Credit Process Flow Management 3

Process and Policy definitions

The core principle of the ARGOS solution is the optimization of analytical and operational process. Any implementation starts with a process flow definition as defined by the bank. We do not impose any process flow; we use the bank’s defined process! Nevertheless we know that more often than not banks will decide to reengineer their process when confronted with a clear description of them, often highlighting process flaws.
We will of course collaborate with the bank to define the process it wants to manage. This consulting work is done before the implementation of the solution and can be limited to the description of the current process or their reengineering. The process definition will be documented through a standard process flow description applications readily available in the market, so that the bank may maintain the process description in line with their evolution in time.

To illustrate the credit process, consider the following simplified credit process:

credit UW process

Start
Step 1: Client contacts bank and request is registered
Step 2: Account manager conducts interview registering details in Excel template
Step 3: Excel data are submitted to remote server
Step 4: Remote server reports credit risk assessment and financial analysis
Step 5: Decision account manager
Step 6: Decision credit manager
Step 7: Sending out letter to client
Step 8: Recording in database
End

All the documents referred to in the process flow are of course bank specific templates. Unless requested to change/ improve the current bank documents, ARGOS uses the existing templates. ARGOS makes use of the dynamic forms technology through which content filled out in any of the forms is stored automatically in the database. All of the data can be retrieved and posted in automatically generated documents such as proposal letters and reports. The interview will thus be based on the standards questions required by the bank to analyse the solvency of the prospect client.

The process can be completed by the New Business Officer, the Analyst and the Manager anywhere, anytime as long as he can be connected to the bank information system or the internet. The process implementation is simple and requires standard inputs in template electronic documents.

The procedures (and process) will be compliant to the Banks’ Credit Procedure Manual. If such a reference does not exist, our consultants can support its development.

management steps UW process

As for procedures, the Bank will have Credit Policies that define all the aspects of credit risk management. These policies include the rules applicable for the type of loan products and client characteristics, as well as the rules for the approval authority of credit risk, the credit analysis models and methodologies, the risk pricing rules and of course the reporting rules (internal management reporting as well as compliance reporting and other external communications).

If these policies need to be reviewed, adapted, enhanced for management purposes or for regulatory purposes, we can support that effort through a parallel consulting effort. The system must also be flexible so that policy changes can be easily be implemented. For example the credit approval matrix may change (amounts by function…). The changes are integrated in the credit rules of ARGOS quickly and easily. For example risk authority delegations or other rules. The policies will of course define acceptable credit analytical models and scoring/rating rules.

Business Drivers for an integrated credit underwriting process like ARGOS

The business advantages of using a platform such as Argos have been mentioned previously. They can be summarized as follows.

UW process management benefits

This risk management platform is not a credit risk capital adequacy management platform; it is a business management platform for credit risk, which is compliant to the 2nd pillar of Basel 2. The scoring/rating analytical models are optimized for markets with limited current and historical date of the quality and depth required by the Basel Accord. It is recommended that these emerging banks use the standardized approach to calculate their Capital requirements. But the reality of the matter is that both these approaches are reconcilable and complementary.

Conclusion

The credit underwriting process flow management is a system that allows smaller banks to streamline and integrate all the aspects of the stages of credit decisionning.

Those that are interested to know more can email me (cw@bamkstrat.com) to request a complete description of the approach and product which includes descriptions of:
1. The scoring engines,
2. The rating approach,
3. The collateral module,
4. The reporting and document generation module,
5. The audit trail and control functions.

Also included are descriptions of the Business Architecture and the Technical Architecture.
Let me know if you wish to receive this. I will only respond to request that include the name of the institution and the full name, function and contact detail of the person requesting this document.

Thanks and talk to you soon.

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