Credit Risk Management: Business Unit Credit Risk Management
Interactive

Credit Risk Management: Business Unit Credit Risk Management

Intuition Publishing
Updated Sep 25, 2020

At the business unit level, business heads, in collaboration with credit, are responsible for implementing business unit strategy in line with group business goals and target market. Effective implementation requires business and credit to be organizationally independent. Business unit credit risk appetite must be appropriate and aligned to group credit risk appetite. An appropriate and effective credit risk management framework is required to ensure that business unit credit risks are accepted and managed within appetite, while control mechanisms should be in place to test the effectiveness and adequacy of the credit risk management framework. Here we describe in detail the requirements for banks to manage credit risk at a business unit level and some of the challenges that banks face in that regard.