the Importance of Decision Support System and

Portfolio Risk Management:
the importance of decision support
system and of credit reporting
Fabrizio Fraboni
Director of International Division and Strategic Planning
Warsaw, October 23, 2003
© 2002 CRIF Group
•
The CRIF Group
•
The Importance of Credit Reporting
• EURISC - the CRIF Credit Reference
Bureau
• Public and Business Information
•
The management of Decision Process
•
The Portfolio Monitoring
© 2002 CRIF Group
Table of contents
The CRIF Group
•
An European, private- and bank-owned company with headquarters in Bologna
(IT).
•
Started in 1988 as the Italian Credit Bureau for the retail and small-medium
business credit market (over 90% of market share).
•
Over 500 employees in 6 countries; extensive growth in terms of revenues and
employees.
•
Leading European provider of information, decision systems, technology
•
More than 200 scoring and decision solutions systems in 10 countries.
•
Banks, Financial Houses, Insurance Companies and Utilities are main customers.
© 2002 CRIF Group
and consultancy to evaluate credit risk and develop marketing strategies.
The CRIF Group
Offices in the U.S., Mexico, UK,
Germany, Czech Republic.
Bologna
Bologna
Tampa, USA
London, UK
Hamburg, Germany
Prague, Czech Republic
Mexico City, Mexico
© 2002 CRIF Group
Information systems, decision-support
models, outsourcing, software,
consultancy and management solutions
providing support to banks, financial
institutions, service and insurance
companies in every phase of client
liaison.
From strategic planning to the final
acquisition and management of the
client portfolio.
CRIF solutions can be integrated
with the CRIBISNET Group offer
• CRIBISNET
Group
provides
integrated
services
of
commercial
information
worldwide
business
and
credit
&
Bologna
&
marketing reporting
• Among their customers, there are 330
Bologna
Tampa, USA
Italian banks and financial institutions
companies
Bologna, Rome
© 2002 CRIF Group
and over 2000 Italian, European and US
CRIF
Information
Main Data Bases
Voters’ Rolls
Credit Application
Data
Protests
and
Court
Judgements
Surveys from
Company
Registry
Frauds
Land Registry
Surveys
Telephone
Directory
Lost and stolen
Documents
Balance Sheets
© 2002 CRIF Group
EURISC
Financial Statement positions from over 410 Subscribers
25.500 branches out of 29.000 connected on-line every day
42.000.000 credit lines constantly updated
81% of successful inquiries per year (Hit Rate).
CRIF
Information
• Germany: B2B Credit Bureau
• UK: DB of Claims on Personal
Injuries for the main English
Insurance Companies
• Skyminder: Business
Information Aggregator (48
mln companies worldwide)
• From 1999 partner of Trans
Union for methodology and SW
• JV in Czech Republic, Mexico
and US
• Scoring models for the
following Credit Bureaux:
•
•
•
•
•
Schufa (Germany)
ICB (Ireland)
BIK (Poland) in progress
Buro de Credito (Mexico)
Serasa (Brazil)
© 2002 CRIF Group
• Czech Consumer Credit Bureau
Decision Systems
CRIF
Decisions Systems
• Professional Team of about 90 consultants
• ISC
• Platform for the development and the monitoring of
scoring models (DANTE)
• Projects for the IRS development
• Offerings:
 Consultancy
 Automation Systems for decision processes
© 2002 CRIF Group
 Data analysis and modelling
CEE Focus at CRIF
Strong CEE regional team
The largest CEE dedicated team among all international decision solutions
companies
3 CEE regional offices (Prague, Bratislava, Vienna); over 20 professionals focusing
on the region
Cooperations with local companies in 6 CEE markets; extensive collective
knowledge of banking environment in the CEE markets.
CEE specific activities
Shared client databases: Insurance anti-fraud systems; non-banking client registers
(leasing, telecommunications, utilities, etc.)
Scoring; credit process automation and consultancy projects (retail & SME)
© 2002 CRIF Group
Credit Bureau activities: CR, Slovakia, Romania, Croatia, Hungary, Bulgaria, Serbia
Credit Reporting Industry in Italy
Eurisc
Bankit
75.000 Euro
CRIC
30.000 Euro
© 2002 CRIF Group
CRIC, Bankit db and
EURISC provide credit
risk information
complementary and
complete about a
subject
EURISC - the CRIF Credit Reference
Bureau
• It is the most important Italian private credit
reference system for all kinds of credit aimed to
meet the information needs of :
• Banks and Financial Institutions operating in the
retail credit market
Companies granting commercial credit
•In connection with European Credit Bureaus
© 2002 CRIF Group

EURISC - the CRIF Credit Reference
Bureau
EURISC manages all kind of retail credit
These are the types of credit that can be inquired:
Personal loans
Consumer credits
Credit cards
Mortgages
Leasing
Credit line on current account
Advance on current account (for import/Export) and bill
discounting
Service account
© 2002 CRIF Group
Factoring
EURISC: Hit Rate trend
74
62
65
80
68
55
46
38
41
30
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
© 2002 CRIF Group
Found 80
out of 100
subjects inquired
85
80
75
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
Volumes of Rejected credit stored in EURISC
Million Euro
3.724
4.000
3.238
3.500
3.000
2.666
2.500
2.000
1.500
500
first half-year 2001
second half-year 2001
first half-year 2002
© 2002 CRIF Group
1.000
Percentage of contracts with delay in reimbursement in case
of use or no use of EURISC
9,0%
8,2%
7,8%
8,0%
7,0%
6,8%
6,8%
6,3%
6,0%
5,0%
4,0%
3,0%
3,0%
1,0%
0,0%
Leasing
Mortgage
% Use EURISC
Loans
% No Use EURISC
© 2002 CRIF Group
2,0%
•
By an accurate credit risk control, the Institution can
extend its financial activity, aware of risk assumed.
•
Credit is fairly granted.
•
The System allows to prevent overindebtness.
•
Decisions about credit granting are not subjective.
•
Overestimation of payment capability is avoided
•
Control of the “Credit Shopping”
© 2002 CRIF Group
EURISC: benefits of complete
information
The Global Online
Information Solution
An Integrated Solution
INDUSTRY INFORMATION
NEWS
MARKET RESEARCH
FINANCIAL COMPANY DATA
EXECUTIVE PROFILES
PUBLIC RECORD
TABLES
© 2002 CRIF Group
COMPANY INFORMATION
CRIF Business Information Services
Business and Reliability Area
Services
Failures, ...
Registry of
Companies
Protocol
Financial
Statements
Prejudicial
Information
Rating
Company
Ownership
Directors Board
Other CRIF’s
Data Banks
© 2002 CRIF Group
Protests
From the Credit Bureau …
Output
RA18 - Copyright Crif ----------------------------------------------------------- ANAGRAFICA 800010790 -------- NUM. 01 DI 01 --------COD.FIS. BNCRRT60R15G337C PARTITA IVA
N.ISCR.CCIAA
DI
COGNOME E NOME
DENOM./RAG.SOC.
SESSO
M NATO IL 15 / 10 / 1960 A
PROV. PR
RESID.
VIA CASTIGLIONE,6
CAP.
40124 COMUNE BOLOGNA
PROV. BO NAZIONE I
------ RIEPILOGO EURISC E CREDIT BUREAU SCORING - INDICAZIONI ISTITUTO ----------------------------
N. POSIZIONI SEGNALATE
9 -----------------------RC/IS |
RF/DE |
RN/AF |
AC
|
EA/ES
_
RATEALE
:
2
|
0
|
0
|
2
|
1
_
NON RATEALE
:
0
|
0
|
0
|
1
|
0
_
CARTE
:
1
|
0
|
0
|
2
|
0
TOTALE ENTI SEGNALANTI
:
8
DI CUI SEGNALANO SOFFERENZE :
1 DI CUI SEGNALANO PASSAG. PERDITA:
0
_
CREDIT BUREAU ESTERI / ALTRE B. DATI CRIF INTERR.:
1
_
IMPEGNI DI PAGAMENTO
:
0
_
EVENTI RILEVANTI SEGNALATI A CARICO DEL SOGGETTO :
0
------------------------------------------------------------------------------
APPLICATION
FORM
-------------------------
6=SOCI/SOCIETA' S+INVIO=SELEZ.SEZ. INVIO=SCORRIM.SEQ
Branch
Input
Credit Bureau
Applicant Id and Matching Codes,
Number of Contracts,
Global Exposure, Credit Behaviour,
No. of Banks and Financial Institutions, …
© 2002 CRIF Group
PF: 4=RIT. 7/8=PREC/SUCC
… to the management of Decision Processes
Output
PUBLIC
DATABASES
CREDIT
BUREAU DATA
& BUREAU
SCORE
BUSINESS
RULES
Branch
Input
Credit Bureau
Database Integration,
Policy Rejects, Credit Policies,
Business Rules, Scorecards, Decision Matrix, …
© 2002 CRIF Group
APPLICATION
FORM
-------------------------
APPLICATION
SCORE
Management of Decision Solutions
Integration of different types of data
and tools (scores, credit policies, etc.)

Implementation of evaluation criteria
tailored to meet credit grantors’ needs

Minimize organizational/IT efforts

Integration with internal evaluation
systems
KEY
SUCCESS
FACTORS
© 2002 CRIF Group

Application Processing
Data Entry
Custom designed
Checks
- mandatory fields
- valid values
- cross validation
Databases & Applications
- Credit Bureaus
- External Systems
- Internal Databases
Data
Acquisition
Data
Validation
Data
Retrieval
Response
to the
Clients
Referral
Decisions
Applications
Clients
Individuals (Consumer)
Small Companies (Small Business)
Legal Entities (Corporate)
Results notification
- E-mail
- Letter
- Contract print out
Final Credit Decision
- Automatic
- Manual
- Underwriting process
Scoring & Rules
- Scorecards
- Policy Rules
- Credit Strategies
© 2002 CRIF Group
Final Decision
The need for Portfolio Monitoring
When a Credit Bureau provides tools, services and solutions
for risk control and marketing development
throughout the entire credit life cycle …
… the need arises for:
 Making comparison with the whole market:
- market trends
- benchmarks
 Increasing confidence in the use of the decision
systems
© 2002 CRIF Group
 Improving credit risk attitude
What to monitor?
Scorecard performance
• Maintain predictive power
Policy rules
• Risk of acquired portfolio
• Dynamics of credit card utilisation
 Demand Characteristics
• Risk profile
• Personal Profile
Results of strategy execution
• Acquisition and Portfolio
Management function
© 2002 CRIF Group
Typical
areas of
interest
Customer behaviour
How to monitor?
 Analysing portfolios from different
vantage points
 Understanding trends in advance
 Evaluating dynamics to give the right
priority to corrective actions
Multi
Dimensional
Analysis
 Using ‘Key Performance Indicators’
© 2002 CRIF Group
to quantify business trends
The need for Portfolio Monitoring
Micromarketing &
Competitive Analysis
 Identifying market positioning (market share, comparative
performance, trends …)
 Revealing valuable marketing opportunities (by credit
demand, quality, market share)
 Identifying competitors’ strengths & threats
SELECT VALUABLE & QUALITY PROSPECTS
© 2002 CRIF Group
 Assessing market opportunities by branches/delivery
channels
The need for Portfolio Monitoring
Portfolio Monitoring
& Query
 Analysing Portfolio performance (volume, bad rates,
demographic characteristics, …, by branch/channel …)
SELECT VALUABLE & QUALITY CUSTOMERS
© 2002 CRIF Group
 Monitoring scorecard and credit policies (score
distribution, stability of demand, overrides,
performance, vintage analysis, …)
Conclusions
Key Aspects
Key Aspects
• Richness of information:
•Credit Reporting
•Public and Business Information
• Management of Decision Solution
• The portfolio Monitoring
• Improving credit risk attitude:
•Understanding trends in advance
•Development of effectiveness preventive
actions
© 2002 CRIF Group
•Awareness of risk assumed
Thank you!
Fabrizio Fraboni - CRIF, Italy
© 2002 CRIF Group