The Importance Of A Credit Risk Management - 973 Words

These are general factors which are important in process of controlling credit risk management by the banking industries from all over the world. Proper consideration of these factors in for the proper credit risk management process is very essential. Thus the study of these factors is always helpful for the banks. 2.2.1.1 Importance of proper policy for risk management in banks While looking at the events of financial crisis of the various countries it can be said that misunderstanding of the development of the risk factors from their roots and failure to formulate appropriate policies to tackle those risk may lead to the rise of highly unfavourable consequences (Hilbers, Otker-Robe, Pazarbasioglu, Johnsen, 2005). McNaughton and Barltrop (1992) states that well formulated credit policies of the banks will provide the base to act according to the certain standards and parameters to avoid unnecessary risks during business expansion. These policies plays prominent role in all stages of credit from proper appraisal of credit facilities by the credit officers to evaluation of those facilities by board, management and risk auditors. 2.2.1.2. Various factors for safe lending process needed to be applied by banks The business of any bank is providing loans. Thus there are various factors which are extremely necessary to be taken into deep consideration before providing credit facilities to the client. These factors are more important while providing realShow MoreRelatedRole of Financial Statements in Decision Making1634 Words   |  7 PagesTOPIC: ASESSMENT OF CREDIT RISK IN FINANCIAL MANAGEMENT THE ABSTRACT This proposal study explores financial credit risk assessment. This is an important issue because there is currently no standardized method used by financial institutions for the assessment of credit risk. 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