How do you assess and manage the company's exposure to credit risk in customer and supplier relationships? - Navigating Success in Business and Management

Sample interview questions: How do you assess and manage the company’s exposure to credit risk in customer and supplier relationships?

Sample answer:

Assessing Credit Risk

Customer Relationships:
- Review financial statements, credit ratings, and payment history.
- Establish credit limits based on risk assessment.
- Monitor customer activity and early warning signs of financial distress.
- Obtain credit insurance or implement credit mitigation strategies as appropriate.
Supplier Relationships:
- Evaluate supplier’s financial stability, delivery performance, and reputation.
- Establish payment terms that balance the need for timely payment with mitigating credit risk.
- Monitor supplier’s financial health and track any potential supply chain disruptions.

Managing Credit Risk

Implement Credit Policies and Procedures:
- Establish clear credit policies that outline credit assessment, approval, and collection processes.
- Regularly review and update credit policies based on market conditions and company risk appetite.
Monitor and Track Credit Exposure:
- Establish a credit risk management system to monitor and track credit exposures.
- Use credit scoring models or other analytical tools to identify high-risk customers and suppliers.
Diversify Credit Exposure:
- Spread credit risk across a diversified customer and supplier base.