Credit Portfolio Models

Successful credit portfolio management requires sound knowledge of the individual portfolio components as well as of the interaction mechanisms between them. Here, risk measurement at the portfolio level (economic capital) is a crucial pillar.
In the recent past, it was not just the high volatility of the different types of model and the strong dependence on abstract model assumptions (the drivers of default correlations and, to a certain extent indirectly, of asset correlations) that contributed to a certain amount of scepticism as regards the further development of credit portfolio models. The use of diversification instruments that are difficult to value has further promoted this uncertainty. 
As the effects are not taken into account in Pillar I, the knowledge gains and the improvements in the risk management system that can be derived from own measurement are frequently underestimated. From an economic as well as a regulatory perspective, such methodological/procedural monitoring and management offers real value added (cf. e.g. amendments to the MaRisk in respect of concentration risks and audit practices).

Your road to value-oriented portfolio management  

As soon as the measurement results can be assigned to specific business units or lending units - by combining risk analysis with the calculation of income based on accounting principles - there is a clear road to value-oriented portfolio management with the following strategic focus.

  • Reduced income volatility
  • Enhanced external communication
  • More effective divisional management and resource allocation
  • Improved strategic planning
  • Value-oriented remuneration systems

SKS has extensive experience on all methodological levels right up to value-oriented portfolio management. We can provide support here from the strategy analysis stage through conceptualisation down to the technical and procedural realisation and implementation.