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feature ANALYTICS Or ig i nat ion s e r v ic i ng Evolution of Risk Management Leaders have to tow a fine line in order to remain ahead of the competition, and are resorting to new strategies and tools to ensure they are successful in their efforts. By Tory Barringer T he first question to address when trying to tackle the subject of risk and data management is the basic definition: What does risk management mean today, and how does it compare to risk management five or 10 years ago? While the moderators had different ideas regarding the details of where organizations should put their focus, all seemed to agree that managing risk is much more complicated today—and more important than ever before. "Managing risk in today's market is a lot more complex than it has been historically," Sharga said. "It's a lot more difficult if for no other reason than that lenders and servicers are facing the larger economy—has found its "new normal," a slower-paced rate of growth that might be frustrating to some but seems to have created a safer overall environment. While lenders, servicers, and investors undoubtedly have much more to consider when it comes to evaluating loans and portfolios, Blomquist says the backdrop of the "new normal" gives firms a little bit of breathing room, and their more cautious approach, in turn, keeps the recovery from boiling over. "In the mortgage industry, I think that slow, steady turtle's pace going forward is the result of companies looking much more at risk and using all the tools available to them to not make rash and too speculative decisions," he said. "That slow growth, that 'new normal,' is the byproduct of using some of those new tools and the data that's available to evaluate risk. I see that as a good thing . . . [S]ome people would want to see faster growth and see the industry taking off much more quickly, but I think that will get us in trouble again if that happens." Blomquist also says if there's one silver lining to the housing The M Report | 63 se c on da r y m a r k e t The Changing Definition of Risk Management exponentially more scrutiny than they ever have before." Sharga explained that historically, issues like prepayments— which may affect an investor's wallet—were a source of concern. However, the spike in foreclosure rates over the last decade has spawned a series of new categories as worrisome areas. These include regulatory compliance, litigation risk, and even headline risk, which can be a major issue for publicly traded companies trying to please shareholders. Worth noted that doublechecking data and knowledge of all a loan's aspects have become the responsibility of everyone within a lending business. "I think there's now increasing awareness that [risk management] is something that's going to be critical for people throughout an organization," Worth said. "It's critical not just for examiners in the field, but also for people in my line of work: research. But you also want to make sure that front-line managers can get their hands on critical data and do analysis in a quick and timely manner, because that's how you want your decisions to be informed." Also discussed was the idea that the housing market—and a na ly t ic s G iven the growing pains the mortgage industry has experienced in the last few years, the topic of risk management is a heady one for many professionals still adjusting to today's climate. There are plenty of factors affecting the risk environment today that have many industry leaders talking. At the 2013 MPact summit, Daren Blomquist, VP at RealtyTrac; Kyle Lundstedt, managing director of Lender Processing Services' Applied Analytics division; John Worth, chief economist for the National Credit Union Administration; and moderator Rick Sharga, EVP of Carrington Mortgage Holdings, LLC, gathered with attendees to discuss what can be done going forward.