The credit risk management function often finds itself operating as a silo; separate from other key organizational function. However, in reality the success of any credit risk management function is completely reliant on these other functions and similarly their ultimate success is profoundly impacted by the credit risk function. A silo mentality in such inter-related fields will always lead to conflict and almost always lead to sub-optimal results for the organization as a whole. The sales team might push for growth at all costs while the credit team pushes for the opposite. Energy is wasted in these inter-departmental battles and the blind pursuit of conflicting priorities results in lost opportunities.
In order to breakdown a silo mentality it is important to have a single unifying goal and a common understanding of how to reach that goal. Profit model analytics is one means of doing this. A profit model represents – diagrammatically or mathematically – the relationships between each connected department, their actions and the overall profit of that organization. This allows each department to understand the profit levers to which they have access and, more importantly, the internal and external impact of each action they take on those profit levers. Source: Discussion on LinkedIn LinkedIn Group: Credit Risk Managers
BIIA Newsletter October II – 2010 issue