While underwriting is known for the “three Cs” ― credit, capacity, and collateral ― corporate risk can best be boiled down to the “three Ps”: people, process, and programs.

That was the message from Mark Humphrey, Tidalwave Finance Corp.’s chief credit officer, in a session at the Auto Finance Risk & Compliance Summit last month. In a nutshell, the three Ps get to the heart of a company’s operations, encompassing who manages what, how things get done, and what tools are required to drive performance. To identify corporate risk, lenders must critically evaluate all services, software, and personnel.

Within the three categories of people, process, and programs, lenders must play to their strengths but evaluate and improve on weaknesses, Humphrey said. A key consideration is to determine which area or system needs the most work. More specifically, lenders should identify and measure the level of risk, and prioritize severity. Think of it in terms of defining the “show stoppers,” he said.

Within the “people” category, training, performance evaluation, and career-path mapping are core areas for evaluation. “Process” issues revolve around documentation and strategy review, and “program” matters center on software selection, with particular attention on the specific purpose and ease of programs, along with the support available. Training is a component of all three “Ps,” Humphrey said.

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