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Minimize Credit Risk: Best Practices and Common Mistakes to Avoid

This comprehensive guide explores effective strategies for assessing and minimizing credit risk in your company. Learn about the common pitfalls in establishing credit limits and how to avoid them. We'll discuss the importance of evaluating your client's portfolio risk, the necessity of regular status checks, and the centralization of credit limit decisions within the finance function while collaborating with sales. Additionally, understand the critical role of reliable information in trade and risk management, and discover steps for handling high and low-risk companies effectively.

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Minimize Credit Risk: Best Practices and Common Mistakes to Avoid

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  1. Assessing and minimising the credit risk

  2. The Plan • The most common mistakes done by companies admitting the credit limits and ways to avoid this. • How to evaluate the risk of your client’s portfolio? • Costs and benefits. Współpraca z Dun & Bradstreet

  3. The most common mistakes and solutions Solutions • No credit limits in the absence of sufficient data • Regular (annual) status check • All credit limits decisions should be centralised within finance function, but collaborating with sales • The information is the foundation to trade and risk limiting. Mistakes • Casual setting of credit limits. • No updates of the knowledge about clients • The lack of clear lines of authority between sales and financial department • Over reliance on collateral Współpraca z Dun & Bradstreet

  4. Categorisation - what to do next High risk companies Low Risk companies What we do next? What we do next ? Check in 6 months Set the credit limit Conservative credit limit Non - standard solutions in „hard”cases Check once in year Credit Limit based on collateral Współpraca z Dun & Bradstreet

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