CREDIT POLICY and PROCESS

Your credit business needs an effective business plan that captures and communicates "how we do things around here," that is, that reinforces your culture.

You scrutinize the business plans of your commercial credit customers:

• Do their plans specify the kinds of customers they want, and do not want, clearly focusing on target markets?
• Do they reflect market conditions, the competitive environment, the available resources?
• Do they anticipate trends and changes in their industries?

You have probably encountered customers who simply had the wrong business plans, strategies that did not match up well with conditions, threats, and opportunities.

In other cases, you started a relationship with a customer based on a solid business plan. But as conditions and demands on the business changed, the plan remained the same. The borrower drifted into a weaker and weaker position, the business plan was more and more out of touch with actual practices. The culture deteriorated, perhaps without the company's management even noticing.

Credit Policy = Your Business Plan for your Credit Business

Exactly the same patterns can be found in the credit operations of many banks. Whether the policy is unrealistic in the first place, or whether a good policy drifts out of touch, compared to credit practice, when your policy goes out of synch with the way you actually work with borrowers, you are increasing risk.

You may face an urgent need to review and update credit policy, for a variety of reasons:

• Many clients who have done a culture assessment have recognized that a clear and up-to-date credit policy is essential to tightening the culture.
• Recent hints, or more than hints, from the bank examiners have referenced deficiencies they must address;
• Dramatic changes in markets, systems, or business practices have revealed how out-of-touch the policy and process have become;
• Inefficiencies and conflicts surrounding credit policy, processes, and practices have become such a drain on your performance that a policy overhaul must be part of an effort to regain control and standardize practices;
• Acquisitions or mergers require developing a single, common approach from the previously existing policies and processes.

Or you may have a regularly scheduled review coming up, and you know that you want to do more than just tweak your policy. You want to carefully evaluate your policy and develop the most effective business plan for your credit operations.

Whether you're responding to immediate pressures, conducting an annual review, or simply trying to develop a more relevant, more effective credit policy, please contact me to learn more about how my team can help you reach your goals.

And if it would help to know more about the common ways in which policy goes astray, and how to address them, consider my White Paper, "Is Your Credit Policy Working for You?", available upon request by e-mail or phone. Learn more about the White Paper here (including the executive summary and table of contents).

We Have Been There

Jeff Judy & Associates has worked directly with clients on credit policy, credit process, lending practices, and with every step between the strategic vision at the top of your organization and the implementation of that vision on the front lines. Among my team of associates we have played many official roles: credit policy officer, chief credit officer, corporate credit training, corporate risk management, strategic planning, employee communication, corporate culture assessment and development, systems analysis. We have been involved at every level from subtle tweaking to major overhaul of policy, from making recommendations in a small bank to helping merged institutions come to a common policy.

Very simply, we know why things go wrong, and how they can be put right.

Add to that out expertise in training and culture, and we can not only help you develop the policy your bank needs to meet your unique circumstances, we can help ensure that the information and guidance in your credit policy is successfully communicated all the way to the front lines and support staff.

Please contact me to discuss your credit policy issues and how we can address them together. And, again, if you'd like to learn more about what makes a good credit policy, and how banks end up with poor credit policies, look into my white paper titled, "Is Your Credit Policy Working for You?"

(You may also want to look at my Culture White Paper & Readings ... )

If your credit policy does not provide a realistic and relevant blueprint for your credit culture, your credit business is unlikely to match your goals.