Credit risk management
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In finance, Credit risk management is the process of assessing risk in an investment. When the risk has been assessed, 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, individuals or sovereigns.
Credit Risk is further divided into many areas in a somewhat hierarchical fashion.
[edit] Country risks
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 counterparty in a transaction to meet its obligations in a foreign currency.
[edit] Company group risk
Sometimes the credit worthiness of a business which belongs to a group is related to the credit worthiness of that group (or holding).
