at the right level in 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 reported and managed u

32、rgently to resolutionRisk Rating System EffectivenessCredit Scoring is generally used to“risk rate”homogeneous portfoliosHighest applicability is in consumer and retail portfoliosSome advanced scoring systems are being migrated for use in rating“middle market”clientsSuch models are only as good as t

33、he underlying assumptionsInternal credit rating systems are difficult to assess and are often not independently validatedClient relationship may interfere with objective assessment of risksRating criteria usually a matter of practice rather than written policyRatings are not consistent over timeQual

34、itative credit assessments often lag current market informationInstitutions often assume a mapping with external ratings in order to quantify credit riskEffective Risk Rating SystemsSufficient granularity of risk rating categoriesAccurate and timely assignment of ratings Clear and consistent applica

35、tion of default definitionPeriodic calibration,triangulation and validation of risk ratings Accurate identification of migration of transactions and portfolios(as reflected by upgrades and downgrades in ratings)Credit Evaluation:Financial FactorsGet the information you need to make a full analysisSo

36、me information will need to be cross-checked and obtained on a regular and timely basisBe constructively cynical:new business models are difficult to pull offBe cognizant of delaying tacticsNumbers dont tell the whole story!Credit Evaluation:Qualitative FactorsEvaluation of subjective factors is oft

37、en times more important than the numerical analysisPeople make a business:visions,values and strategies are only words unless people implement themManagement,industry,product,geography,competition etc.all influence results and must be properly assessedAnalysis-paralysis may lead to wrong decisionsAr

38、t and Science of JudgmentGetting access to the best clients and all the relevant information is a challengeEnsuring 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 ca

39、uses high lossesConcluding CommentsCompanies 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 ratios and market valuesConcluding CommentsRisk Assessment and Limit Managemen

40、tCredit Infrastructure and Portfolio ManagementCredit Analytics SupportCredit Technology EnablementCredit QualityCredit UnderwritingRisk Rating System EffectivenessCounterparty and Portfolio LimitsOrganizational Structure Policies and ProceduresTechnology Selection and ImplementationProblem Asset Ma

41、nagementRisk Rating CalibrationTransaction Pricing,Structure and SupportDefault Probability and Recovery CalibrationCredit Reserve MethodologyRisk Based Pricing ModelsRisk Adjusted Return AnalysisPortfolio Value MeasurementCredit Risk MeasurementCredit Performance Scorecards Internal Software Intern

42、al Software External Vendor SoftwareExternal Vendor SoftwareAppendix:Business Proposal ChecklistBusiness Proposal SummaryCustomer,Rating,Legal Status,Line of BusinessGuarantor,if anysameCollateral,if anytrue value explainedOther Support,if any.Legal or moral onlyThe Transactionrisks and mitigationAm

43、ount,purpose,terms and conditionsSources of repayment clearly identifiedClient payment history and relationshipAppendix:Business Proposal ChecklistRationale and AnalysisCustomer,Guarantor,Collateral,SupportFacility DescriptionAmount,purpose,tenor,pricing,terms,conditions,covenants,restrictions etc.C

44、onsider affect on 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,or processRisk adjusted return acceptability Appendix:Business Proposal

45、ChecklistClient RelationshipBusiness strategy:increase,maintain or decrease exposure or exit relationshipConsider relation to rating,latest risk profile and payment performanceCustomer profitability:risk adjusted return,revenue,fees,direct and allocated costs etc.Any conflicts of interest or special

46、 concernsAppendix:Business Proposal ChecklistMacro AnalysisBusiness Environment ReviewCustomers competitive market position and future industry prospects:size,cycle,volatility,new entrantsStrength of customers business and financial strategiesManagement Evaluation:competency,experience and effective

47、nessAppendix:Business Proposal ChecklistCustomer AnalysisCompany history,background,objectives and performanceRelevance and strength of future business plansConsider seasonality and scenario analysisPrimary and secondary sources of repaymentHistorical financial capacity and analysis of future performance:sales,profitability,working capital,liquidity,cash flow,leverage,tangible net worth etc.Quality of earnings Absolute and ratio analysisPeer comparisons