{"id":22011,"date":"2023-02-22T13:58:23","date_gmt":"2023-02-22T13:58:23","guid":{"rendered":"https:\/\/www.factris.com\/?p=22011"},"modified":"2025-10-20T16:38:21","modified_gmt":"2025-10-20T16:38:21","slug":"what-is-credit-risk","status":"publish","type":"post","link":"https:\/\/www.factris.com\/en\/news\/importance-of-credit-risk-management\/","title":{"rendered":"What is credit risk?"},"content":{"rendered":"\n

Credit risk is the risk that a borrower will not be able to meet its financial obligations and therefore, does not repay the loan. This risk is present in any type of loan, whether it is to an individual, a company, or a government.<\/p>\n\n\n\n

Assessing credit risk<\/h2>\n\n\n\n

There are several ways in which credit risk can be assessed. One of the most common methods is through credit assessments. This looks at various factors, such as the borrower\u2019s income, ability to repay the loan, and past payment behaviour. Based on this, a credit rating is assigned to the borrower.<\/p>\n\n\n\n

Importance of credit risk management<\/h2>\n\n\n\n

An important aspect of credit risk is managing it. There are numerous ways in which this can be done, such as diversifying the loan portfolio, setting limits on credit issuance, and establishing contractual agreements with borrowers on how credit risk will be managed.<\/p>\n\n\n\n

How can you mitigate credit risk?<\/h2>\n\n\n\n

There are several ways to mitigate credit risk:<\/p>\n\n\n\n