Credit Risk Appetite - Part 3
Every product gives rise to a different combination of risks, although not all create credit risk. Key product risks must be identified, quantified where possible, and accepted, mitigated, or avoided. This tutorial discusses the importance of understanding and managing product risk. It describes the various factors that determine whether a particular product is considered high or low risk and some of the approaches banks use for setting and managing product risk appetite.
Managing country risk is a challenging task for banks. It is important to be able to identify country risks both effectively and efficiently when processing transactions and assessing credit proposals. Failure to do so can lead to banks accepting risks outside appetite. It can also slow down processing and lead to a loss of business. This tutorial explores the issues surrounding the identification of country risk, describing the methods used by banks to ensure country risks are identified and managed effectively and risk appetite is not exceeded.
On completion of this tutorial, you will be able to:
- Describe the importance of understanding and managing product risk
- Outline the key types of country risk
Topic 1: Product Risk
Topic 2: Country Risk