Credit risk management only begins with the approval of a loan. The ongoing processes of managing collateral, loan covenants, and monitoring the borrower’s financial condition are key to ensuring that the bank is in the best position to minimize its loss, should the borrower encounter issues with repayment.
Many institutions are still using manual procedures to perform these functions. While these procedures can be effective, many suffer from issues relating to lack of efficiency, consistency, and transparency.
These problems can result in unwanted challenges for the financial institution should the borrower encounter financial difficulties. Frequently the bank learns about these problems later than they should.