With rising delinquencies and credit losses nationwide, it is imperative that credit unions take a more global view of credit risk from a portfolio level. With this issue in mind, Wescom Credit Union, one of the largest credit unions in the US, chose SAS, the leader in business intelligence, to help better forecast portfolio credit loss. More precisely predicting future loan losses – a key component to Wescom’s business plan – will help to improve proactive risk management.
“Historically, lenders have viewed credit risk management at the loan level by setting loan-level credit criteria,” explained Anna Mendez, Chief Credit Officer and Senior Vice President for Wescom. ”We need to better understand risk at the portfolio level. Better forecasting of how portfolios will perform in the future is critical to Wescom, especially with the fluctuating economic conditions and ever-changing loan characteristics. Our objective is to elevate credit risk management to the same level of scrutiny and diligence that interest rate risk management has obtained in years past.”
“We know that SAS is one of the premier risk management software companies,” said Mendez. “With SAS, we expect to more accurately assess how much current and future risk we have embedded in our individual loan portfolios and determine where adjustments may be needed.”
With SAS® software, Wescom hopes to more effectively balance risk across all portfolios. In addition, the credit union will be able to utilize the information within their collection strategies and collect according to forecasted portfolio losses rather than by risk score, which is just one indicator of potential losses.
“Given the current volatile economic environment, understanding the makeup of your risk profile is crucial for any business,” said Mendez. “Having a good understanding of that is a significant competitive advantage, now more so than ever before.”