Credit Risk Policy for a Money Transfer Operator (MTO)
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Client
A money transfer operator (MTO) based in the UAE.
Assignment
Approach
Benefits to the client
Bottomline
Set up a credit policy framework including automation of the credit scoring model and establishing credit limits and settlement periods.
1. We studied the MTO’s business process in detail to ascertain the precise points at which credit exposures are incurred and the periods for which the exposures stay open.
2. Against this background, we developed a framework that included a credit scorecard to evaluate each counterparty’s creditworthiness and a methodology to compute the credit limits for each such entity.
3. We then wrote a credit risk policy to cover all practical aspects of administering the policy including top management oversight, a delegation of authority matrix, transitional provisions and an escalation path to handle delinquencies.
The client was able to implement a robust credit framework that secured the buy-in of all business units. This, in turn, made it possible for Management to expand the business with confidence.
This helped lower enterprise risk significantly.