Nature of credit risk management continues to evolve

The business landscape has evolved in the wake of the 2008 financial collapse. While a number of economists have cited a dearth of risk as an underlying cause of the tepid economic recovery, isolated pockets of excessive risk have managed to cost markets billions. The recent incident of a rogue UBS trader who tallied roughly $2 billion in losses for the bank is a prime example. Nonetheless, the nature of risk management is changing. While large banks are employing stricter methods to rein in investment losses, other institutions are modifying their consumer credit risk management policies as well. For example, a recent survey by Willis Group Holdings found 50 percent of companies claim to have adjusted their risk management strategies to be more long-term in scope, sometimes up to 10 years in range. More than half of survey respondents also claimed their risk function plays a critical role in developing strategy and assessing new market investments. "Establishing long term risk management at the heart of strategic planning is essential to the future success of any commercial organisation," said Willis Group President Grahame Millwater. "We must also reflect upon how we are preparing our companies to face longer-term risks in order to protect our future and ensure the sustainable growth and value of our businesses."