Lending function risk management
At the government lending function, risk management along with its continuous maintenance and development forms a significant part of credit management. Credit risk is managed with regard to credit and guarantee relationships. In addition, operative risks are managed with regard to all operations.
Credit risk management
Credit risk is directly included in government lending and lending covered by government subsidies.
At the State Treasury, customer- and customer company-specific credit risk management is performed, as far as possible, in accordance with the same principles used by financial institutions, while taking into account the special requirements for government funding activities determined by any special legislation or other provisions. The objective of the risk management of credit and state guarantees is to safeguard government receivables and minimise losses related to credit and guarantees.
The primary tool used for the management of credit and guarantee risks are up-to-date and continuously monitored credit and guarantee portfolio reports. Payment default monitoring is continuous and operating procedures in case of payment delay have been determined for all loan categories. The State Treasury also provides regular reports related to loan and guarantee portfolios that can be used by the agencies issuing credit.
The State Treasury acts as the state debtor with regard to credit it manages. Representation of government interests, related to the protection of government receivables, becomes emphasised in situations involving a bankruptcy, business restructuring, debt settlement or guarantee liquidation. In these situations, the supervision of receivables, active representation of the government and statements as a debtor form a significant part of risk management and the protection of receivables. From the risk management perspective, the objective in insolvency situations is to secure the maximum payment to the government, in spite of any difficulties.
Management of operative risks
Operative risks mean risks caused by insufficient or failed internal processes, personnel, systems or external factors. The basic components of operative risk management are risk identification and regular risk assessment. Operative risk management is supported by, for instance, internal competence instructions, work instructions and process descriptions. One more key component of operative risk management is the safeguarding of the functionality of substance information systems.