Linking Knowledge Management Approaches and Credit RiskManagement as an Innovative Strategy in Banking Institutions: A Perspective from Malaysia

This study is expected to shed light on establishing an effective credit risk environment with the appropriate credit risk strategy, the infusion of Knowledge Management (KM) approaches into Credit Risk Management (CRM) practices of selected banking institutions. Managing effectively on credit risk matters requires innovative and local-based banking strategy. A survey which consists of 4 active KM approaches and CRM performance, which measures according to four perspectives of Balance Score Card (BSC) developed by Kaplan & Norton (1996) has been established. Questionnaires are sent to 100 respondents from respective CRM department of participating banking institutions’ headquarters. Mean score analysis is applied to examine the efficacy of banking institution in managing its credit risks and active KM approaches. The study further determines the relationship between KM approaches and CRM performance in the selected banking institution. The findings reveal that active KM approaches implementation and CRM performance in banking institutions are at medium extent and also at high level respectively. Further, it is evinced that there is a significant positive relationship between active KM approaches and innovative CRM performance.