Top risks and controls for Special Assets

From the Doorstep International risk register, curated by Ahmer Nehal. Last updated 17 Oct 2026.

The Special Assets register lists 24 key risks and 70 best-practice controls across 6 units: Asset Recovery, Bankruptcy, Collateral Management, Foreclosure, Non Performing Loans, Special Assets Administration. Use it to identify risks, benchmark your existing controls or start a risk and control self-assessment (RCSA).

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The administration of non-performing loans and distressed assets is a key responsibility of a bank's special assets division.

Regular risk assessments must be performed by the special assets management team due to the nature of the assets being managed.

This is true because, compared to performing loans, managed assets frequently carry a higher amount of risk and unpredictability.

The special assets management team can identify possible hazards and create effective ways to reduce them by conducting routine risk assessments.

This ensures that the assets are properly managed to maximise recovery while also protecting the bank from any losses.

Asset Recovery: key risks and controls

Charged with recovering and selling non-performing loans, assets, and security.

Risk	What can go wrong	Best-practice controls
Building strong relationships	Another important factor in successful asset recovery is maintaining strong relationships with clients and customers. By building trust and maintaining open lines of communication, banks can better navigate difficult situations and increase the likelihood of successful recovery.	Transparent and Timely Communication: Establishing open lines of communication with clients and customers is crucial. Promptly inform them about any potential risks, changes, or developments related to asset recovery. Transparency fosters trust and allows for better collaboration in navigating challenging situations. Proactive Relationship Management: Invest in building and maintaining strong relationships with clients and customers. Understand their needs, provide personalized support, and demonstrate a genuine commitment to their success. Regularly engage with them to address concerns, offer solutions, and reinforce the partnership.
Complexity of legal procedures	Asset recovery efforts often involve complex legal procedures, including court proceedings and negotiations with other parties.	Diversify assets across multiple jurisdictions to limit exposure to any one legal system. Establish clear and comprehensive contracts with all parties involved to minimize the potential for disputes. Develop a detailed asset recovery plan that includes contingency measures and identifies potential legal risks. Retain experienced legal counsel to guide recovery efforts and ensure compliance with all applicable laws and regulations.
Lack of expertise	Asset recovery requires specialized skills and knowledge, including knowledge of fraud investigation, legal procedures, and debt collection practices. Small business banking departments may lack the necessary expertise to conduct effective asset recovery efforts.	Outsource Asset Recovery: Partnering with a professional asset recovery company can ensure access to specialized skills and knowledge required for effective asset recovery efforts. Train Staff: Invest in staff training to equip small business banking departments with the necessary skills and knowledge to conduct successful asset recovery efforts. Collaborate with Other Departments: Collaborate with other departments within the organization, such as legal or risk management, to leverage their expertise and knowledge to improve asset recovery efforts. Enhance Due Diligence: Conduct enhanced due diligence on potential clients to minimize the risk of default and increase the chances of successful asset recovery efforts.
Limited resources	Small business banking departments in commercial banks may have limited resources in terms of staff, technology, and financial resources to conduct effective asset recovery efforts. This can make it difficult to locate and recover assets that are fraudulently obtained or illegally obtained.	Strengthen Collaboration and Information Sharing: Encourage increased collaboration between small business banking departments within commercial banks and law enforcement agencies, industry associations, and regulatory bodies. Sharing information and intelligence can enhance asset recovery efforts by leveraging collective expertise and resources. Implement Robust Fraud Detection Systems: Invest in advanced technology and analytics tools to proactively detect and prevent fraudulent activities. Implement robust fraud detection systems that can identify suspicious transactions and patterns, enabling early intervention and asset recovery before significant losses occur.

Bankruptcy: key risks and controls

Managing bankruptcy proceedings involving non-performing loans and assets.

Risk	What can go wrong	Best-practice controls
Communication and Coordination	Effective communication and coordination are essential in managing bankruptcy cases. Small business banking departments must work closely with other parties, such as attorneys, trustees, and creditors, to ensure that all aspects of the case are addressed and that everyone is informed of any developments or changes.	Develop a clear communication plan: Establish a protocol for regular updates and communication among all relevant parties to ensure that everyone is aware of any developments or changes in the bankruptcy case. Assign a dedicated point of contact: Designate a single point of contact to serve as a liaison between small business banking departments, attorneys, trustees, and creditors, ensuring that communication channels remain open and that everyone is informed of any pertinent information. Utilize technology: Utilize technological tools such as collaboration platforms, video conferencing, and project management software to facilitate communication and collaboration between all parties involved.
Emotional and Personal Factors	Bankruptcy cases often involve emotional and personal factors, particularly for small business owners who may feel a sense of failure or loss. Small business banking departments must be sensitive to these factors while also working to protect the bank's interests.	Communication and empathy: Small business banking departments should communicate with sensitivity and empathy, understanding that bankruptcy cases can be emotionally challenging for clients. By establishing a supportive and understanding relationship, the bank can increase the chances of a positive outcome. Clear and concise documentation: Small business banking departments should provide clear and concise documentation about the bankruptcy process, including the steps involved and the bank's expectations. This will help to minimize misunderstandings and ensure that the client understands the process. Risk assessment: Banks should perform a thorough risk assessment before extending loans to small businesses. By evaluating a company's financial health and capacity to repay, banks can mitigate the risk of bankruptcy and reduce the likelihood of personal and emotional empathy.
Lack of Expertise	Bankruptcy law is complex and constantly evolving. Small business banking departments may not have staff with the necessary expertise to navigate bankruptcy proceedings, negotiate with creditors and other parties, and develop effective restructuring plans.	Expert Advisory Services: Engage specialized bankruptcy law firms or consultants to provide expert guidance and support to small business banking departments. Their in-depth knowledge and experience in navigating bankruptcy proceedings, negotiating with creditors, and developing effective restructuring plans can significantly mitigate the risk associated with complex and evolving bankruptcy laws. Training and Education: Invest in comprehensive training programs for staff within small business banking departments. By providing regular updates on bankruptcy law changes and offering professional development opportunities, employees can acquire the necessary expertise to handle bankruptcy proceedings and effectively negotiate with creditors and other parties.

Collateral Management: key risks and controls

Accountable for looking after and selling ancillary assets like equipment and real estate.

Risk	What can go wrong	Best-practice controls
Disposition strategy	Once the collateral assets have been seized, the bank must decide on the best strategy for disposing of them. This could involve selling the assets through a public auction, negotiating a sale with a third party, or holding the assets for a period of time.	Develop a clear and comprehensive collateral management strategy that outlines how to handle seized assets and minimize their risk of loss. Regularly review and update the collateral management strategy to ensure its effectiveness and alignment with changing market conditions. Use experienced and reputable asset managers to oversee the disposal of seized assets and maximize the value they generate. Consider diversifying the portfolio of seized assets to minimize the risk of loss due to a single asset or asset class performing poorly.
Maintenance and storage costs	The bank must also factor in the cost of maintaining and storing the collateral assets while they are in the bank's possession. This can include costs associated with security, insurance, and upkeep.	Implementing a streamlined collateral management system enables the bank to optimize asset storage and minimize costs associated with security, insurance, and upkeep. By leveraging technology, such as automated tracking and monitoring solutions, the bank can effectively manage collateral assets, reducing the risk of unnecessary expenses and ensuring efficient utilization of resources. Employing stringent security measures, including physical and cybersecurity protocols, bolsters the protection of collateral assets. Enhanced surveillance systems, access controls, encryption, and regular security audits mitigate the risk of theft, damage, or unauthorized access.
Risk management	The bank must carefully manage the risks associated with collateral management and disposal. This includes identifying potential risks such as fraud, theft, or damage to the assets, and implementing appropriate safeguards to mitigate those risks.	Robust Asset Tracking and Verification: Implementing a comprehensive system to accurately track and verify collateral assets throughout their lifecycle is crucial. This includes rigorous documentation, serial number tracking, and regular physical audits to minimize the risk of fraud, theft, or damage. Strict Access Controls and Authorization: Restricting access to collateral assets and related systems is vital to mitigate risks. Implement strong authentication mechanisms, role-based access controls, and regular reviews of user privileges. This helps prevent unauthorized individuals from tampering with or misusing collateral assets.
Valuation of collateral assets	The first challenge is to accurately value the collateral assets that have been pledged by the borrower. The value of these assets may fluctuate over time, which makes it difficult to determine the actual value of the collateral at any given point.	Regular appraisal of collateral assets can mitigate the risk of inaccurate valuation. Using multiple sources of data to evaluate the value of the collateral assets can increase the accuracy of the valuation. Applying a conservative haircut to the value of the collateral assets can provide a buffer against market fluctuations. Setting up a margin call mechanism where additional collateral is required from the borrower if the value of the collateral assets falls below a certain threshold can help mitigate the risk of inaccurate valuation.

Foreclosure: key risks and controls

Accountable for overseeing the foreclosure process, which includes the title search, property appraisal, and court cases.

Risk	What can go wrong	Best-practice controls
Communication with stakeholders	The foreclosure process involves multiple stakeholders, including borrowers, investors, regulators, and internal departments. Effective communication with these stakeholders is crucial to ensure that everyone understands the process and their roles and responsibilities.	Develop a comprehensive communication plan that outlines the foreclosure process and the roles and responsibilities of all stakeholders involved. Ensure that the plan is accessible to all stakeholders. Establish regular meetings or check-ins with all stakeholders involved in the foreclosure process to discuss progress, concerns, and updates. This will help ensure that everyone is on the same page and has a clear understanding of the process. Implement a system for tracking and reporting on the progress of the foreclosure process. This will help identify any bottlenecks or issues that may need to be addressed and keep stakeholders informed. Conduct regular training sessions for all stakeholders involved in the foreclosure process to ensure they are up-to-date on any changes or updates to the process.
Legal and regulatory compliance	Foreclosure is a legal process that requires compliance with a complex web of federal and state laws and regulations. Non-compliance can result in significant penalties and legal liabilities for the bank, which can be a major challenge for special assets departments to manage.	Robust Compliance Program: Implementing a comprehensive compliance program that ensures adherence to all federal and state laws and regulations related to foreclosure. This includes regular training, audits, and monitoring to mitigate the risk of non-compliance and minimize penalties and legal liabilities. Expert Legal Counsel: Engage experienced legal professionals specializing in foreclosure laws and regulations. Their expertise can provide guidance and ensure compliance throughout the foreclosure process, reducing the chances of errors and potential legal challenges.
Operational challenges	Managing foreclosures requires coordination among multiple departments within the bank, as well as external vendors such as attorneys, property managers, and auction houses. Managing these relationships can be challenging, particularly if there are delays or miscommunications.	Clear communication protocols: Establish clear communication channels and protocols among all parties involved in the foreclosure process to minimize delays and misunderstandings. Robust vendor management: Implement a robust vendor management program to select, monitor, and assess the performance of external vendors such as attorneys, property managers, and auction houses to ensure they meet quality and performance standards. Cross-functional training: Provide cross-functional training to employees involved in the foreclosure process to ensure they understand each other's roles and responsibilities, and can work together effectively. Technology-enabled coordination: Implement technology solutions such as workflow automation, document management, and collaboration tools to streamline communication and coordination among departments and vendors.
Valuation and disposal of collateral	The special assets department of a bank must determine the value of the collateral and ensure it is sufficient to cover the outstanding debt. This requires an understanding of market conditions, property values, and legal requirements. Disposing of the collateral, such as through a sale or auction, also requires careful planning and execution.	Robust Market Research and Analysis: Implement a comprehensive system to gather and analyze market data, property values, and legal requirements regularly. This will enable the special assets department to make informed decisions regarding collateral valuation, ensuring that it adequately covers outstanding debt. Streamlined Collateral Management Process: Establish a standardized and well-documented procedure for assessing, monitoring, and managing collateral. This includes clearly defined guidelines for disposing of collateral, such as conducting thorough appraisals, engaging professional auctioneers, and adhering to legal protocols.

Non Performing Loans: key risks and controls

Managing and reorganising non-performing loans in order to maximise recovery and minimise losses.

Risk	What can go wrong	Best-practice controls
Borrower challenges	NPLs are often associated with distressed borrowers who may be facing financial difficulties or insolvency. Managing and restructuring these loans requires specialized skills, knowledge, and experience.	Specialized Training: Providing specialized training to staff can enhance their skills, knowledge, and experience to effectively manage and restructure NPLs. Engage Experts: Engaging external experts with a proven track record in managing NPLs can help to mitigate the risk associated with distressed borrowers. Robust Due Diligence: Conducting robust due diligence before lending to mitigate the risk of borrowers becoming distressed or insolvent. Diversification of Portfolio: Diversifying the loan portfolio can help to reduce the overall risk associated with NPLs and mitigate the impact of borrower defaults.
Financial and operational challenges	NPL management and restructuring can involve significant financial and operational risks, such as credit risk, liquidity risk, and operational risk. Banks must have robust risk management processes in place to identify, assess, and mitigate these risks.	Robust Risk Assessment and Monitoring: Implement a comprehensive risk assessment framework to identify and evaluate potential credit, liquidity, and operational risks associated with NPL management and restructuring. Regularly monitor and review these risks to ensure timely identification and mitigation. Strengthened Risk Mitigation Measures: Develop and enforce stringent credit risk management practices, including thorough due diligence, proper loan documentation, and collateral valuation. Enhance liquidity risk management by maintaining adequate funding sources and contingency plans. Implement robust operational risk controls, such as process automation, segregation of duties, and regular staff training.
Legal and regulatory challenges	NPL management and restructuring involve various legal and regulatory requirements, which can be complex and time-consuming. Banks must comply with applicable laws and regulations, which can vary across jurisdictions.	Robust Compliance Framework: Establishing a comprehensive compliance framework is crucial to mitigate the complexities and challenges of NPL management and restructuring. This includes a thorough understanding of legal and regulatory requirements across different jurisdictions, regular monitoring and updates of regulations, and proactive measures to ensure compliance. Cross-Jurisdictional Expertise: Banks should develop a specialized team with deep knowledge and experience in managing NPLs across multiple jurisdictions. This team can navigate complex legal and regulatory landscapes, identify jurisdiction-specific requirements, and ensure adherence to applicable laws through effective coordination and collaboration with local experts.
Organizational challenges	NPL management and restructuring can involve multiple departments and stakeholders within a bank, such as credit, risk, legal, and operations. Effective collaboration and coordination across these departments and stakeholders can be challenging.	Standardized protocols and procedures for NPL management and restructuring to ensure clear communication and coordination between departments and stakeholders. Implementing a centralized platform or system to track and manage NPLs, which provides transparency and real-time updates to all relevant parties. Regular training and workshops for staff to build knowledge and skills in NPL management and restructuring, emphasizing collaboration and communication between departments. Establishing a cross-functional task force or committee to oversee NPL management and restructuring, comprising representatives from different departments and stakeholders, to ensure effective collaboration and decision-making.
Valuation challenges	Valuing NPLs can be challenging, especially when there is limited information available or when the underlying assets are illiquid. Accurate valuation is essential to determine the appropriate level of provisions or write-offs required.	Robust Risk Assessment and Data Management: Implement a comprehensive risk assessment framework that identifies the potential challenges in valuing Non-Performing Loans (NPLs). Establish efficient data management systems to capture and analyze relevant information, ensuring data accuracy and accessibility. Regularly update and validate data sources to enhance valuation accuracy. Enhanced Valuation Methodologies: Develop sophisticated valuation models and methodologies specifically designed for NPLs. Incorporate multiple valuation approaches, such as market-based comparables and discounted cash flows, to reduce reliance on limited information or illiquid asset market data.

Special Assets Administration: key risks and controls

Accountable for overseeing the Special Assets Department's administrative tasks, such as compliance, reporting, and record-keeping.

Risk	What can go wrong	Best-practice controls
Cultural challenges	The SAD must operate within the organizational culture of the bank, which can be challenging when there are conflicting values or priorities. The SAD must align its operations with the bank's overall strategy and culture to ensure effective collaboration and decision-making.	Clear Communication: Establish open communication channels to ensure that the SAD and the bank's management team are on the same page regarding the bank's goals, values, and culture. Training and Development: Provide training and development opportunities to SAD members to improve their understanding of the bank's culture, vision, and strategy. Performance Metrics: Set performance metrics for the SAD that are aligned with the bank's overall strategy and culture, to ensure that their decisions and actions are in line with the bank's goals. Cross-Functional Teams: Encourage cross-functional teams and collaboration between the SAD and other bank departments to foster a culture of teamwork and cooperation.
Data management challenges	The SAD is responsible for managing a large amount of data related to distressed assets, which can be complex and difficult to organize. Ensuring data accuracy, completeness, and security is critical to effective decision-making.	Implement a robust data governance framework: Establishing clear policies, standards, and procedures for data management will help ensure accuracy, completeness, and security. This includes defining data ownership, access controls, data quality checks, and data classification. Deploy advanced data management tools: Utilize cutting-edge technologies like data integration platforms, data cleansing software, and data encryption tools to enhance data organization, accuracy, and security. These tools can automate data validation, improve data quality, and protect sensitive information from unauthorized access.
Performance measurement and reporting	The SAD must demonstrate the effectiveness of its operations through performance measurement and reporting. This can be challenging, particularly when there are multiple stakeholders with different reporting requirements.	Implement a standardized performance measurement framework: Develop a comprehensive system for measuring and reporting performance that aligns with industry standards and meets the needs of all stakeholders. This framework should define key performance indicators (KPIs), establish clear metrics, and outline reporting processes to ensure consistent and accurate evaluation of the SAD's operations. Establish a stakeholder engagement strategy: Proactively engage with all stakeholders to understand their reporting requirements and expectations. Regularly communicate and collaborate to identify common ground and develop mutually agreed-upon reporting formats and timelines. This will help streamline reporting processes, reduce conflicts, and ensure that the SAD's operations are effectively demonstrated to all stakeholders.
Resource constraints	SADs often operate with limited resources, such as staff, budget, and technology. This can result in delays, errors, or omissions in administrative tasks, such as documentation, reporting, and communication.	Automation of administrative tasks can reduce delays, errors, and omissions caused by limited resources, ensuring consistent and timely completion of tasks. Cross-training staff members on administrative tasks can mitigate the risk of delays and errors by ensuring that multiple team members are capable of performing critical tasks. Implementing a prioritization system for administrative tasks can help ensure that limited resources are allocated to the most critical tasks first. Developing clear communication channels and protocols can minimize the risk of miscommunication and errors caused by limited technology resources.

This register is a starting point for risk identification and benchmarking against international practice. Adapt the risks and controls to your institution's size, products, jurisdiction and regulatory requirements.

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A spreadsheet-ready CSV with every risk and control on this page, plus blank columns for control owner, inherent likelihood and impact, control design, operating effectiveness, residual rating and actions. We confirm your email with a 6-digit code, then email you the download link.

Frequently asked questions

What are the key risks in Special Assets?

The main risk areas covered are Asset Recovery, Bankruptcy, Collateral Management, Foreclosure, Non Performing Loans, Special Assets Administration. Each unit lists its key risks with a short explanation and the best-practice controls that mitigate them.

How do I use this register for a risk and control self-assessment?

Select the risks that apply to your units, map the listed controls to the controls you actually operate, rate inherent risk and control effectiveness, then agree actions for gaps. The free RCSA workbook on this page has the columns ready.

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