The Role of Operations in Credit Risk Management

By Anne Mwangi

This article is one of two essays to win an Honorable Mention designation during the CFA Women in Commercial Finance Young Professional Thought Leadership Contest held last summer. Look for the second one in TSL Express soon!

Credit risk is the potential that expected or unexpected events will have adverse effects on a lender’s earnings, capital or franchise or enterprise value. Credit risk may arise from inadequate accounting and inventory control systems, poor collection practices or inaccurate collateral valuation, among other factors. It is imperative that management and operational professionals share the knowledge and experience to recognize, assess, mitigate and monitor the risks unique to asset-based lending (ABL). Success or failure in serving a customer efficiently while managing credit risk depends on understanding the role one plays in the company and also how well the teams work together. Here we will examine the role of operations professionals in successfully managing credit risk.

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