Credit risk is defined as the risk that a borrower will fail to meet the obligation to make payment in accordance with the agreed terms. The recent credit crunch and global financial crisis have put the credit risk management into the regulatory spotlight. For banks, loans comprise of the largest source of credit risk. Besides loans, banks are also facing credit risk in various financial instruments: trade financing, foreign exchange transactions, interbank transactions, financial futures, bonds, and the extension of commitments and guarantees to name a few.

Citing such an importance, the Basel committee has increased its focus on credit risk, encouraging sound practices for managing and reporting credit risk. Some of the key components through which Basel requires credit risk management are

  • Probability of Default (PD)
  • Loss Given Default (LGD)
  • Exposure at Default (EAD)
  • Capital computations: RAROC
  • Credit Policy and Procedures
  • Portfolio Management
Aptivaa, as a risk expert in the area, has worked with enterprises to help them manage credit risk in the mentioned areas. To fulfill these requirements, Aptivaa brings in expertise in areas of Risk Analytics such as PD, LGD, EAD model development, validation and calibration. We also bring in expertise in the areas of portfolio management, risk reporting, and RAROC framework.