 Credit plays a critical role in “selling” products and services –Expands revenue opportunities with creditworthy, incremental customers
–Utilizes innovative structures to support business relationships
Effective credit risk management limits credit losses and provides stable cash flows and earnings –Marketplace rewards companies exhibiting earnings and cash flow stability with higher P/E multiples
–Marketplace penalizes credit induced volatility and “surprises”
 Raises questions about quality of management
Companies are exposed to significant levels of credit risk emanating from different sources Accounts Receivables Other Notes Receivables Buyer and Franchise Financing With Recourse Financing –Project Finance
–Structured Transactions
–Leases with Recourse
Derivatives Exposures –FX, Interest Rate Risk, Commodities etc.
Collateral Risk –Parent or Third Party Guarantees
–Commercial and Standby Letters of Credit
–Note also that Critical Suppliers to the company may pose specific credit risk
|