Sample interview questions: How do you assess and manage credit risks in treasury operations?
Sample answer:
Assessing Credit Risks
- Counterparty Due Diligence: Evaluate the financial health, credit history, and industry standing of potential and existing counterparties.
- Credit Rating Analysis: Obtain and analyze credit ratings from reputable agencies to gauge the creditworthiness of counterparties.
- Covenants and Warranties: Review loan agreements, bonds, and other financial instruments for covenants and warranties that protect the lender from potential losses.
- Stress Testing: Conduct simulations to assess the impact of various economic scenarios on the creditworthiness of counterparties.
- Monitoring News and Market Events: Track industry news, economic indicators, and geopolitical events that may affect the financial stability of counterparties.
Managing Credit Risks
- Risk Mitigation Techniques:
- Diversifying counterparty exposure
- Obtaining collateral or guarantees
- Entering into credit insurance contracts
- Establishing clear credit policies and procedures
- Credit Limit Setting: Establish… Read full answer