Question

    C redit risk assessment and credit risk management are

    not the same. Which of the following is true regarding credit risk assessment and credit risk management?  
    A Credit risk management is a broader concept than credit risk assessment Correct Answer Incorrect Answer
    B Credit risk management is about actively controlling and minimizing credit risk over the life of a loan Correct Answer Incorrect Answer
    C Credit assessment is about evaluating and quantifying risk Correct Answer Incorrect Answer
    D All of the above are correct Correct Answer Incorrect Answer
    E All of the above are incorrect Correct Answer Incorrect Answer

    Solution

    Credit risk assessment and credit risk management are two pivotal components in the domain of financial risk management each serving a distinct yet interconnected role.   

    • Credit risk assessment is the initial step where the lender evaluates the likelihood of a borrower defaulting on their obligations . This involves analyzing the borrower's financial health, credit history, and other relevant factors to determine the risk level associated with lending to them.   
    • C redit risk management encompasses a broader scope, involving the strategies and practices implemented to mitigate and manage the risks identified during the assessment phase. It includes setting risk thresholds, monitoring loan performance, adjusting risk exposure, and developing recovery strategies for loans that may default.  

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