Credit Risk Management cheat sheet

Overview of risk management

• Risk is the possibility that an actual outcome will differ from what was expected in a way that could cause loss or harm, judged on two dimensions: likelihood and impact.
• A business faces strategic, operational, financial, compliance or legal, and reputational risk; credit risk is a financial risk, and the subject of the rest of this guide.
• The risk management process runs in five steps: identify, assess, treat, monitor and review.
• Treating a risk means deciding how to respond to it: avoid, reduce, transfer or accept it.
• Monitoring tracks key risk indicators against thresholds, checks that controls work, reports to management and keeps the risk register up to date.