Business ownershipRisk management3
While IBA’s lending and debt recovery practices are modelled on sound commercial principles, the overall portfolio is characterised by high gearing, low security and, in some cases, customers with little experience in business operation. In addition, many accounts in IBA’s portfolio are in industry sectors which require relatively low levels of training or professional development, meaning that IBA’s customers are frequently operating in highly competitive commercial environments, such as the retail, food and construction sectors.
IBA aims to offset the risk inherent in lending to its customer base by ensuring that business proposals are commercially viable, or have the potential to become viable, and by providing appropriate planning and support throughout the life cycle of the business. This is delivered by enabling access to business planning and mentoring support; partnering and monitoring arrangements; hardship provisions, where difficulties arise; and support to either turn around or exit a business.
IBA also seeks to limit its exposure to losses by setting tolerances in relation to provisioning for doubtful debts, compulsory third-party due diligence, minimum trading periods on loans greater than $1 million, and portfolio monitoring by industry.
All of these risk management activities are the subject of ongoing review and redevelopment to ensure that efficiencies are achieved and outcomes continue to minimise the potential harm to customers arising from small business ownership risks, and the potential loss of loan capital for IBA.