The Risk Advisory Service Loan Product Risk Assessment Guide circulated recently provides a framework for conducting risk assessments for new credit union loan products as this is a key element of a Risk Management Officer’s role on an ongoing basis. Risk assessing new loan product proposals is a vital part of a comprehensive, informed, decision-making process which, if completed correctly, should strengthen the outcome of the decision and clearly demonstrate good governance and management.
This guide takes the Risk Management Officer through the loan product risk assessment process step-by-step. It provides a framework with which to develop the risk assessment by addressing each risk category which is materially affected by the proposal under consideration. The guide takes the form of a range of questions to be asked and answered by the specific credit union under each relevant risk category. This provides the basis for each credit union to consider the questions in the context of their own individual business model characteristics, financial performance and risk appetite.
The guide includes some examples of loan product-related risks which should be evaluated as part of the risk assessment process. The same process can be used to assess a wide variety of loan products across a range of risks. Also provided is a Loan Product Risk Assessment Checklist to facilitate the work of the Risk Management Officer to ensure that the important elements are considered during the course of each new loan product risk assessment.