ONTARIO, Calif.-In 2012 expect to see only more usage of automated analytical and business intelligence tools to better manage lending portfolios, address risk, and get more quality loans out of their members.
Analytics provider Lending Insights reported it has seen a dramatic 900% increase in its business since the recession, and cites more credit unions realizing they need to protect their most valuable asset as the reason, said Mike James, COO.
"If you asked credit union executives what their most important asset is, some will say employees, some will say members. In my opinion their most important asset is their loan portfolio, and more CEOs are agreeing with me," offered James. "The credit union's main job is to bring in revenue to support their members and the most revenue is brought in through the lending portfolio."
James asserted that using automated risk management reporting analytics gives the CU the ability to obtain key member information, not only more quickly but more detailed and granular. "They are able to drill down into certain key characteristics of the portfolio that allow them to identify members they could make additional loans to and where potential risk lies. We call it the multi-dimensional portfolio analysis process. Regulators are also recognizing the importance of this."
Reaching Deeper Into Membership
Automated risk analytics can also help the credit union reach deeper into the membership, down to B and C paper, without taking on a great deal of risk, said James. "You can determine where the success stories are-what characteristics of prime and non-prime borrowers are performing and providing opportunities. Also, you can better understand what characteristics of the portfolio you should be concerned about and make changes before any real problems surface and escalate, such as in the areas of interest rate and concentration risk."
James asserted that the practice of calling up manual reports and creating spreadsheets may have been OK when lending was easy and there were not the economic problems of today. But that approach now is time consuming, less effective, and far too slow.
"Do this and the credit union will find itself 60 to 90 days behind the curve," insisted James. "Not only in spotting issues, but more important, missing opportunities. You can also put yourself in a sticky situation with collections if you don't get information to the right people at the right time."
