If a Relationship Manager does not know where along the credit application process the latest customer lies, which credit analyst last tended to the application and how long it took that analyst to compile the memo for credit committee, the financial institution is operating at a severe disadvantage. The larger a borrower database, the more difficult it becomes to mentally supervise these key credit related tasks. Furthermore, in today’s regulatory environment this sort of modus operandi is no longer an acceptable form of business practice. 

On behalf of both internal improvements and external requirements, it is crucial that financial institutions attain clear and consistent loan approval procedures that can be enforced and monitored. This requires implementing a workflow mechanism.  A workflow is the ideal way to go about organising, enforcing and tracking a clearly defined step-by-step work process. Since financial institutions tend to offer a variety of financing options, each with its own unique requirements, it would be prudent to define several workflows to account for the various financing options. The size of the credit request as well as the industry in which the borrower operates are also factors worth considering when developing an appropriate workflow plan.  Furthermore, an updated workflow system allows the current status of a deal to be viewed by authorized personnel at any time along with pending tasks, tasks assigned to specific employees as well as alerts and warnings. Rules may be defined whereby only select personnel may be authorized to take a decision regarding a credit request. It is surprising to discover the number of financial institutions that have not defined formal workflows, creating quite a challenge in monitoring credit related activities and ensuring that policy is adhered to.

Moreover, having and enforcing a workflow or Credit Policy process reduces the tendency for Relationship Managers to send work to the same underwriters repeatedly, and ensures that certain minimum standards of information are gathered before advancing applications while cutting down on the ability of eloquent Relationship Managers to attempt to dazzle the decision making process with charisma.  Who hasn’t heard the story about a relationship manager proudly proclaiming that he had not had a credit rejected in 6 years, while peers had an approximately 65% pass rate.  Either this individual sat in front of a significantly more credit-worthy group of potential borrowers than his peers, or he knew how to “push the committee’s buttons”.