managing rlf ** risk **. what is risk? how is risk identified?
Post on 14-Dec-2015
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UNDERWRITING RISKS!
• KEY AREAS OF REVIEW IN THE KEY AREAS OF REVIEW IN THE UNDERWRITING PROCESSUNDERWRITING PROCESS
• INFORMATION VITAL TO SOUND INFORMATION VITAL TO SOUND UNDERWRITINGUNDERWRITING
CASHFLOWCASHFLOW•Cash pays the bills not Profits•Look a little Deeper•If it is Good can they do it
Again?•If it is Bad can they correct it?
MANAGEMENTMANAGEMENT
•How Do You Know If Someone is a Good Manager?
•What are the Signs of a Good Manager?
The Two Most Common The Two Most Common Reasons for Business Reasons for Business
FailureFailure
•LACK OF CASHFLOWLACK OF CASHFLOW
•POOR MANAGEMENTPOOR MANAGEMENT
CHARACTERCHARACTER
•Most Difficult to Quantify!
•Importance of Honoring Debts
•Providing What you Need
INFORMATION VITAL TO INFORMATION VITAL TO SOUND UNDERWRITINGSOUND UNDERWRITING
•Credible Financial Statements•Credit History•Try to Get Your Arms Around Character
Red FlagsRed Flags•Late payments•Poor record keeping•Failure to provide financials•Significant increase in sales•Increases in current liabilities
Red FlagsRed Flags•Stale inventory•Significant changes in
Balance sheet composition•Decreasing sales•Loss of major customers –
concentration
Compliance with Funding Compliance with Funding AgenciesAgencies
•Understand the REGS•When in Doubt – Get in Touch•Keep Them in the Loop
Inadequate Program Inadequate Program IncomeIncome
•Do You Generate enough Income to Keep it Going?
•Can you Sustain Losses?
Poor DocumentationPoor Documentation
•If You are Unsure – Find a Partner
•Talk To Your Helpful Banker•Shame an Attorney in to
Helping
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