Retail Credit Risk & Credit Scoring
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The programme begins with an introduction to the notion of risk and risk management, in life, in banking and then in consumer lending. This leads onto to credit scoring, the most common set of techniques for managing and controlling consumer credit risk.
The agenda then moves on to consider a range of issues that impact on how we implement and use credit scoring in a consumer lending environment and also how we ensure it is successful in its management of risk.
Attend this 4-day course / workshop and learn:
- About risk, risks in banking, risks in retail banking, and the credit cycle
- The process of scorecard building
- How scorecards are implemented and how to set the cut-off
- How scorecards are managed once in use
- The impacts of fraud on retail lending
- About the laws and regulations that apply to retail lending
- How to design and recruit your retail credit risk management team
Throughout the programme there will be:
- Individual exercises, examples, and case studies
- Group exercises and case studies, in some of which each group will need to report their conclusions to the other groups
- Discussions, where delegates are expected to participate
What is Risk?
- Defining risk
- Exploring risks
- Exploring risks in banking and then in retail lending.
- Various risks will be discussed together with examples from a variety of banking and non-banking organizations.
Case Study: Brand Risk
- What credit products exist – and what are their implications for credit risk management?
- What channels do we use to process and manage the customers and the credit products?
The Credit Cycle and Principles of Credit Risk Management
- What is the credit cycle – and what are the key steps along its path
- What are the key principles of credit risk management?
- How is credit governed within lending organizations?
- Credit product launch
- Application fulfillment
- Customer retention
How do we lend money?
- What are the high level principles?
- What processes do we need?
- Traditional underwriting – its strengths and weaknesses
An Introduction to Credit Scoring
- What is credit scoring?
- Why do many lending institutions use it?
Case Study: Reasons for and benefits of credit scoring
- Data and the types of data used to make a credit decision
- Sources of data
Case Study: Data quality
The Typical Scorecard Development Process
- What is the typical process? What are the key steps?
- How long does it take and why?
- What does a scorecard look like?
Data Quality and Quantity
- Key aspects of data quality
- Why is data quality important?
- How do we drive data quality?
- How much data do we need to capture?
Case Study: Data quantity
How are Scorecards Developed?
- What are the principles of the common methodologies?
- Reject Inference – what is it? Why do we have it? What are the options for it?
- How many scorecards do we need?
- How do we measure the strength of a scorecard?
- The key steps to take prior to using a new scorecard.
- Setting the scorecard cut-off
- Business implications of various strategies
Case Study: Setting the scorecard cut-off
Scorecard monitoring and tracking
- Ensuring that the scorecard is still appropriate for the target population
- Assessing if the scorecard is still working
- Over-rides and their management
- Monitoring - characteristic analysis
- Monitoring - final score report
- Credit policy
- Affordability checks
- Lending limits – customer and institution
- How to manage individual accounts - credit limit management, cross-selling, re-selling, and customer retention
- Scoring uses
- Portfolio management and forecasting
Case Study: Portfolio management and forecasting
- Collections and recoveries - principles, strategies, tactics
- Debt sale
- Use of scoring
Credit and Sales
- Risk based pricing
- Up-selling and down-selling
Case Study: Up-selling and Down-selling
- Detection, prevention and analysis
Case Study: Major fraud cases
Regulation – Basel
- Background and principles
- Impact on credit risk management
- Impact on the credit risk and credit governance processes
Bad Debt Provisions
- What are these?
- What rules apply to them?
- Key requirements
Case Study: Exploring a multi-national bank’s MI manual
Designing and Recruiting a Credit Risk Management Team
- Roles and functions
- Recruitment and retention
Course summary and close