Credit Risk Management: Trends and Opportunities

| Point of View

The Current State of Credit Risk Management

Financial institutions are subject to a number of risks such as credit risk, operational risk, and liquidity risk. Although credit risk has always been of primary concern to these institutions, its importance became paramount during the recent financial crisis. The crisis exposed the shortcomings of existing risk management systems, and several firms saw significant losses resulting from failure of their counterparties to deliver on contracts. Firms may also be worried about a second recession, which makes credit risk a top priority.

Firms are now looking for new and more innovative ways to manage their credit risk and are approaching risk management from a holistic, enterprise-wide view.This is one of the business areas that saw the highest IT investment from financial firms in 2010, and spending on risk and compliance in 2011 is expected to be double that of 2008. While North America and Europe are expected to have the highest IT spending, Asia is expected to have the most growth during this period.