The credit crisis which began late last year started as a relatively small exposure to US sub-prime loans. However in just over twelve months this situation has developed into the most significant global economic event to occur for many, many decades.
Every day there are reports of the latest casualty, the latest attempt to calm the markets, the latest country to become embroiled in the crisis. Global GDP has slowed and forecasts for growth are being downgraded in an increasing number of nations.
At a local level the main implication of the global crisis has been that credit has become more difficult and expensive to access. However for the credit manager, the return of risk aversion has many implications. This unprecedented credit market turmoil has brought the importance of effective credit management to the forefront, demonstrating that the economy cannot function effectively without it. The scale of the turmoil currently rocking world financial markets and economies will significantly alter the financial landscape in a shift that has massive consequences for credit departments around the globe.
These events will impact the role of the credit manager and the effectiveness of the risk management strategies of Australian organisations.
However the credit crisis isn't the only event that will impact credit risk management practices through to 2020. There are five key trends that will have profound and lasting impacts on the credit industry in the coming years:
1. an increased focus on risk management rather than credit and collections
2. business outsourcing of non-core functions, including the credit department, will escalate
3. the credit and receivables function will become increasingly linked with the marketing and sales division
4. an increasing number of firms will become global enterprises
5. technological change will continue to impact the way in which the credit department operates.
Change is inherent in the credit industry - organisations must continue to drive their risk management processes forward to ensure they stay ahead of the risk game.