Credit Risk Management: How to Avoid Lending Disasters and Maximize Earnings (PROFESSIONAL FINANCE & INVESTM)

Description

Credit Risk Management is a comprehensive textbook that looks at the total integrated process for managing credit risk, ranging from the risk assessment of a single obligor to the risk measurement of an entire portfolio. This expert learning tool introduces the principle concepts of credit risk analysis…explains the techniques used for improving the effectiveness of balance sheet management in financial institutions…and shows how to manage credit risks under competitive and realistic conditions. Credit Risk Management presents step-by-step coverage of: The Credit Process_discussing the operational practices and structural processes to implement and create a sound credit environment The Lending Objectives_explaining the credit selection process that is used to evaluate new business, and describing how transaction risk exposure becomes incorporated into portfolio selection risk Company Funding Strategies_presenting an overview of the funding strategies on some of the more commonly used financial products in the extension of business credit Company Specific Risk Evaluation_outlining some fundamental credit analysis applications that can be used to assess transactions through the framework of a risk evaluation guide Qualitative Specific Risk Evaluation_offering additional approaches to risk evaluate a borrower's industry and management Credit Risk Measurement_defining the role of credit risk measurement, presenting a basic framework to measure credit risk, and discussing some of the standard measurement applications to quantify the economic loss on a transaction's credit exposure Credit Portfolio Management_exploring the basic concepts behind credit portfolio management, and highlighting the distinctive factors that drive the management of a portfolio of credit assets compared to a single asset Credit Rating Systems_analyzing the pivotal role that credit rating systems have come to play in managing credit risk for lenders The Economics of Credit_showing how the modern credit risk approach has changed the economics of credit in order to achieve more profitable earnings and maintain global stability in the financial markets Filled with a wide range of study aids, Credit Risk Management is today's best guide to the concepts and practices of modern credit risk management, offering practitioners a detailed roadmap for avoiding lending mishaps and maximizing profits. Review: Five Stars - Great book Review: Read chapter 6 - Chapter 6 is a comprehensive, succinct overview of the various frameworks for analyzing a customer's industry. Commentators repeatedly encourage bankers to go beyond financial statements when issuing credit. If you're unfamiliar with the various ways to analyze an industry, Chapter 6 of this book is a must-read. Among the frameworks the author describes are: The Porter Model: How to evaluate the threats of new entrants to an industry, the bargaining power of buyers, the bargaining power of sellers, threats of substitutes, and intensity of rivalry within each industry. Pestel Analysis: An examination of the Political, Economic, Societal, Technology, Environment, and Legal issues for each industry. SWOT Analysis: Stanford Research Institute's (SRI) analysis of the Strengths, Weaknesses, Opportunities, and Threats facing each industry. Industry Life Cycle: How each industry goes from emerging/early development phase, to rapid expansion phase, to growth shakeout and consolidation phase, to mature growth phase, and then stabilizing and declining phase. Management: The author then asserts, "An industry analysis would not be complete with the assessment of a firm's management." She summarizes her survey of approaches, "A company's industry dynamics are unique to the fundamental characteristics that drive it. Industry fundamentals vary significantly among individual sectors and are predicated on the industry market environment in which it operates." As Buffett famously put it, "Beware of geeks bearing formulas." While this book contains a comprehensive discussion of the various quantitative methods of evaluating credit risk, it's her qualitative methods that I found most enlightening.