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What Does a Portfolio Officer Do?

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  • Written By: Geri Terzo
  • Edited By: Shereen Skola
  • Last Modified Date: 12 November 2016
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A portfolio officer makes it possible for businesses that are seeking to make large purchases to invest in their operations. This role is often suited for a financial professional with significant experience and could be a high-executive position. The portfolio officer is generally the person who, with the help of risk-management systems, decides whether or not a borrower should receive financing from an institution. This process leads to the underwriting of a loan by the lending officer, which essentially is a decision to accept risk and extend necessary financing.

Portfolio officer duties generally include researching and vetting potential borrowers before approving any funds for distribution. This due-diligence process is necessary to ensure that a financing firm is not inheriting excessive risk that will put the company at risk of losing the amount altogether as a result of a client default. A financing firm typically has risk management procedures in place so that a portfolio officer is well aware of the criteria that are required for a loan. These practices could include limits on loan amounts, lending conditions, and restricting loans to borrowers with a certain credit standard. Bad loans can still be issued because of an inappropriate judgment call made by the individual.

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In addition to the merits of a new or existing client, a portfolio officer must also examine the health of the financial markets and economy prior to issuing a loan. The credit markets can become especially tightened, which means the standards and cost for receiving financing increase, when there is a greater level of default circulating among borrowers. It's more likely the risk that underwriters must take on in such an environment is deemed inappropriate. Subsequently, portfolio officers are likely to assess whether or not the amount of risk in the markets disqualifies certain borrowers from receiving loans. If an officer decides to underwrite financing, he or she is likely to do so when interest rates associated with the loan are high.

There are different stages involved with becoming a portfolio officer. Prior to becoming a senior officer, for instance, a finance professional may serve several years a a junior loan officer and support the role of a more experienced professional. The role of a lending officer also involves forming client relationships and servicing the needs of those businesses. These relationships are often symbiotic and dependent on one another. Companies may need financing to grow and to purchase necessary materials while portfolio officers may receive bonuses tied to the amount of business volume that is produced.

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