Credit Management
Where to from here for Credit Risk Management? By Nick Jenkins*
Nick Jenkins
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Collection teams and risk managers face the prospect of challenges ahead as the COVID-19 pandemic continues to drive changes to the credit environment, customer behaviour and the global economy into 2021. The next six months are expected to bring continued economic uncertainty resulting in possible significant challenges with delinquencies and loan defaults. In this ever-shifting landscape, real-time data and analytics are proving their value in helping organisations and customers find a quicker path to recovery. Dynamic, agile risk tools and machine learning techniques can be highly effective in delivering a closer profile of customer risk and vulnerability for informed decision making. If COVID-19 has taught us anything, it’s the importance of acting on fact, not on assumptions. For lending institutions, this means harnessing external data sets as a means for making timely, proactive decisions. Without the ability to
augment traditional financial data and conventional assumptions with newer high-frequency information and behavioural insights, credit risk management may become significantly harder in the challenging times that lie ahead.
From deferrals to? As the home loan deferral period ends, customer communication strategies should be updated using real-time insights to enable tailored and fair outcomes. While many borrowers have transitioned back to normal contractual repayments, a substantial number are flagging vulnerability still needing payment deferral programs. As of late September 2020, 7.4% of total housing and 10.8% of SME loans remain on payment deferrals (Source: APRA) at a value of $168 billion. For some customers, this might be the first time they have experienced financial insecurity, and they will be looking to their lender to understand their needs and provide personalised
“If COVID-19 has taught us anything, it’s the importance of acting on fact, not on assumptions. For lending institutions, this means harnessing external data sets as a means for making timely, proactive decisions.”
CREDIT MANAGEMENT IN AUSTRALIA • January 2021
