Credit risk management is essential in successful banking business. Ongoing financial crises, macroeconomic instability, inflation and other factors made corporate environment volatile causing credit risk management extremely important in banking business.
Main idea of risk management is to prevent bank’s portfolio from adverse effects caused by debtor’s failure to fulfill its obligations. The main subject of discussion of this work is to present how financial analysis of legal entities is essential in assessing credit risk and minimizing it. It will be examined what are the main factors influencing credit risk and what are the main tools used in achieving this goal. Besides financial analysis other so called soft facts referring to management experience, market reputation, customers/suppliers diversification will be elaborated in order to determine their influence in total credit risk assessment.
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