Energy Credit Best Practices – Chapter: Information Technology http://ccro.org © Copyright 2022, CCRO. All rights reserved. 12 2. Technology for Governance 2.1 Credit IT Design Aligns with Organizational Strategy Prior to developing a Credit IT Design, a firm-wide risk strategy must be established which is integrated with the overall organizational strategy. The firm- wide risk strategy establishes a Risk Appetite for the firm, which in-turn provides an allocated appetite for credit risk specifically. To ensure a credit group’s risk strategy is successful it must be aligned with the defined Credit Risk Appetite. The credit risk function should effectively communicate its Credit Risk Strategy with credit risk professionals and other associated functions to ensure that the firm understands how the Credit Risk Strategy is effective. In addition, the Credit Risk Committee should evaluate the Credit Risk Strategy periodically to ensure relevance and appropriateness as the organization changes over time. The evaluation should be performed Periodically to ensure that the Credit Risk Strategy still meets the firm’s needs under current market and regulatory conditions. More details on these Credit Risk Strategy concepts can be found in the previous chapter on Governance. Most importantly for this chapter on credit IT, when the credit function has a clear, defined Credit Risk Strategy, it provides the foundation for an effective credit IT design. Recommendation 1: The defined Credit Risk Strategy provides the foundation for the Credit IT Design. 2.1.1 Board of Directors Mandate for Credit IT Design One part of the IT organization’s mission is to enable the credit function to execute its Credit Risk Strategy with success. Therefore, the Credit IT Design is so important to the credit function and to the overall firm. Only with sponsorship from executive leadership can the most effective and appropriate Credit IT Design be implemented effectively and in a timely fashion. Recommendation 2: The most senior risk professional (the CRO or other head of corporate risk) leads advocacy for the Credit IT Design with the Board of Directors and senior management. Organizational Strategy Firm-wide Risk Appetite Credit Risk Appetite Credit Risk Strategy Credit IT Design