Essays on Effect of Credit Risk Management on the Financial Performance of Commercial Financial Institution Research Paper

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The paper "Effect of Credit Risk Management on the Financial Performance of Commercial Financial Institution” is an excellent example of the research paper on finance & accounting. The strength of the financial institutions is the growth in the income, which is of great significance in the business operations. The financial institution is the leading financial intermediaries in the economy and they are the leading providers of credit. The financial institution deals with retail as well as appropriate clients, they have a diversified portfolio deposit as well as lending book and primarily providers a while assortment of financial services for economic developments at comparatively steady growth rates.

Specifically, the financial institution makes profits by selling debts with one set of traits and with the use of proceeds to purchase assets with a diverse set of traits like the asset transformation. The latest financial management defines the business of banking as appraising, controlling, as well as acknowledging the risk. Under such definitions. the very significant as well as the uncertainty that financial institution should appraise. , control as well as supervise its credit risks, this threat also known as the default risk is the threat that the counterparty will default or underperforming.

with the growth in the pressure on the financial institution to enhances shareholders wealth maximization, the financial institution have had to assume the high risk and also, control this risk to get rid of losses, current transformation in the financial sector which h[might have a serious effect on the performance of the financial institution. The objective of risk management is not just to minimize or get rid of the risk as normally depicted but is considered as the procedure of recognizing, appraising, as well as controlling the risk that investors will face (Greener, 2009).

This might not be likely in many situations of evaluating risk as well as the constraints of the instrument for managing risk (Brennen, 2009). Risk management should be a constant procedure that the composition of investors’ portfolios as well as the risk of assets therein.


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