Do You Have a Strong Business Plan for your Credit Business?
You scrutinize the business plans of your commercial credit customers:
- Do their plans specify the kinds of customers they want, and do not want, clearly focusing on target markets?
- Do they reflect market conditions, the competitive environment, the available resources?
- Do they anticipate trends and changes in their industries?
You have probably encountered customers who simply had the wrong business plans, strategies that did not match up well with conditions, threats, and opportunities.
In other cases, you started a relationship with a customer based on a solid business plan. But as conditions and demands on the business changed, the plan remained the same. The borrower drifted into a weaker and weaker position, the business plan was more and more out of touch with actual practices. The culture deteriorated, perhaps without the company's management even noticing.
Credit Policy = Your Business Plan for your Credit Business
Exactly the same patterns can be found in the credit operations of many banks. Whether the policy is unrealistic in the first place, or whether a good policy drifts out of touch, compared to credit practice, when your policy goes out of synch with the way you actually work with borrowers, you are increasing risk. (To learn more about how policy can become ineffective, and what to do about it, download "Is Your Credit Policy Working for You?" from my white papers page.)
An expert, external review of your credit policy can help ensure that your credit business is safe, sound, and successful. Such a review is especially helpful if:
- Your policy has grown bit by bit, case by case, borrower by borrower, until it has become internally inconsistent and self-contradictory.
- Your industry regulators have grumbled about lack of guidance or inconsistent practices.
- Acquisitions or mergers have created the need for a new, consistent policy for the entire organization.
- Changes in markets, systems, or conditions have revealed out-of-date segments of your policy.
- You spend more time arguing over exceptions and omissions than you do applying the policy as it stands.
Whether you're responding to immediate pressures, conducting an annual review, or simply trying to develop a more relevant, more effective credit policy, please contact me to learn more about how my team can help you reach your goals.
We Have Been There
Jeff Judy & Associates works with clients on credit policy, credit process, lending practices, and with every step between the strategic vision at the top of your organization and the implementation of that vision on the front lines. Among my team of associates we have played many official roles: credit policy officer, chief credit officer, national bank examiner, corporate credit training, corporate risk management, strategic planning, employee communication, corporate culture assessment and development, systems analysis. We have been involved at every level from subtle tweaking to major overhaul of policy, from making recommendations in a small institution to helping merged entities come to a common policy.