Monitoring tools
The monitoring tools, something that will definitely clarify the differences with other players.
Lenders have relied only on the knowledge they have of their own clients: this is logical and correct! Nobody knows clients better than the bank or FI who serve them. But with a growing market and an increasing number of new clients shared among different banks the situation changes and new tools are needed.
If we ask to a lender “Are you able to know what happens to your clients’ credit behavior after the credit is granted?”, the answer will be most probably “Yes, I look at the performance of my clients over time”.
But if you ask them “Are you able to know what happens to your clients’ credit behavior with all lenders (he has got or will have a relationship with) after the credit is granted from you?”, then the answer will be a clear “No I’m not able to know anything about what happens with others after I grant credit”.
Furthermore, in the development of a credit history normally there are many situations that can be detected and that might suggest actions either for business or for risk, and even collection. In other words, there is no “black or white” picture.
This is the area the “monitoring package” here presented aims to manage.
Let’s start by reiterating how instruments to monitor credit risk are not limitations to the dimension of business, or of the access to credit, but are instead powerful tools in that they allow banks and financial institutions to take informed decisions on their portfolio.
Portfolio Explorer - is a modul, which is a batch module that allows institutions to monitor the behavior of their clients over time, in order to have a clearer understanding of their portfolio risk trends.
This monitoring should occur on demand or with a specific time frame, usually managed on a given frequency (monthly, quarterly and so on so forth).
For instance, lending institutes in the most developed credit environments use monitoring instruments on a monthly basis, as they utilize them for purposes other than risk management as well.
The most important functions of the instrument are the following:
1. To control the overall situation of risk of a portfolio;
2. To create clusters of clients with different level of risk;
3. To activate strategies according to the cluster/client risk level;
4. To have a tool to prioritize the actions;
5. To improve the overall portfolio management thanks to a cluster oriented approach: this will allow not only better risk management but also additional business opportunity for low risk clusters/clients
6. To refresh the internal data base regarding subject’s data
