Story

This bank’s need to prevent and reduce credit losses from defaulted commercial loans was symptomatic of a greater challenge. It needed a data management program that could help it more effectively manage different aspects of the business. Follow the story of how a new data-driven strategy helped our client triumph over the core challenges of 1) meeting stringent regulatory demands for more robust reporting and 2) dealing with issues surrounding its data and data access.

 

Solution

Each year, banks approve billions of dollars in commercial loans. Throughout the approval process, documents are signed and covenants are created to ensure that funds will be repaid. Funds not repaid within the outlined term can result in higher capital requirements on the institution and, ultimately, credit losses for the bank.

Most often, the only indicator that a loan has gone bad is when payments become delinquent – which is too late. Our client wanted to analyze such scenarios well in advance to prevent payment default. And that’s what led to the need for an improved data management program.

Our team's assessment revealed that this bank’s ability to quickly uncover and manage credit loss was constrained by a lack of consistent, quality data, and by static reporting and manual processes. In addition to regulation issues, other issues to resolve included:

  • Incomplete and inconsistent data

  • A desire to have more time to analyze data before monthly, quarterly, and yearly reporting

  • An inability to see the “story” behind the data

  • An inability to interact with the data through visualization tools

Summary of deliverables

  • An Enterprise Data Management framework that included culture, people, process, and technology change management

  • The enablement of a new data leader, i.e., a chief data officer

  • Numerous executive dashboards:

    • Status dashboards – accrual, AQR status, charge-off and recovery, delinquency, and others

    • Trend dashboards – commercial portfolio, retail and mortgage portfolio, charge offs, large dollar exposure, etc.

    • Operational dashboards – delinquencies and maturities

    • Alert dashboards – accruals, loan structure alerts, AQR alerts, etc.

Success

The strategic data management program we developed has been critical to improving operations and the bottom line for this client. It generates more meaningful, accessible, and secure data. By implementing more effective reporting and more insightful data, the bank has revitalized its data management program, while leveraging existing architecture and resources. Fewer hours are spent on static reports and fewer conclusions are drawn from inefficient data.

Based on conservative assumptions, the potential favorable financial impact of this project is estimated at nearly $1.8 million annually, resulting in an ROI of over 1,000% over three years. In addition, the bank now proactively addresses credit issues and aligns with regulatory and compliance requirements.

Decreased manual interventions
Refocused resources on value-added activities