Process Trumps Analysis: Investment and lending decisions can be
improved through better ‘decision governance’ i.e.: process trumps analysis.
Research shows that the process is six times more important than analysis
and can make a difference of 100 bps per year in the performance of an
investment portfolio. This is why the existence of so called ‘stars’ in a financial
institution is in the long run riskier than the seemingly less outstanding individuals who are committed to following due process in arriving at a lending
or investment decision – while the stars may make millions for the institutions and appear that they can do no wrong, in one deal they can cause
losses in the billions by not following due process.
Role for Independent & Professional Rating Agencies: At this point,
acutely aware of my enlightened self-interest, I unashamedly make a call for
the maintenance of independent credit ratings by all banks in the Caribbean
and I would even say all deposit taking institutions above a minimum asset
size.
An independent credit rating must be seen as an integral component of
a bank’s governance framework and an important input into its enterprise
risk management framework. The rating examines on a current and forward-looking basis