Credit Risk Management- Key to the Holistic Growth of the Business

credit risk management

Are you looking for the intact credit risk strategy for your business? It is kind of challenge for the firms. Let me tell you that efficient Credit Risk Management can help you to achieve multiple objectives of the business. It can take your business beyond the regulatory requirements and development goals.

Here, in this blog, we discussed some crucial basics of Credit Risk and its effective management in the Financial Institutions. Diligent management of credit problem is becoming a strategic focus of the business.

What is Credit Risk?

Credit Risk refers to the risk that arises from borrower’s or counterparty’s incompetency to meet payment terms as stated in the invoice and defaulting on the same. (3rd party debt collection and bad debt collection terms). Credit collection is the major issue faces by most of the financial institutions. A Greater part of firm’s credit risk is emerged out of its lending activities like Unfunded Loan Commitments, Outstanding Eases and Loan Amount, Letter of Credits, Trading Accounts Assets, Financial Guarantees, Account Receivables Outsourcing and Derivative Assets. Credit risk is also associated with interbank transaction activities, acceptance and trade finance, investment settlements and retail banking.

How it works?

Debts risk management is set of activities conducted to minimize the loss by properly analyzing the loan loss reserves and bank’s capital at the given point of time. It is essential to form and execute a radical credit policy balance the risk involved in credit appraisal activities. It is a top management’s responsibility to formulate a strategy for credit risk reduction and management along with improvement in credit policies and risk monitoring practices.

Business information reports and credit reports should be precisely examined to set credit limits and control the risk in all kind credit provision activities. Hence, it is advisable to the financial institutions to monitor all the aspects of the credit risk management for achieving the overall growth and competitive advantage.

Brief Synopsis of Business Information Reports are :
Our Credit Rating process is highly technical in nature with a fact based approach. Parameters considered are:

  • Management details
  • Operational details
  • Financials Statements
  • Financial Ratios
  • Industry standings
  • Financial institutions feedback
  • Credit rating history
  • Regulatory filings
  • Database and Desktop searches

  • Our Approach

    We ensure that all clients are rated in a consistent manner with the Credit report (aka Business Information Report) which involves following aspects:

  • Credit Terms or Prepay Terms
  • In case, Credit Terms, Credit Lines will be recommended