Portfolio Credit Risk Management

Portfolio Credit Risk Management involves identifying, assessing, and mitigating the risk that borrowers in a financial institution’s portfolio might default on their obligations. It aims to ensure that the mix of loans or investments remains healthy and within acceptable risk levels. Techniques include diversifying investments to avoid heavy losses, analyzing borrowers' credit profiles, and regularly monitoring economic factors that could impact repayment. By managing these risks effectively, institutions protect their assets and maintain financial stability, ultimately safeguarding their ability to lend and support the economy.