WEDC enhances credit and risk management capabilities

A key component of WEDC’s business model is a process of continuous improvement. To that end, in November 2012, WEDC enlisted the services of the Financial Institution Products Corporation (FIPCO), a wholly owned subsidiary of the Wisconsin Bankers Association, to assess the organization’s financial documentation and reporting systems and to make recommendations for improvements. With the implementation of FIPCO’s recommended risk control policies and procedures, WEDC is delivering on its core value of accountability.

One of the primary recommendations made by FIPCO was the appointment of a vice president of credit and risk, a position that would report directly to WEDC’s CEO. That position was filled in April 2013 with the hiring of Jake Kuester, who joined WEDC with nine years of banking experience including a strong track record of loan underwriting and financial risk management.

Kuester’s hiring essentially creates a new division within WEDC where risk management is centralized. Increased attention to lending policies and procedures based on new regulations has led to the development of similarly focused roles within other lending institutions.

In addition to creating and ensuring adherence to lending and reporting policies appropriate to WEDC’s mission, the Credit and Risk division will also assess the performance of WEDC’s financial products. “Not only will we continue to make prudent and responsible investment decisions, we will gather the necessary data to report on the outcomes of WEDC programs,” Kuester says. “When necessary, we’ll make adjustments to our program offerings to increase our effectiveness in creating new business opportunities in Wisconsin.”

Kuester points out that when the Wisconsin Department of Commerce was abolished, the statutes governing the administration of its financial assistance programs were nullified. That left WEDC to develop its own policies reflective of the new organization’s mission, operating structure and governance framework.

A Legislative Audit Bureau (LAB) review of WEDC’s operations during this transitional period confirmed the need for WEDC to formalize operational policies to ensure organizational transparency and accountability. One area of particular concern that was revealed both by WEDC’s internal systems review and LAB’s audit was insufficient loan reporting and collections practices, which had been carried over from the Department of Commerce.

“The problem wasn’t our delinquency rate,” Kuester says. “The problem was the unknown status of some of the companies on the list, most of which were Commerce loans.”

Kuester says that some of the companies in arrears are unable to repay, either because of their financial standing or because they have gone out of business. Others simply needed amended loan terms. WEDC is in the process of contacting every company on its delinquency list and updating its status.

WEDC has also formalized its collections process as part of its recent implementation of 101 systems policies designed to provide clarity on organizational standard practices. WEDC has also issued a request for proposals from financial software companies to identify the best information technology solution to track its various financial assistance programs.

As WEDC seeks to reenergize the state’s economic development efforts, the organization is also improving the transparency with which it operates. For more information about WEDC, click here.

(July 2013)