As the global economy continuously changing, all industries and organizations must adapt and evolve to stay relevant and successful. Similarly, risks are always changing and evolving all businesses must detect, assess, and mitigate the change for survival or success of the business. This means that when the economy is stable, the risks that a business must manage largely remain constant. However, there is a major change in the local or global economy also a major change in the risk portfolio that businesses need to manage. New risks emerge and the severity and significance of old risks change.

2021 is one such year where businesses must manage a dynamic risk portfolio that will continue to fluctuate over the next two years or so. Credit risk has emerged as one of the most important risks and risk managers across the country are monitoring closely.

Why Credit Risks Matter So Much in 2021 and Beyond

Lending money and extending credit lines has always been a core business process for financial organizations. Whenever a bank or another financial institution provides a credit line to a business entity or a consumer, it first performs in-depth analytics to ensure that the investment it is making is safe. This is done by closely evaluation the business model and financial reports of the business entity that is being given a loan. The business environment is also monitored closely; if there is a sign of decline in the domain in which the business operates then it may be a bad idea to extend a credit line to it, as it may not be able to pay back whatever loan it gets.

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This process works well when the economy is stable. The problem banks and other financial institutions are facing right now is that all the metrics they used to assess businesses when giving them a credit line have changed. The pandemic and the shutdowns have completely altered the financial reality of many businesses. Businesses that would have performed well under normal circumstances were not able to generate the profits they expected. Many businesses had to shut down because their revenue streams were eliminated.

The problem is compounded by the fact that the risks are still evolving. This is not a situation where the banks simply need to reassess all their credit lines; they need to continuously monitor changes in the market in real-time. This means that credit risks will be a major force for the overall enterprise risk framework and will need to be managed as efficiently as possible.

Risks and losses are not the only things banks are thinking about – changing market dynamics do not just mean new risks, they also result in new opportunities emerging. Banks are keen to understand which portions of the economy are recovering from the pandemic’s effects the fastest, because those portions of the economy are a prime avenue for investments and credit lines. Banks and financial institutions can use such opportunities to make up for the losses faced over the past 12 months.

Integrated risk platforms simplify risk mitigation by revealing real-time vulnerabilities and threats. Instead of relying on periodic reports, the risk stakeholders in the organization can monitor credit risk in real-time. Click To Tweet

Integrating Credit Risk Metrics

A recent survey revealed that credit risk was the top concern of most risk managers over the next two years, for the aforementioned reasons. It is important not just for risk managers but also for the board of directors to get real-time data on credit risk so they can factor it into the decisions they make for the strategy, the organization will take to grow over the next two years. This is where risk management platforms are proving essential to organizations that want to capitalize on the new opportunities and mitigate the new risks that banks must deal in 2021 and 2022.

Integrated risk platforms simplify risk mitigation by revealing real-time vulnerabilities and threats. Instead of relying on periodic reports, the risk stakeholders in the organization can monitor credit risk in real-time. Not only they can monitor it in real-time, but they also see how credit risks affect other parts of the business and interact with other risks in the risk portfolio. The automated risk analysis capabilities of modern risk management platforms enable these platforms to create risk maps. These risk maps tell management about the documents, controls, policies, and processes that are affected by changes in the risk portfolio.

Enterprise Risk Management Software

Credit risks are just one of the risks which can be kept track of using risk management platforms; businesses can choose the risks which need to be presented on executive dashboards and included in analytics. This gives risk experts the tools they need to quickly perform in-depth analysis on the latest risk reports and provide summaries and alerts regarding latest developments in the risk mitigation framework. Instead of struggling to keep up with an ever-changing risk portfolio, the risk experts are ahead of the curve because they can predict emerging risks using the integrated data framework present in modern risk management solutions.

Interested in seeing how your organization can better track credit risks as they evolve and change? Get in touch with our risk experts for a demonstration of the Predict360 Risk and Compliance Intelligence Suite to see how it can help your organization.