Risk & Return Solution
The Risk & Return
application calculates and aggregates portfolio and sub-portfolio risk and
risk-adjusted returns. The management of a debt portfolio is similar to
the management of an investment portfolio. The objective is to build and
maintain an efficient portfolio.
The application has a
built-in, drill-down query function. Through the set up process, numerous
sub-portfolio queries can be written. Sub-portfolio risk and risk-adjusted
return information includes: percent volume, volume, risk of the pass
credits, risk of the total sub-portfolio, non-accrual rate, past due rate
and loss rate, annual risk-adjusted return, annual income, economic
risk-adjusted return, and economic income. The sub-portfolio information
is archived and trended within the application.
Fixed and variable costs are
allocated by loan type and size, along with probability of default and
loss given default. The risk-adjusted return of every loan is calculated
and aggregated at the customer level.
Customer reports can be
created to identify undesirable relationships. Once identified,
appropriate action can be taken to improve the overall portfolio return.
Numerous portfolio management
reports and graphs can be created.