Risk management is often considered a cost. Consequentially the practice of risk management is often considered another purely operational expense to be minimized. Risk management as a cost structure is implemented to try to prevent or limit unnecessary losses. But more importantly, properly implemented risk management can be used to drive revenue and increase profitability while decreasing exposure.

Finance. Risk. Unified. (FRU) is a collaboration between SOLA Analytics and OnPoint Risk Advisors. We help organizations understand the art of strategic risk management, which combines:

  • The strategy of the organization, which in many cases, is to grow and expand certain products in markets and areas of service
  • With the ability to do that strategically with risk in mind
  • With the added benefit of allowing you to be strategically successful

We know there’s risk associated with all the products and services that a bank has. We also believe it’s important to have a process in place to understand the cost of that risk – and the potential upside associated with proper risk management. Having visibility into both the risk (downside) and return (upside) makes it possible to align risk management with organizational strategy.

Because once a bank understands their strategy and aligns the risk management process to support that strategy, then they can actually focus their resources on selling the products and services that drive profitability or align with their strategy to return sales and revenue to the top line.

When looking at ways to increase their margins, banks often view products and services without a risk overlay to understand both the risk and cost of the associated product/service.

In order to increase the margins, a bank needs to understand those risk profiles and improve their margins and reduce their cost for operating and delivering those products. Without understanding the operational risk and the market risk and the credit risk and the governance risk associated with each product and service at a high level to some extent, you can’t rank, order and then deliver those to achieve the right results. Delivering the right products and services within this framework will help you accomplish your objectives associated with those strategic initiatives.

The importance of Credit Risk Score Cards

Key to being able to do this is Credit Risk score cards. And we understand that many bankers often view scorecards as a black box, where they:

  • Don’t understand why a particular score was derived
  • Feel that subjectivity and unique expertise can be lost
  • That they can’t capture underwriting practices

However, when you use modern methods, unite finance and risk data and pull that data together in modern technology this is no longer the case. Instead you can leverage scorecards for:

  • Full transparency into the calculations
  • Comparing third party industry data and quantitative benchmarks
  • Subjectivity based on your qualitative practices

What Will Scorecards Do to Help You Grow

What will these scorecards do for us? We’ve seen from our direct experience with clients over decades that they create hard value, strategic business alignment in value, and of course, they check the box for regulatory and auditor compliance and value. The key outcomes of scorecards are loss avoidance through risk-based pricing and price credits according to the risk profile.

Credit risk score cards also reduce the time needed for competitive product and market positioning, develop a credit-risk culture that’s unified throughout the organization, and help an organization achieve its long-term growth and performance objectives. And last but not least, regulatory and auditor value and exam outcomes are much more predictable and result in the support of the bank’s organizational goals.

Bringing it all together means improved ROI and Competitive Advantages

Bringing together finance and risk data and leveraging scorecards creates alignment between strategy and sales. Now, an organization:

  • Can have one version of the truth for better informed decision making
  • Will better understand the risk profile of portfolio segments and of markets and regions to decide how to grow smarter
  • Will avoid risk with an allowance methodology that is aligned, supported and unified to understand upside and downside with credit risk stress testing to better understand what happens under certain economic conditions

With credit risk scorecards you can do fast portfolio analytics with complete visibility, that is tied to financial reporting through integrated report generation using a dynamic technology. Your entire team will have point/click access and data exploration tools you need to identify both opportunities and threats from/for:

  • Markets
  • Segments
  • Portfolios
  • Economic trends
  • Larger competitors

This is for regional banks that see a narrowing range of profitable lending opportunities. These tools provide the level of visibility necessary to compete against larger banks that have used their scale to gain a pricing advantage in volume-driven businesses such as consumer lending. Having informational parity allows community and regional bankers to find new opportunities for lending that are strategically viable.

This allows you to both continue to support the local community as you simultaneously stave off threats from Global and Super-Regional competitors.

More About Finance. Risk. Unified. for Community and Regional Banks

Finance Risk Unified is a single, modern software solution that provides strategic visibility and combines financial and risk analytics in a highly automated and intuitive technology platform. It provides institutions with the tools to compete effectively against the largest and most sophisticated banks in the country.

Sola Analytics and OnPoint Risk Advisors have collaborated to provide banks with best practices for Financial and Risk Management delivered inside a cutting-edge technology solution.

We are bankers helping bankers. Key delivery components include Financial Reporting, Budgeting & Forecasting, CECL Allowance Models, and Enterprise Wide Stress Testing and Best Practice Credit Risk and Enterprise Risk Management Methods.

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