The financial services industry quickly pivoted in 2020 when the COVID-19 outbreak moved institutions to rethink how best to serve their customers. For many institutions, implementing a strategy to efficiently deliver PPP loans became a priority. Banks and credit unions also joined the ranks of all employers in developing a work from home solution.
Operating in a regulated industry, banks and credit unions faced an additional challenge; addressing the best way to provide their regulatory agency with the means to remotely examine a loan portfolio as well as other functional areas. During the early months of the pandemic, some financial institutions benefited from an established platform for imaged file contents that could be accessed remotely. Others worked diligently to create imaged files on demand using a manual process without the benefit of an integrated platform. Prior to the COVID-19 pandemic, less than 40% of Cobblestone’s clients used an enterprise-wide software system to access imaged customer information. Fast forward to today, many more institutions have since purchased a financial technology platform that allows their regulatory agency, loan review company, auditor and employees to efficiently access customer files remotely.
The move from an in-person work environment to a remote one has created challenges to the loan review and audit function. A structured process to convert paper file contents to imaged copies is required to maintain a transparent audit trail for each commercial/member business loan transaction. Such an audit trial is key to ensuring the successful completion of a loan review or audit project. To that end, the imaged customer file should include all of the information that would otherwise be found in a paper-based file. Absent comprehensive file information, a third party is likely to draw inaccurate conclusions that may underrate or overrate the credit risk involved. For example, a single file memo might provide significant information to a third party about how the financial institution views the credit risk inherent in a particular loan transaction. At the very least, the loan review or audit process cannot be performed efficiently if such information is not immediately available.
Financial institutions reacted quickly to the challenges posed by the pandemic by being responsive to the unprecedented needs of bank customers and credit union members. In developing a remote work environment for auditors, banks and credit unions should also be aware that external auditors and loan review analysts require an imaged file system that is user friendly and frequently updated if credit risk is to be efficiently identified.