Sample interview questions: How do you assess and manage credit risk associated with leveraged loans?
Sample answer:
Assessing Credit Risk
- Quantitative Analysis: Use financial ratios, cash flow projections, and stress tests to evaluate the borrower’s financial health and ability to repay.
- Qualitative Analysis: Conduct credit interviews, review management presentations, and assess industry and market conditions to gain insight into the borrower’s business plan, competitive landscape, and operating environment.
- Stress Testing: Simulate adverse economic scenarios to assess the borrower’s resilience and ability to withstand potential shocks.
Managing Credit Risk
- Loan Structuring: Negotiate loan covenants, collateral requirements, and other protective provisions to mitigate risk.
- Monitoring and Surveillance: Regularly monitor the borrower’s performance against financial targets and covenants, and initiate early intervention if necessary.
- Early Warning Systems: Establish automated systems to identify and alert to early signs … Read full answer
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