As the world shut down in the early months of 2020, every industry had to deal with unforeseen problems and the world, and its economy are still only beginning to bounce back. The banking sector always has its pulse on both the economy and the society; it is always trying to anticipate the way the world is moving so it can make the right decisions right now. As the pandemic instantly changed the outcomes for every industry in the world, bankers were quick to adapt to the new normal and to understand how they could best protect the interests of their clients and their employers.

Bankers are therefore some of the most informed people to get in touch with during uncertain times, as they are experts in making educated guesses and estimating new trends. 360factors thus took the opportunity, during one of its own webinars being attended by hundreds of bankers, to ask them what they thought were the most important risk categories during these times.

These key risk indicator categories represent, according to hundreds of bankers across the country, the biggest areas of concern for the banking industry right now. These are the indicators which are telling the stories that bankers need to hear, which is why these are the metrics the bankers are using. It may have been expected that bankers would be looking at operational key risk indicators but the most important indicators, the ones that bankers were prioritizing above the rest, were credit related indicators.

The pandemic has impacted industries to a different degree. Businesses that were involved mostly in online commerce have benefited from the pandemic. Click To Tweet

Here is how the bankers categorized the most important KRIs:

  • Credit
    • Loan Defaults
    • Loan Delinquencies
    • Non-performing Loans
  • Operational

    • Fraud
    • Customer Request Volume
  • Market

    • Unemployment Statistics
    • Business Closing

Credit KRIs

Credit related KRIs topped the list for bankers because these metrics are highly predictive in nature. Loan defaults have proven to be an extremely important indicator of how the economy will perform. Bankers are looking at the rate of loan defaults by businesses and individuals in different industries to determine which industries are being hit the worst by the pandemic and which ones will be able to easily recover. The same is true for loan delinquencies and non-performing loans, both indicators that the businesses and other clients in the industry or area are underperforming.

The pandemic has impacted industries to a different degree. Businesses that were involved mostly in online commerce have benefited from the pandemic. Industries that help people work from home or entertain themselves at home have seen a major increase in business. The telecommunication industry is reporting higher usage and the video game industry is reporting higher sales. Airlines and the hospitality industry are reporting historic lows and it is easy to see why – flights are banned in most countries and tourism is banned almost everywhere. Business conferences have shifted to online, which has further reduced the customers of both the airline and the hospitality industry.

Credit related KRIs help mid-sized banks understand how the pandemic is affecting the local business community in finer detail. It is critical to get this information for bankers because they have access to the data and can thus be the first ones to understand the financial standing and the future of the local economies.

Operational KRIs

Operational KRIs were the second most important set of KRIs being evaluated by risk and compliance professionals. Bankers were keeping a close watch on fraud related metrics to ensure compliance during the disruptions to operations. Customer request volume was another important metric – showing what areas of banking customers were now opting for and which ones they were avoiding.

It is important to remember that while the shutdowns being experience across the world are temporary, the pandemic will change the way we conduct business in many ways forever. Banks are looking at how customers are acting right now to determine the safest and most comfortable customer experience for the post-pandemic era.

Market KRIs

While credit related KRIs are important to determine how the market will be in the future, market KRIs are important in shedding a light on the biggest problems in the market right now. Bankers are looking closely at unemployment statistics across the country. High unemployment has a significant effect on the economy. Not only does high unemployment show that businesses are facing lower demand and thus reducing workforce, unemployed people also cannot participate in the economy anymore which makes it harder for the economy to recover.

Keeping track of multiple categories of risk indicators in real-time can be impossible manually – that is why mid-sized banks are now opting for risk management solutions which can continuously monitor and manage risks. Interested in seeing what such a solution can do for your organization? Get in touch with our risk experts for a demo, or sign up for our upcoming webinar on September 1 to see our solution in action.