Credit Assessment

and
Risk Management
some thoughts

Why Credit and Risk Management ?

Absence of Risk Management may diversify your portfolio!!

And structure

Risk
Matrix

Controllable

Uncontrollable

Acceptable

Unacceptable

internal
action/
monitor

mitigate

To take a
view

Insurance/
Derivatives

So that all the risks are assumed by the respective

parties that can best manage it

Risk Management

Independent
Focused
Top Management Support

Look for out of box solutions

Insurance... do not leave it to the insurer

Look into the fine print

The Credit Assessment Challenges

Getting good data is relatively easy

Assessing data involves more than just
collecting information
Accurate interpretation of the data is the
challenge
Perception of risk is the key.

Project Management
would mean balancing
of various risks.

It is important to
identify each of them

Anticipate

Assess

Control

Mitigate

Assessment need to look beyond the cover

Do not get carried away by the presentation styles

Financials are important

but not the last word

Look Beyond Balance Sheets
Market Reports are important

Are the Plans Implementable ?

Look out for over ambitious plans

Assessment of Project Completion

A realistic assessment of Project COD and implications

of delay is important

Avoid Speculative Projects

There is no short cut to sustainable profits

Cash Flows are the key

Analysis of the future cash flow is important.

Only they can keep the transaction afloat

Assumptions needs to be carefully examined

Projections maybe misleading

Treat your customers liberally, bearing in mind the fact

that a Financial Institution prospers as its customers
prosper,

BUT NEVER PERMIT THEM TO DICTATE

YOUR POLICY

Market Strategy...

... is as important as Market Size

A Formal Risk Control Trigger Points are essential

Insist upon the payment of all paper at maturity no matter

whether you need the money or not ...

Invest in the right technology for the future

Watch out for obsolescence

Documentation

Management of Documents is vital, particularly in difficult times

Documentation needs to be friendly but

remember that in a financing transaction
thats all you have

No room for ambiguity

Read between the lines

a good deal is
one where none of the parties alone has to
assume full credit responsibility for the
project, yet when the undertakings are
combined, the equivalent of a satisfactory
credit risk results for all the parties.

effective risk allocation

where all the risks are assumed by the party
that can manage it within effective cost limits
efficiently.

Suggestions???