While the initial wave of COVID-19 spread appears to be abating, the stormy seas are far from over.
Entire industries and their employees are reeling from the change in what life looks like now. The unprecedented spike in unemployment has big consequences on the banking industry — financial, operational, and reputational, both now and for a long time to come. Banks have experienced flavors of crises in the recent past, so there is muscle memory amongst senior management. However, there are many differences from the last storm in 2008 which mean that old playbooks will only get you part of the way there.
Without diminishing the public health implications and broader financial impacts to the economy — which are vast in scale and rightfully the top priority of many — there is a massive effort that is needed to address the practical issues at the coalface in day-to-day bank credit operations and risk management.
Front-line credit operations and decisioning at large banks is complex, spanning numerous systems, analytics, internal teams, and customer touchpoints. Models that drive decisioning won’t work as intended given the lack of historical precedent for the current scenario and uncertainty around customer behavior. Dealing with the typical challenges of managing distressed assets en masse would put enough stress on the system, and adding numerous emergency government programs on top makes this far more complex.
In this paper we focus on the operational challenges of navigating a credit business through the circumstances at hand.