SAARC FINANCE, REGIONAL SEMINAR, ISLAMABAD
Credit Risk Framework Management - Insights
The Philosophy:
The word “Risk” is synonymous to “danger” or “something harmful or undesirable”, which has a negative connotation. Banks are in the business of taking risk, and profit from mitigating risks, and managing residual risk.
The key learnings are that risk management:
ŘHas evolved over the years and will continue to evolve
ŘMust avoid “conflict of interest” my maintaining independence. Those who manage risk should not report to those who have revenue targets.
ŘA strong credit risk management governance structure is necessary.
ŘNot all players in a geography or industry are at the same level of sophistication.
ŘMaintain a healthy balance between the risk & reward – Higher the risk, higher the pricing.
ŘRegulators have a key role to play in developing the industry.
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