When banks carefully track small, significant changes in their customers’ financial situations, these institutions can improve their fortunes and compete more effectively. First-Mover Matters: Building credit Monitoring for Competitive Advantage, a report from McKinsey’s risk practice, shows that one way to better monitor credit is to tap analytics and specialists to spot quantitative and even qualitative early-warning signs of borrower trouble. Another approach is to set up formal triggers for timely intervention that can guide customers back to financial health or limit further losses when the situation isn’t likely to improve. McKinsey argues that better credit monitoring could be one of the main ways that capital-strapped banks can improve their business model.

Read the full report from McKinsey to find out how banks can significantly reduce their exposure.