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Credit risk management
From Wikipedia, the free encyclopedia
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This article may require cleanup to meet Wikipedia's quality standards. Please discuss this issue on the talk page or replace this tag with a more specific message. This article has been tagged since September 2006. |
Credit risk management is the process of finding risk in an investment When the risk has been identified, investment decisions can be made and the risk vs. return balance considered from a better position.
The main way to reducing credit risk is by monitoring the behaviour of clients who wish apply for credit in the business. These clients may be businesses or individuals.
Credit Risk is further divided into many areas in a somewhat hierarchical fashion.
a) Economic Country Risks These risks relate to credit events (risks) which originate in a particular country.
b) Transfer Country Risks Transfer risk arises from the inability of a countrparty in a transaction to meet it's obligations in a foreign currency.