Risk assessment and management system

• US 7,006,992 B1
• Filed: 04/06/2000
• Issued: 02/28/2006
• Est. Priority Date: 04/06/2000
• Status: Expired due to Fees

• Current Assignee: Thomas R. Packwood
• Original Assignee: Union State Bank
• Inventors: Packwood, Thomas R.
• Primary Examiner(s): Millin, Vincent
• Assistant Examiner(s): Havan, Thu Thao
• Application Number:
  US09/544,400
• Time in Patent Office: 2,154 Days
• Field of Search: 707/3, 703/17
• US Class Current: 705/38
• CPC Class Codes: G06F 40/18 of spreadsheets form-filling G06F40/174
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof

Abstract

A method of analyzing and presenting a series of risk factors associated with the operation of a business, such as a bank. Quantifiable risk factors are identified. Ranges of acceptable and unacceptable values for the factors are selected and arranged to each factor. Each risk factor has an immediacy value, or risk tolerance, assigned to it. A business is evaluated by measuring the actual values for each factor found in the business, comparing the actual values to the user-defined acceptable value ranges for each factor and creating a report identifying unacceptable valued risk factors and their immediacy value to the business. The measuring, evaluating and reporting may be automated using a computer, or portions can be done manually.

Claims

1. A risk assessment and management reporting method, comprising:

identifying a plurality of financial risk factors affecting a financial operation being managed, the risk factors being selected from the group consisting of;

late payments received;

difference between interest rate on savings and on loans;

rate of turnover of employees;

days of product in inventory;

accounts receivable aging;

number of loans in default;

gross sales, value of old inventory;

value of returns;

value of inventory losses;

operating costs;

net profit;

latest compliance regulatory exam rating;

quarterly teller over and short count;

open audit and regulatory findings over twelve months old;

variance of year-to-date budget versus actual operating income;

number of branch manager meetings during past twelve months;

current internal audit rating;

number of branches reporting operating losses;

months since last approval of operations policy;

loan allowance as percentage of total loans;

number of loan officers with portfolios greater than selected amount;

asset quality rating;

percent of loans to total assets;

net interest yield on loan portfolio;

number of appraisals not reviewed by in-house reviewer;

mortgage loans with expired hazard insurance;

percentage of total loans outside lending area of the organization;

net interest income as a percent of average assets;

return on common equity;

legal risk self-assessment;

investments as a percent of total assets; and

return on assets;

evaluating each risk factor to determine at least two ranges of risk level values for each risk factor, one range containing unacceptable risk level values, the other range containing acceptable risk level values, each range of risk level values corresponding to a visual indicia in the form of a different color for each range;

associating one of a plurality of different risk tolerance levels with each risk factor, the risk tolerance levels indicating a level of tolerance of the risk factor to the operation;

determining actual risk level values for each of the plurality of risk factors; and

generating a risk management report having one of the visual indicia colors displayed in conjunction with and adjacent each risk factor, the particular visual indicia color being displayed being dependent on which of the at least two ranges of risk level values the actual risk level value for the associated risk factor is within, and displaying in the report the actual risk level value for each risk factor in proximity to the risk factor and associated visual indicia color, the risk factors, actual risk level values and visual indica colors each being in a line with the lines being parallel to, and near each other, all risk factors having the same risk tolerance level being accumulated in a separate area of the report for each risk tolerance level.

2. A risk assessment and management reporting method according to claim 1, wherein the colors are red and green.

3. A risk assessment and management reporting method according to claim 1, wherein there are three ranges of risk level values, one range containing the unacceptable risk level values, a second range containing marginal risk level values and the third range containing the acceptable risk level values, the visual indicia for each range corresponding to a different color.

4. A risk assessment and management reporting method according to claim 3, wherein the colors are red, yellow and green, respectively.

5. A risk assessment and management reporting method according to claim 1, wherein generating the report comprises preparing a computerized spreadsheet having a first column identifying each of the plurality of risk factors in one of a plurality of rows of the spreadsheet, a second column displaying the risk level values determined for each risk factor in the same one of the plurality of rows as the associated risk factor, and a third column displaying the visual indicia color for the risk level value in the same row.

6. A risk assessment and management reporting method according to claim 5, wherein preparing the computerized spreadsheet further comprises programming a formula for each risk factor into the spreadsheet for comparing the actual risk level value of each risk factor to the at least two ranges of risk level values for each risk factor.

7. A risk assessment and management reporting method according to claim 6, further comprising programming a code for each formula into the spreadsheet for displaying one of the unique visual indicia in the second column dependent upon the result of comparing the actual risk level value to the at least two ranges of risk level values for each risk factor.

8. A risk assessment and management reporting system for a financial operation being managed, the system comprising:

means for identifying a plurality of financial risk factors associated with the financial operation being managed, the risk factors being selected from the group consisting of;

late payments received;

difference between interest rate on savings and on loans;

rate of turnover of employees;

days of product in inventory;

accounts receivable aging;

number of loans in default;

gross sales, value of old inventory;

value of returns;

value of inventory losses;

operating costs;

net profit;

latest compliance regulatory exam rating;

quarterly teller over and short count;

open audit and regulatory findings over twelve months old;

variance of year-to-date budget versus actual operating income;

number of branch manager meetings during past twelve months;

current internal audit rating;

number of branches reporting operating losses;

months since last approval of operations policy;

loan allowance as percentage of total loans;

number of loan officers with portfolios greater than selected amount;

asset quality rating;

percent of loans to total assets;

net interest yield on loan portfolio;

number of appraisals not reviewed by in-house reviewer;

mortgage loans with expired hazard insurance;

percentage of total loans outside lending area of the organization;

net interest income as a percent of average assets;

return on common equity;

legal risk self-assessment;

investments as a percent of total assets; and

return on assets;

each of the risk factors having at least two different risk level value ranges, each risk level value range corresponding to a different visual indicia color, one range containing unacceptable risk level values and the other range containing acceptable risk level values;

an actual risk level value for each risk factor;

means for associating one of a plurality of different risk tolerance levels with each risk factor, the risk tolerance levels indicating a level of tolerance of the risk factor to the operation; and

a graphical risk management report on a computer, the report having one of the visual indicia colors displayed in conjunction with each risk factor, the particular visual indicia color being displayed being dependent on which of the ranges of risk level values the actual risk level value for the associated risk factor is within, the report displaying the actual risk level value for each risk factor in proximity to the risk factor and associated visual indicia color, the risk factors, actual risk levels and visual indica colors each being in a line with the lines being parallel to, and near each other, and risk factors having the same risk tolerance level being accumulated in a separate area of the report for each risk tolerance level.

9. A risk assessment and management reporting system according to claim 8, wherein the colors are red and green.

10. A risk assessment and management reporting system according to claim 8, wherein the ranges of risk level values comprised the one range containing unacceptable risk level values, a second range containing marginal risk level values and the other range being a third range containing the acceptable risk level values.

11. A risk assessment and management reporting system according to claim 10, wherein the colors are red, yellow and green, respectively.

12. A risk assessment and management reporting system according to claim 8, wherein the report comprises a computerized spreadsheet having a first column identifying each of the plurality of risk factors in one of a plurality of rows of the spreadsheet and a second column displaying the unique indicia associated with each risk factor in the same one of the plurality of rows as the associated risk factor and means for publishing the spreadsheet.

13. A risk assessment and management reporting system according to claim 12, wherein the computerized spreadsheet further comprises formula for each risk factor programmed into the spreadsheet, each formula comparing the actual risk level value of the associated risk factor to the at least two ranges of risk level values for the associated risk factor to determine which of the at least two ranges the actual risk level value is within.

14. A risk assessment and management reporting system according to claim 13, further comprising a code programmed into the spreadsheet for each formula for displaying one of the visual indicia in the second column dependent upon the result of comparing the actual risk level value to the at least two ranges of risk level values for each risk factor.

15. A risk assessment and management reporting system according to claim 8, wherein the operation being managed is a bank having a plurality of operational segments.

16. A risk assessment and management reporting system according to claim 15, further comprising means for sorting the risk factors according to the operational segment of the bank the risk factors affect.

17. A risk assessment and management report for a financial operation, the report comprising:

a plurality of separate visible areas each corresponding to one of a plurality of different financial risk tolerance levels;

a plurality of financial risk factors each associated with one of the risk tolerance levels, all of the risk factors having the same risk tolerance level being listed in the same separate visible area, the risk factors being selected from the group consisting of;

late payments received;

difference between interest rate on savings and on loans;

rate of turnover of employees;

days of product in inventory;

accounts receivable aging;

number of loans in default;

gross sales, value of old inventory;

value of returns;

value of inventory losses;

operating costs;

net profit;

latest compliance regulatory exam rating;

quarterly teller over and short count;

open audit and regulatory findings over twelve months old;

variance of year-to-date budget versus actual operating income;

number of branch manager meetings during past twelve months;

current internal audit rating;

number of branches reporting operating losses;

months since last approval of operations policy;

loan allowance as percentage of total loans;

number of loan officers with portfolios greater than selected amount;

asset quality rating;

percent of loans to total assets;

net interest yield on loan portfolio;

number of appraisals not reviewed by in-house reviewer;

mortgage loans with expired hazard insurance;

percentage of total loans outside lending area of the organization;

net interest income as a percent of average assets;

return on common equity;

legal risk self-assessment;

investments as a percent of total assets; and

return on assets;

at least two ranges of risk level values associated with each of the plurality of risk factors, each of the at least two ranges of risk level values corresponding to a different visual indicia color, one range containing unacceptable risk level values and the other range containing acceptable risk level values;

each risk factor having an actual risk level value, the actual risk level value for each risk factor and the visual indicia color corresponding to the range of risk level values in which the actual risk level value of the risk factor is within being displayed associated with their corresponding risk factor in the corresponding separate area, the actual risk level value for each risk factor being in proximity to the risk factor and associated visual indicia color, the risk factors, actual risk levels and visual indica colors each being in a line with the lines being parallel to, and near each other.

18. An assessment and management report according to claim 17, further comprising a computerized spreadsheet for displaying the plurality of risk factors and the associated unique visual indicia colors.

19. An assessment and management report according to claim 18, wherein for each risk factor, the at least two ranges of risk level values are programmed into the computerized spreadsheet as a formula for comparing with the actual risk level value for the risk factor.

20. An assessment and management report according to claim 19, further comprising a code programmed into the computerized spreadsheet for each risk factor for displaying one of the unique visual indicia in association with the risk factor, dependent upon the result of the comparison of the actual risk level value to the at least two ranges of risk level value for the risk factor.

21. An assessment and management report according to claim 20, wherein the at least two ranges of risk level values for each risk factor comprises three ranges.

22. An assessment and management report according to claim 21, wherein the three ranges are an the unacceptable value range, a marginal value range and the acceptable value range.

23. An assessment and management report according to claim 22, wherein the colors comprise red, yellow and green, respectively.