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AAA Spark Meeting of Regions

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Mitigating Inherent Banking Risk Related to Loan Portfolio

Tue, May 25, 3:30 to 4:30pm, Virtual, TBA

Abstract

Despite regulatory requirements and technological advancements, bank managers face inherent risk in their retail loan portfolios. Bank managers that do not address and mitigate inherent risk in their retail loan portfolios are at a disadvantage to better know their customers, use technology, and enhance credit analytics. Grounded in the enterprise risk management framework, the purpose of this qualitative multiple case study was to explore strategies bank managers used to mitigate the level of inherent risk in their retail loan portfolios. Data were collected from semistructured interviews and document reviews. Participants comprised 8 leaders at 4 companies who had implemented successful strategies in managing the risk of their retail loan portfolios participated in this study. Using Yin’s 5-step data analysis process, 4 themes emerged: know your customer, business knowledge and effective leadership, enhance credit analytics, and technology use. A key recommendation for bank managers is to use holistic risk assessment strategies to manage inherent risk. The implications for positive social change include increased sponsorships for local events with the potential increase of donations to local schools and outreach organizations supporting local community residents.

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