The credit risk is the risk which the borrower does not refund his Dette at the fixed limit. If it were in the beginning a concern for the only banking organizations, it however relates to all the companies (in particular via the credits which they grant to their customers, who are forms of short-term loan), and many are today brought to integrate it in their management in order to minimize it. This risk is indeed full of consequences for very undertaken: any not refunded debt is economically a dead loss which the creditor supports. Speaking Comptablement, the credits and loans granted to thirds thus constitute a specific station in the assessment of the company and any negative evolution obère of as much the survival of the company in the short or the long term. Very early, the companies thus sought to be immunized against this credit risk, and this in two manners. Upstream, the risk can be the subject of a evaluation thanks to various criteria and of the techniques mélant calculation and intuition. Following this evaluation, the companies lay out then different means of protection to even minimize to cancel this economic risk.

The evaluation of the risk

To evaluate the credit risk initially amounts raising the question of the solvency of the company considered. This solvency depends at the same time on the purely internal elements to the company, but also on contextual elements like its geographical location, the total economic situation and the prospects for sectoral evolution.

Exogenic data

Geographical presence

To consider the environment of the company is an essential preliminary as regards evaluation of the risk since a company is not an entity living in autarky: it interacts with a whole of external actors (other companies, private individuals, banks, insurances, States…) in a more or less broad geographical context. The establishment of the company (head office and possible subsidiary companies) in a country thus puts the company under influence of the political situation (stable or not), of the local tax system, the legislation (law the labor, right of the businesses, regulation on safety and environment…). Notwithstanding the situation of the company in itself, the quality of its establishment and the prospects for evolution in its country of origin can handicap it seriously or largely support it according to the cases, influencing of the kind its future.

To help to assess the quality of the geographical context of a company, the principal credit rating agencies financial (like Standard & Poor' S), the insurances and the large banks of investment publish " ratings" where each country is seen allotting a note (figure or letter) synthesizing the data considered to be relevant. The note is generally accompanied by a comment explaining the evaluation which was made and indicating the favorable and/or unfavourable independent factors.

Considerations on the sectoral prospects

The sector in which the company carries on its activity also impacts him on its economic good health. If a growth sector forecasts of a quasi unquestionable increase in the activity as of the company in the following years, a sector in crisis causes contrary to the greater risks for the company which operates there; this is all the more true in certain sectors particularly sensitive to the international context (raw materials, transport, light industries…) A thorough analysis of a sector gives to final good idea prospects over the years to come and makes it possible to refine the evaluation of very undertaken which carries on its activity there.

The macroeconomic situation

This point relates to mainly the companies having a strong international activity. Tributaries of multiple markets, operating transactions on several different currencies, they are particularly sensitive to the risks of the worldwide economy or continental and the sometimes abrupt variations of foreign exchange rates between currencies.

Endogenous data

For this aspect, in fact mainly purely financial criteria enter in account, and some simple calculations can give a rather precise idea of the capacity of a customer/borrower to refund his debt in desired times. Here an not-exhaustive list of data " parlantes"

• annual Sales turnover

• Level of current debt (in the short and long term)
• Turnover
• Flow of treasury (Cash-flow) generated
• Availabilities (id is the treasury of the company)
• Financial result

From these data, the calculation of certain basic ratios immediately allows a first evaluation of the solvency of the company. Thus, if the relationship between the debt and the annual turnover is too large, to grant a new credit can be very risky. A weak turnover compared to the turnover can also indicate difficulties in the refunding of the loans (which should not exceed the amount of the BAIIA).

External bonds

• Article of Finance & Strategies dealing with the risk of counterpart
• Modeling of the correlations of defects in the analysis of the credit risk

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