Tools for controlling for credit risk: There are many tools and
principles that organisations follow to manage credit risk, some of
these are stated below.
- Establish a suitable credit risk environment:
Here top managements are involved in assessing and approving credit
risk management process and they provide appropriate guidelines to
the others involved in this process.
- Work under effective credit granting process:
Here before granting credit to anybody banks and other financial
institutions must define a well structure criteria and also they
should have defined taget market so that it will be easier to make
decisions whether to grant credit or not.
- Maintain a good credit administration, measurement and
monitoring process: Financila Institutions like Banks
should have internal credit rating system and also they should have
internal monitoring system. They should have sound information and
analytical system to evaluate the credit risk management
process.
- Ensure sound control over credit risk management
tools: Credit risk management tools should be independent
and regular evaluation should be done to avoid any loss from the
risk, these information regarding the evaluation of the credit risk
should be communicated to the top management of the organisation so
that they can take a sound decision about the management
processes.
- Credit Risk management platforms: There are
many Credit Risk Management softwares available in the market which
helps managing credit risk of financial institutions. These
platforms are AI based thus they are able to capture large volumes
of data and manage the risk effectively.
These softwares add information from the news of domestic as
well as global countyries and gives signals to the lender if
anything happens or the risk increases due to the release of the
news on existing credits.
Hence, managing credit risk is very crucial and of greater
importance, so involving senior management in the management
process of credit risk is also very important.