managing rlf ** risk **. what is risk? how is risk identified?
Post on 14-Dec-2015
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MANAGING RLF ** RISK ** Slide 2 WHAT IS RISK? Slide 3 HOW IS RISK IDENTIFIED? Slide 4 Slide 5 Slide 6 Slide 7 Slide 8 Slide 9 IF IT DOESNT KILL YOU, IT MAKES YOU STRONGER Slide 10 HOW IS RISK IDENTIFIED? 1.OBSERVATION 2.EXPERIENCE Slide 11 3 TYPES OF RLF RISK 1.UNDERWRITING RISKS 2.SERVICING RISKS 3.FUNDING RISKS Slide 12 UNDERWRITING RISKS! KEY AREAS OF REVIEW IN THE UNDERWRITING PROCESSKEY AREAS OF REVIEW IN THE UNDERWRITING PROCESS INFORMATION VITAL TO SOUND UNDERWRITINGINFORMATION VITAL TO SOUND UNDERWRITING Slide 13 KEY AREAS OF REVIEW 1.CASHFLOW 2.MANAGEMENT 3.CHARACTER Slide 14 CASHFLOW Cash pays the bills not Profits Look a little Deeper If it is Good can they do it Again? If it is Bad can they correct it? Slide 15 CASH IF KING! Slide 16 MANAGEMENT How Do You Know If Someone is a Good Manager? What are the Signs of a Good Manager? Slide 17 The Two Most Common Reasons for Business Failure LACK OF CASHFLOWLACK OF CASHFLOW POOR MANAGEMENTPOOR MANAGEMENT Slide 18 CHARACTER Most Difficult to Quantify! Importance of Honoring Debts Providing What you Need Slide 19 INFORMATION VITAL TO SOUND UNDERWRITING Credible Financial Statements Credit History Try to Get Your Arms Around Character Slide 20 Servicing Risk 1.Key Areas of Review 2.Red Flags Slide 21 Key Areas of Review Performance of the Business Competition Trying to Stay Ahead of the Curve Slide 22 Red Flags Late payments Poor record keeping Failure to provide financials Significant increase in sales Increases in current liabilities Slide 23 Red Flags Stale inventory Significant changes in Balance sheet composition Decreasing sales Loss of major customers concentration Slide 24 Funding Risks Compliance with Funding Agencies Inadequate Program Income Loan Losses Slide 25 Compliance with Funding Agencies Understand the REGS When in Doubt Get in Touch Keep Them in the Loop Slide 26 Inadequate Program Income Do You Generate enough Income to Keep it Going? Can you Sustain Losses? Slide 27 Loan Losses Poor Documentation Loan Servicing Slide 28 Slide 29 Poor Documentation If You are Unsure Find a Partner Talk To Your Helpful Banker Shame an Attorney in to Helping Slide 30 Loan Servicing Find a Partner Outsource for Better Effectiveness Slide 31 Slide 32 WHY DO WE PUT OURSELVES THROUGH THIS ??? Slide 33 YOUR LOCAL ECONOMY BENEFITS FROM RLFS Slide 34 YOUR LOCAL BUSINESSES NEED RLFS Slide 35