Over the last 20 years, the number of banks has dropped from 9,000 to a little under 5,000, and net interest margins have continued to decline. Clearly, there are historical challenges that were a direct result of the downturn a decade ago that reduced the number of banks. There are also external challenges that threaten the entire industry, from disruptive technologies to online banks. At Finance. Risk. Unified we believe there are two key challenges bank can control that also have an impact:
- A bank’s ability to aggregate their data into near real time visibility of budgets and projections
- Lack of visibility to credit risk and how that affects your products and services mix
As you can see in the chart provided below, there’s a significant swing in total losses that banks have experienced over the last 14 to 20 years as a direct result of not having visibility into credit risk.
The green line above shows the effect that unifying financial and risk data has – it greatly reduces losses in high volatility environments and out-performs even in stable conditions. In order to achieve these results, banks must:
- Generate detailed, driver-based rolling forecasts to project financial performance over the short and long-term.
- Streamline the budgeting and reporting process to incorporate branch, board, and external reporting to bring forecasting and strategic planning together.
- Bring risk data and visibility into the same system and tie it all together to monitor and manage the business day-to-day using a highly-graphical and intuitive interface for operating, performance, and risk metrics. This allows you to make risk-adjusted decisions to optimize your organization’s strategic plan.
A strategy that uses credit quality that incorporates expect loss measurement can proactively see their exposure risk. This goes beyond risk adjusted returns and allows you to see what products/services are performing and which need to be adjusted. Banks that don’t use a credit quality strategy are in a less mature position with their credit risk management and puts them at a competitive disadvantage regarding risk. This disadvantage has:
- Product implications – You don’t package the right products for the right customers in your markets
- Pricing implications – You under or over price products
- Sales implications – You don’t price competitively enough and lose business
- Margin implications – You don’t get the return you should from what you do sell
Many community banks are still using spreadsheets and struggling to find the data to inform these decisions.
When they do pull the data together, they are still using static spreadsheets with data that is pulled from their core systems. Updating this data is a time-consuming task that frequently results in out of date data being used for decision making. Updating your risk management methods and automating data sources provides an immediate competitive advantage.
By using a unified, real-time data-driven platform, an organization can have one version of the truth. Leaders now have the analytics, visibility and real-time reporting to drive strategic results, while your sales team has the data and freedom to reach growth goals and foster client prosperity. In short, you replace the everyday chaos of manual data with order, simplicity and clear visibility for the entire organization. With the same powerful tools that the big banks already use, you can further help your clients and community at large.
Bringing it all together means improved ROI because now you have the ability to:
- Take the right products to market
- Price them correctly
- Optimize your portfolio
- Sell more profitable products
- At a higher margin
Your customers and community wins – so you win too.
About Finance. Risk. Unified.
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.