Financial institutions face different types of credit risks—default risk, concentration risk, country risk, downgrade risk, and institutional risk.
Lenders gauge creditworthiness using the “5 Cs” of credit risk—credit history, capacity to repay, capital, conditions of the loan, and collateral..
Stress testing and scenario analysis Credit risk models are used to simulate a range of scenarios to test the resilience of a lender's loan portfolio.
Stress tests help lenders identify potential losses under adverse economic conditions, such as a recession or financial crisis..
Credit risk is the probability of a financial loss resulting from a borrower's failure to repay a loan.
Essentially, credit risk refers to the risk that a lender may not receive the owed principal and interest, which results in an interruption of cash flows and increased costs for collection..
Why is credit risk important? It's important for lenders to manage their credit risk because if customers don't repay their credit, the lender loses money.
If this loss occurs on a large enough scale, it can affect the lender's cash flow..
PYMNTS research indicates that while inflation has decreased slightly since its peak in July 2021, 70% of grocery shoppers and 67% of retail customers anticipate significant price increasesin the next 12 months.
Most people do not anticipate a significant improvement in the price outlook until late 2024.
The study also discovered that consumers wer.
While private labels in the grocery aisle are not new, consumers are seeing more private-label alternatives in items like mac and cheese, ketchup and pasta sauce.
Reacting to this trend, Dollar General announced in March that it would be beefing up its own private-label selection in a bid to better compete with retail giants like Walmart. “We’re se.
Private-label brands have long been considered a generic alternative to premium brands.
The same can be said for brands found at drugstores, as consumers often turn to them as a last resort when they can’t find the brand they’re looking for, or when their preferred brands are out of their price range.
As inflation continues to impact consumers, the.
The creditworthiness of the borrower, derived from the credit analysis process, is not the only risk lenders face.
When granting credit, lenders also consider potential losses from non-performance, such as:
