A well-designed credit risk dashboard is crucial for better credit risk management and can help financial institutions make better business decisions by providing timely and actionable information, increasing visibility of risks across the organization. While such reporting frameworks vary across institutions, which set of design principles do the most effective ones adhere to?
The most recent financial crisis was driven in part by the inability of financial institutions to effectively identify and manage underlying credit risks in sophisticated investment vehicles. Within financial institutions, the risks being taken by individual lines of business may have been well understood. However, how those risks were correlated, and their cumulative impact on the organizational risk profile, were not. The lack of a portfolio view of risk is due, in part, to fragmented technology and inadequate credit risk reporting.
In order to gain a full understanding of operating results and respond effectively to changing risk dynamics, risk managers must be able to quickly assimilate significant portfolio issues and drill into relevant data as necessary. While credit risk reporting frameworks vary across institutions, the most effective frameworks adhere to a standard set of design principles. Such reporting should: