Portfolio Reviews: Monitor for Risk, Catalyst for Action

A portfolio is simply the aggregate sum of the individual debt instruments it contains—accounts, loans, credit cards, lines of credit or other instruments. As individual accountholders move through different life events, the creditworthiness and risk level of their accounts constantly change. And, because the level of risk contained in your debt portfolio is a function of the risk presented by these individual accounts, your portfolio constantly fluctuates too. Your portfolio's performance, including both profitability and loss rates, directly correlates with how well you identify, anticipate and manage these fluctuations in individual risk.

Clearly, the ability to understand and manage risk fluctuations is an essential part of any effective credit risk management strategy. One of the best ways to do this is by conducting regular portfolio reviews, which can provide both point-in-time and longitudinal statistics. This information gives you the ability to assess both overall portfolio risk and individual account-level risk.

This paper explains four ways in which your business may benefit from the use of portfolio reviews: