Proactive Risk Management Urged for Banks Amid West Asia Conflict

In light of the ongoing conflict in West Asia, a leading consultancy firm has advised banks to proactively manage their risk exposures. The firm recommends shifting focus away from vulnerable small businesses and retail borrowers who may be affected by economic disruptions and lay-offs.

The report, released on Tuesday, emphasizes the importance of converting early risk signals into decisive actions. Banks are urged to assess risks through multi-factor stress testing and to strengthen credit controls. This includes stricter covenants, liquidity buffers, and preemptive restructuring to maintain asset quality.

Furthermore, the consultancy highlights the increased reliance on bank liquidity across supply chains and the challenges faced by export-oriented MSMEs. The report warns of potential job losses and economic disruptions, calling on banks to upgrade their Early Warning Systems to anticipate financial stress more efficiently.