4 Major Challenges of Risk Management in Small Business Lending Industry
                     4 Major Challenges of Risk
Management in Small
Business Lending Industry
James Mary
21/06/2021
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Table of Content
Introduction……………………………………..……………….…….
……………………………………….…………………. 2
Credit Risk………………....……..………………………………………………………...
……..…….……….....………….. 2
Operational Risk.……………....….
………………………………………………………………………....……………… 3
Liquidity Risk………….…...
……………………………………………………………………………...
……………………….3
Market Risk………...….…...
……………………………………………………………………………...
……………………….4
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Introduction
Risk is unavoidable, so small business lenders must do their best
to mitigate it.  Risk is  one of the biggest challenges that many
financial institutions struggle to move forward.
Meeting  this  challenge  demands  a  clear  understanding  of  the
different  types  of  risks  to  look  for  and  state-of-the-art
technologies that will help you overcome them.
Credit Risk:
To  reduce  credit  risk,
financial  institutions  must
have  the  ability  to  securely
access, store, and categorize
data  based  on  a  variety  of
criteria. Your customer's and
borrowers' data needs to be
updated in real-time to avoid
potentially  outdated
information.
Today,  small  business
lenders can access and use the most robust and real-time of
their  customers  through a  financial  data  API  and  reduce
credit  risk.  Some  ground-breaking  FinTechs  use  advanced
analytics,  AI,  and  ML-based  systems  to  collect,  analyze,  and
transport the most accurate and real-time data of your borrowers.
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With the help of data and technology, you can transform raw data
into  meaningful,  easy-to-understand,  and  actionable  insights.
When  you  become  data-driven,  you  will  be  able  to  better
determine the  ability of a borrower to repay the loan and
ultimately reduce credit risk and make smarter lending decisions.
Operational Risk:
From  cybersecurity to
third-party,  internal  fraud,
external  fraud,  and  system
failures,  there  are  several
different types of operational
risk  in  banking.  These
operational  risks  if  not
properly  managed  can
severely  harm  your  lending
business and potentially lead
to legal problems.
You  can  engage  in  continuous  monitoring,  compliance,  and
auditing to avoid operational risks. Today, some technologically
advanced tools enable you to continuously monitor through a
centralized  platform.  With  real-time  notifications,  you  can
prioritize alerts and delegate risk management.
Real-Time Financial Data - Why it
Matters to Small Business Lenders
Liquidity Risk
Liquidity risk is the risk of banks and financial institutions not
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meeting  their  short-term
financial obligations because
they're  not  able  to  convert
assets  into  cash  without
incurring a loss. Simply, you
can  meet  your  cash  and
collateral obligations without
sustaining  unacceptable
losses.
Managing your data is one of
the  most  important  factors
in  mitigating  liquidity  risk.
When  you  properly  integrate  the  latest  market  information,
portfolio  updates,  capital  returns,  and market  view of  liquidity,
you  can  gain  a  centralized  view of  firmwide  interest  rate  and
liquidity  risks.  You should  also  establish an analytic  framework
and integrate your risk management process to mitigate liquidity
risks.
Market Risks
Also  known  as  systematic
risk, it is the risk of losses in
position  arising  from
changes  in  the  global
financial market. Sources of
market risks include interest
rates,  political  unrest,
exchange rates, geopolitical
events, or recessions.
Market  risk  management
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implies  fostering  a  far-reaching  and  dynamic  structure  for
observing,  estimating,  and  overseeing  liquidity,  financing  cost,
unfamiliar  trade,  and foreign  exchange risks.  This  ought  to  be
coordinated  with  the  financial  institutions’  business  technique.
Likewise,  stress testing can survey potential  trouble spots in  a
given portfolio.
So,  these  are  some  of  the  many  common  risks  in  the  small
business  lending  industry.  You  can  follow  the  above  tips  to
mitigate these risks and take your lending business to the next
level.  You can leverage the benefits  of  financial  data API to
access,  standardize,  normalize  and  use  the  most  accurate,
precise, and real-time data of your customers. Also, you can use
credit risk management software that provides the most accurate
assessment of risk possible.
Related Search Term:
#small business loans
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#business loans for women
#new business loans
References:
●  https://finance.yahoo.com/news/must-know-8-types-bank-170022216.html? 
guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_si
g=AQAAAG0H73yHKLnYh-
_GSxQOgLC3qVOYVYYtguJ2wysHoep0yjcnxUcTDxMHdGPyVy4pp6DFHd7yGVme6nxkm7
6
Jo3Ic25WeeaOg9gE4AGa7E0gaprmFOjpJIoCr_GeQtWhDusp-TFA7D9vlNA9-
suvwR9xiShSUsGjUVYs7P6biJgpqJ
●  https://corporatefinanceinstitute.com/resources/knowledge/finance/major-risks-for- 
banks/
●  https://global.hitachi-solutions.com/blog/risk-management-in-banks