Which action is described as adopting a more conservative policy for approvals to manage portfolio risk?

• A. Establish proper credit policy.
• B. More conservative policy, more conservative approvals.
• C. Educate your people.
• D. Increase annual revenue targets.

Answer: (B)

Adopting a more conservative policy for approvals means deliberately tightening the criteria used to grant credit. By raising the standards—such as requiring higher credit quality, stricter documentation, smaller loan sizes, or higher collateral/changing loan-to-value limits—you reduce the likelihood of extending credit to riskier borrowers and cap exposure. This directly targets portfolio risk by slowing growth where risk is elevated and strengthening controls before approval. Among the options, the one that explicitly describes adopting a more conservative policy for approvals is the best fit because it names the exact action of tightening approvals to manage risk. The other choices touch on policy development, training, or goals that don’t specifically address tightening approval standards for risk control.