Types of Risks in Credit decision-making

Question

Accepted Answer

Credit decision-making involves various types of risks that need to be considered.

Credit risk - the risk of default by the borrower
Market risk - the risk of changes in market conditions affecting the borrower's ability to repay
Operational risk - the risk of errors or fraud in the credit process
Reputation risk - the risk of damage to the lender's reputation
Legal and regulatory risk - the risk of non-compliance with laws and regulations
Country risk - the risk of political or economic instability in the borrower's country
Concentration risk - the risk of overexposure to a single borrower or industry
Interest rate risk - the risk of changes in interest rates affecting the borrower's ability to repay
Liquidity risk - the risk of not being able to sell the loan or obtain funding to meet obligations

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