CREDIT RISK ANALYSIS
Credit risk management is an important element of the proper company’s operations. The process can be shown as a series of four phases:
ANALYSIS: Analysis of customers and the environment
The aim of credit risk analysis is: (1) assessment of the creditworthiness of customers, (2) acquire knowledge about the client's business and its market position, (3) the credit risk level allowed for the enterprise associated with the counterparty, and (4) determination of the framework and conditions for cooperation with the customer. The key objective of the analysis is to build and maintain a portfolio of profitable customers. This does not mean that we strive for complete avoidance of credit risk or consider the best the portfolio the one which is not difficult, but we think that the best client portfolio (receivables) is the one that brings the most revenue.
The analysis is a very important part of the credit management process. It is a tool to score the customers and transactions, however its efficiency cannot be considered separately from the other parts of the credit management process (policy set up, monitoring and collection). The aims of the analysis are:
The key goal of the analysis is to build and maintain a profitable customers’ portfolio. it does not mean that we try to completely avoid any risk or think that the best portfolio has no past due items. We should just head to the portfolio which is the most profitable one.
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