Understanding and Managing the Complex Challenges of Credit Risk
Credit Risk is associated with the risk of a loss occurring due to the failure of any counterparty to abide by the conditions of a financial contract. Credit risk generally occurs due to the deteriorated financial condition of the counterparty. Failure to mitigate credit risk can disrupt the cash flows of the lending party and ultimately, take a toll on the organization’s finances.
Value Creed helps its business users better manage credit risk and presents an opportunity to greatly improve overall performance and secure a competitive advantage.
Credit Risk in the Energy Sector
Credit risk has a huge impact on the energy sector and, following the credit crunch, more sophisticated methods of measuring, monitoring, and managing credit and related risks is now the norm. Four challenges arose as a result of this shift.
Energy companies have become more aware of the contributors to and issues surrounding credit risk management functions:
Internal evaluation aimed at workflow improvements
External scoring still important, but other metrics have emerged
Standardization of credit worthiness and exposures all along the value chain
Credit risk concerns are garnering more executive scrutiny and becoming more strategic
Margining and increased collateral demands have shifted risk to other areas
Compulsory clearing places greater emphasis on cash requirements and liquidity management.
Credit Risk Management in RightAngle
Credit Center provides information about a counterparty’s Total Available Credit versus its Total Exposures at any given time. The configurable tools and editable reports in Credit Center aid customers in regulating and managing trading activity with their counterparty. Credit Center reports provide insights that allow customers to predict future exposures and available credit so they can manage current exposures and available credit.
Credit Center allows customers to capture credit instruments for secured and unsecured allocation of credit and blanket instruments as well those specified by deal, deal detail, order, and movement. Credit Center supports RightAngle’s core credit instruments:
Letter of Credit
Value Creed's Approach to Credit Risk Management
Value Creed’s SMEs have worked on various such configurations and customizations in RightAngle Credit Life Cycle:
Assisting the Credit analysts in setting up the different reference data like Counterparty Credit information which includes defining different instruments and limits.
Value Creed’s risk management services for RightAngle ensure the platform delivers all the functionality companies need to generate full transparency so they can make informed decisions to protect themselves while maximizing profits. This necessitates customizations in the RightAngle core Credit and Cash Application workflows, which are designed and developed based on the client’s business needs.