Essays on Credit Risk Analysis for Black Gold Ltd Case Study

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The paper 'Credit Risk Analysis for Black Gold Ltd" is a good example of a finance and accounting case study. One of the difficulties faced by the banking institution relates directly to credit risk. Credit risk can be explained as the possibility of loss that the bank might incur as a result of a borrower defaulting from paying his or her loan and as the terms of the loan agreement. This paper gives the recommendation concerning the loan, which is to be advanced to the Black Gold, risk-return on the loan to be advanced. Submission letter Internal report To: Mr.

Widodo The bank Managing Director P. O Box 452 From: Loan evaluation officer Dear Sir/Madam RE: PROCESSING $ 5BILLION LOAN FOR BLACK GOLD COMPANY LTD In reference to the above topic, I would like to submit my evaluation report and recommendation concerning the processing $ 5billion loan for the Black gold company for purchasing coal mine. Find an attached copy of the detailed report and analysis of the report and the recommendation on the same concerning my view. Thanks Yours faithfully     Introduction One of the difficulties faced by the banking institution relates directly to credit risk. Credit risk can be explained as the possibility of loss that the bank might incur as a result of a borrower defaulting from paying his or her loan and as the terms of the loan agreement (Antwi 2014).

One of the primary goals of credit risk management is to maximize a bank risk-adjusted rate of return for maintaining credit risk exposure within acceptable parameters. There is a need for the banks to manage the credit risk inherent in the entire portfolio and the risk of individual credits or transactions (Dewandaru et al.

2015). The credit managers should also be in a position to consider the relationship between credit risk and another risk (Beatty & Liao 2014). The efficient and effective credit risk management is a critical component of a comprehensive approach to the risk management in a bank, and this will ensure long term success of the Bank. In the banking sector, loans are the largest and the most common source of credit risk. Other banks activities are also a potential source of risk to the bank, which should be considered (Beatty & Liao 2014).

The paper discussed loan credit risk using the case study of Black Gold Company, which intends to borrow $5 billion to pay after 20 years (Harrison et al. 2014). The bank's managers and credit officers should be in a position to draw lessons from the experience, as the banking sector continues to get credit risk continues. The managers should be able to establish appropriated risk environment, they should be able to determine the operation under sound credit process, maintaining a proper credit administration and ensure proper and adequate controls over credit risk (Harrison et al.

2014). Credit risk evaluation process In analyzing the risk-return process, it generally starts by analyzing the borrower's ability to repay and support provided by the structure and any other credit risk mitigation measures (Kitzing 2014). Some of the factors to be considered in analyzing the risk the bank will experience from Black Gold Ltd include

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