Business intelligence combines tools and technology to extract relevant and useful information from large volumes of data in various parts of an organization. Now more affordable, BI can deliver the goods for bank credit managers if the system is properly engineered. This article gives some of the "ins and outs."

Credit professionals have been under the gun--almost literally--to respond to new regulatory and internal pressures. Regulators and shareholders alike demand more transparency and access to whatever credit and risk-related portfolio information they deem relevant. Sarbanes-Oxley, Basel II, and BSA are the drivers; exposure to pockets of risk is the target; and the credit analysts need to be armed with effective tools to hunt down the answers.

Direct access to credit data isn't nearly the problem today that it was 30 years ago, but converting that data into useful and actionable information remains a gargantuan task. Time-consuming manual processes have turned many credit analysts into number hunters-gatherers-crunchers. The daunting task includes needing to combine data from multiple sources and create linkages to provide useful information on demand. Business Intelligence (BI) has been offering help to data analysts with these tasks for many years in many different industries.

Reduced costs and wider availability of BI tools and applications have made BI solutions for banks, and even individual departments of banks, achievable for most institutions.

A properly engineered BI solution is flexible enough to deliver different views of the same information when and where they are needed. CEOs, CCOs, CLOs, Loan Review, board members, and regulators are all looking for the same information, but they need to be able to customize it for their immediate area of focus. BI can automatically generate the required periodic credit reports and charts as well as report on the bank's strategic key performance indicators.

There are some specific issues that a bank needs to consider when evaluating a credit data BI project, which can make the investment of resources really pay off.

There are plenty of horror stories of "black hole" data warehousing projects, but as you will see in this article, there is every reason to believe that your bank's BI credit solution will succeed.

The Credit Professional's Legacy of Gathering and Crunching Data

In the 1970s, banks were more or less completely dedicated to mainframe systems to collect and manage data. Management and performance information was generated in a series of standard hard-copy reports.

In the 1980s, office automation products like VisiCalc[R] and Lotus[R] gave the bank professional the ability to take some data from the mainframe and manipulate it to create more useful information.

In the 1990s, desktop computers became more powerful, with far more personal storage. Personal database applications like Access and advanced spreadsheet applications like Excel workbooks gave the individual user more sophisticated reporting and analytical capabilities.

The downside of the personalization of data management was that important corporate information was now held by individuals on their workstations, with little control or security. Certain groups or departments in the bank manually created and controlled "the numbers" and built up their own technology and controls.

Key stumbling blocks today continue to be the need to pull together credit and risk data from disparate sources and systems, and the requirement of linking this data into one centralized, consistent "authority" for credit analysis and reporting.

The Decade of BI

In the mid-1990s, the Gartner Group introduced banking and other industries to the BI concept, which was to use a combination of data management systems, tools, and formulas to automate data gathering and analysis, and then deliver a multidimensional view of useful information to the business community.

In brief, then, a BI solution is an automated process of gathering related data from disparate sources, categorizing and aggregating that data into meaningful information, and then delivering it to the businessperson in a format that is quick and easy to use.

Delivery of information can be in the form of formulaic analysis, trending, charts, and graphs. The goal is a format that can lead to decisions and actions. In many cases, BI solutions are actually called "executive information management" and "decision support" systems.

Other than the smallest community banks, most financial institutions today have some form of BI systems somewhere in the bank. Marketing, Finance, and Sales Management often have specialized data-mining and management tools to deliver aggregated and sliced-and-diced information for performance management needs. These are typically "point solutions" that deliver information for specific departments in specific formats to meet their business needs.