Description
Risk management practices within the financial sector are of particular interest to regulators. This is because the failures within this sector disrupt the functionality of the financial system and derail economic growth and efficiency. A historical reference point is the subprime meltdown of 2007 because it is the most prominent example of a massive risk management failure. In this assignment, you will evaluate the consequences of such a failure.
You have been hired by the board of Financial Leaders to facilitate a presentation on this topic. You must submit the items you intend to cover to the event planner by next week. Your presentation should be in PowerPoint and should address the bullet points below. You must also submit your presentation notes that you intend to use during the presentation using the Notes feature at the bottom of the PowerPoint slides.
- Discuss why credit risk management within the financial sector is so essential.
- Why do you think so many banks failed to properly manage risk prior to the financial collapse?
- What are the consequences of failing to manage credit risk and whom do they affect?
- What measures can banks employ to mitigate credit risks?
Explanation & Answer
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1
A presentation
on
Credit Risk Management
2
Introduction
Risk management is plans executed through logical development for dealing with
possible losses.
Risk management practices safeguard the institution's assets and manage its
vulnerability to losses.
The risks include credit risks, liquidity risks, operational risks, and market risks.
Techniques for curbing effects of credit risks, include;
❑
Risk rating,
❑
Loan review mechanism,
❑
Credit approving mechanism,
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Portfolio management,
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Risk pricing, and
❑
Prudent limits.
Importance of credit risk management
Credit risk is the risk of lending out money to clients by financial institutions.
Credit risk management helps mitigate credit risks by maintaining the
exposure within acceptable and proper parameters (Xudoyorov, 2017).
Importance
Allows measuring and prediction of the transaction's risk factor.
Though planning, it helps tackle adverse outcomes.
Helps in setting up credit models, the tools for measuring the risk level.
Helps ...
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