Decentralization
of Risk Department. An Opportunity or Challenges for Organization:-
Credit risk refers to the
probability of loss due to a borrower’s failure to make payments on any type of
debt. Credit risk management is the practice of mitigating losses by
understanding the internal ( Bank PPG,CPG, Policy) and external environment (
NRB Guideline, Business Inspection, etc).
Looking at Context of Nepal, As
per NRB Guideline- Every Bank has to open its Province office in every State.
As per the guideline, Bank has followed the practice of decentralization and
has opened its Province Office in. Beside it, delegation of Authority (Risk
department, Operation Department and CAD to Province head has also been given).
As provincial risk system is one
of the new practices for many banks, following problem has been observed in
provincial risk system.
1.
Controversial
Role of Marketing / CAD authority to single person: - Marketing and CAD are two
opposite Role given to One Person . Marketing Role says to enhance business
loan (Increase figure) and CAD role says to Control Role (Approve Loan by
fulfilling all term and Condition).
If we look towards, todays
Nepalese Banking practice. Some banks have gone from centrally CAD system (
I.e. Separate file approval is done from Kathmandu/ Central system) , while
some branch has gone for decentralization CAD system.
It has been observed todays Banks
are giving unnecessary target to various Province / Branch. So to fulfill the
target (to do business), figure are been given more importance rather than CAD.
We can take another example also
if province head / BM has integrity issue problem also, the credit decision may
biased. So, Management should think for this what authority to give to single
person (Marketing or CAD or both ).
2.
Attitude /
Knowledge / Skill of Approving Authority
in Province System :-
It has been observed after the formation of
province Structure, Senior Person who is working on the province as BM has been
given promotion to Province Head. Beside it Province head who are already
working (Without CAD) are also engaged in marketing. So the attitude/ Knowledge formation of both type of person is
towards marketing skill is observed (BM promoted to province head and Existing
province head to whom CAD is not given), they both have marketing Skill rather
than CAD skill.
As we know Marketers always need Business
(Figure), however CAD needs controlling. A person who has been given
responsibility of CAD and Marketing has itself opposite relationship.
As Business has to increase Figure as per the
target assign to them, pressurize can be given to Risk to review the file in
urgent basis by considering risk / compliance part.
So if Bank want to assign Marketing role / CAD
role to single person, Attitude/ Knowledge / Skill towards CAD Skill should be developed (About process and method to review
Credit file, Attitude, Skill ) by keeping Head office under Experience Mentor.
3.
Knowledge of
Province Head / Business Unit towards Credit / operation department :-
As Nepalese Banking are moving towards
Decentralization of Authority. Province Head are been Assigned. Generally it
has been seen some Staffs are expertise in Operation and some are expertise in
Credit. So Staff who are expertise in Operation department is kept as Province
head (CAD of Credit Risk is Assign to them),
it may have direct Impact on
Credit Review Process. (Experience sharing can be taken from those who
are working as Province head having operation back-ground).
4.
Layout: - Layout
is one of the important factors which is affecting in proper assessment. In
Head office separate Department is setup for Risk and there is some distance
between Risk Department and Business Department. While Province office is setup
in Small area, all departments are closely attached ( i.e Business , CAD, Risk,
Operation, etc) are under same roof. Due to which if Business Department needs
file on urgent basis, frequent pressure can be given to Risk (Continuous follow
from Business to review file on urgent basis). This kind of behavior may impact
in proper assessment of fie.
5.
Credit Chain
Structure: - Proper Credit Chain Structure should be design for file review. It
impacts a lot in Credit Review Process.
For this two Responsibility (CAD and marketing) to be given or not it
should be discussed.
Example :-
(In One Bank, CAD was been given to Province head but later Cad
authority was been given to head office only). Experience sharing can be done
from various banks.
6.
Assign of
Business Department ( Expert Credit
Officer in Province office):-
Business Unit should also be set in province
head (Expert Credit Relationship officer to correct file).
It has been seen New Staff Hiring, frequent
turnover of Staff in branch, change in banking culture creates problem to
business/ branch to make and understand credit proposals. So if Expert Officer are hired in province
office, it might be helpful for the branch and staff. This expert Credit
Officer can make tough proposal by sitting in province office, review proposal
send my branch and even if there is scarcity of manpower they can be
alternative sources to make / review credit proposals for branch. Beside it
they (Expert Credit officer) can also guide/ provide training can also be given
to fresher regarding Credit process.
If
Branch make any credit file at first it should be forwarded to Business Unit, this
Unit will review the file once (About further Clarification/ Correction/ What
point to include, / What not to include of file/ verify necessary document),
and if file is properly reviewed from Business team further Risk function will
only to Review file (Regarding Risk Part) and if less mistake is observed (
Process will be fast and approving
authority will not get hassle).
7.
Mental Fair of
RA. ( To whom RA is in Direct Touch)
As RA Job is for controlling and Business Job
is to enhance figure, both opposite department are under same roof.
Although line manager of Risk Analyst is
formed with Risk Head ( Central Based) but also in province structure,
behaviorally it is observed the immediate line manager of risk is Line Manager
who is in regular touch.
For example :- If CAD is given to Province
Head , after Reviewing file from Risk , file will be forwarded to Province Head
( In behavioral Risk has direct touch with Province head ( Business) , than the
Line Manager of Risk who is sitting in
Head Office).
So one kind of fear (Transfer from Job, Convey
of Negative information to Business Unit) may always remain in the mind of Risk
if strict compliance or assessment is done. Beside it, province head has good
relationship with top body / level of Head office, So Head office shall listen
voice of Province head (Top Level Staff) more than Risk (Lower Level staff). So
top level management should be tactful for this kind of problem.
( For this I want to give example of one
lesson written by BP Koirala – Doshi Chasma studied in class 9 Nepali Subject
),it will helps to understand phycology of lower level staff.
8.
How Many file to
review in a day from Single file :-
If number of file to be reviewed is set up per
day from top approving body, than no one can give informal pressure to Risk.
Generally every branch needs every file in urgent basis. So after sending
branch file to risk at late hour , they may need file review on same day (Or
within hour). As more the time gets
passed ( In evening time) , the mind of Risk gets hang ,eye gets pain as they
have to study file and have to see all documentation part closely. But this
phycology has not been understood by business or concern authority.
(Note:-File gravity may varies. Sometime
corporate file are there which takes time and microfinance file don’t take
time. This things to be discussed).
9.
Problem in
Knowledge Sharing / Problem Due to Fresher Risk Analyst (RA).
Sometime Risk Analyst may have confusion on
some points. In this case, he needs to communicate/ ask query with senior (Risk
Head). As many Risk Analyst has been assigned under one risk head and also
other function is also assigned to Risk Head. Problem regarding proper
communication and knowledge sharing lacks.
(Generally for some Urgent basis file). Also nature of RA also impact in
proper communication (Extrovert nature, introvert nature, shy, fear nature)
Beside it fresher RA can get problems in many
points of Single CA. So frequent call may also needed to ask with Risk Head and
if Risk Head do not show proper behave, busy with other work, proper assessment
may get affected as well as delay in process can occurs.
So while Hiring Risk Analyst in Province
Office One Experience RA and One Fresher RA should be kept / hired due to which
knowledge sharing as well as Personal development can be done.
10.
Problem of Single
RA
For Cost Cutting organization wants to keep
less staff. But it has been observed if one days also one RA takes leave (Force
leave, Illness, Social function), process become late. Although the file can be
reviewed from head office too, Head office staff are also busy to review their
assigned work. So at list two RA should be assigned in one province office so
that process can go fast and RA Can also enjoy holiday. Beside it Knowledge sharing can be done among
staff and if one staff leaves the organization ( if new opportunity is found, there is another backup for
organization too).
11.
Attitude of Risk
Analyst
What kind of Attitude One RA should to Business? It is an undefined
question. Some RA are easy in nature and some has rude nature .Since if RA
behave in easy way, Business thinks RA is easy person and they try to give
indirect pressure to forward the Credit File. If attitude of RA is strict one,
they complain with Business to change RA ( RA is showing Attitude, he should be
kept in Branch so that he will know actual problem face by all). RA should be
flexible with Business or not ?, Since
Business team don’t show empathy theory on work. Also in province risk system,
RA is almost familiar with all BM/ RO (Direct relationship) , So RA cannot speak rude or emotionally he becomes
weak. For this Business Head should also groom to Branch Manager / RO regarding
development of Soft Skill and formulate empathic nature on themselves.
Although
above mentioned points are some challenges (Problem) faced however due to
provincial risk system, following benefits/ Opportunity are also seems.
1.
Huge Increase in
Business and Change In Process Mechanism:-
Due to provincial risk system, Almost
business (Loan Figure) seems hugely hiked - Synergy Effect in business growth
is Observed in those bank who has adopted this concept.
2.
Fast in Process
:-
Looking
at the Credit Review process (Almost file are reviewed in 2-3 hours or in
single days). Process problem from Risk is not seen due to Provincial Risk
System.
3. Close Monitoring of Business:-
As Risk department is opened in
Province, RA can also observe, view the business site/Unit from his own eye .It
helps to credit chain authority to crosscheck the business. But one thing is
Business should provide travel facility (Car in province office). Also Management should also provide clear
figure or provide authority (How much figure loan , Risk have to compulsory
visit to Business. It may vary Province to province. Example: - 2 Crore above
file Risk has to visit Business Site Compulsory).
Conclusion:-Risk Department is one of the
backbones of Business. Since it’s function is to minimized the risk. Nothing is perfect in management but
gradual Improvement is always necessary for organization productivity and
effectiveness. If the proper evaluation
of above mention points is done we can improve /create huge opportunity in
provincial risk system in better way and positive synergy effect can be given
to organization.
By
:- Krishna Raj Bhatta
Time
:- 11.50PM ( May 27,2021) ( In my Covid Positive time)
Place
:Dhangadhi
