| It is a given fact that any existing company in the | | | | a given to know your customers. This is why |
| professional realm today faces risks at one time or | | | | companies have to invest in the proper identification |
| another. An online marketing business, for instance, | | | | of their target markets. Now, there are certain levels |
| faces the risk of not meeting the deadlines set by | | | | when it comes to identifying your target markets, |
| their clients. So, the proprietors of these businesses | | | | and these include the primary, the secondary, and |
| would have to make sure that they are indeed | | | | the tertiary levels. Regardless of what level a |
| equipped to meet, and even beat such deadlines. | | | | particular customer belongs to, the overall market |
| These are examples of risks that are not too scary | | | | should still be targeted as accurately as possible. |
| in nature. However, when it comes to businesses | | | | Now that you already know your target markets, |
| that deal with money every single working day, then | | | | you should also include in your framework knowing |
| there are indeed a lot of financial risks involved. Such | | | | your individual customers. There are so many risks |
| is the case with banks, lending companies, and other | | | | involved in the process of granting loans. Oftentimes, |
| financial institutions. Credit risk management is indeed | | | | a loan officer would scratch his head, thinking to |
| a must, and with the help of credit risk management | | | | himself how he never expected a particular borrower |
| notes, the very existence of the organization itself | | | | or debtor to default in payment. You have to |
| can even be saved. | | | | understand that each and every debtor does have |
| It does not matter if you are operating a bank, a | | | | every potential to do this, even if his financial status |
| lending company, or other types of financial | | | | dictates how this is not likely to happen. Thus, a |
| institutions. Just the fact that you are dealing with | | | | thorough investigation of the debtor has to be |
| money and you are lending huge amounts of money | | | | implemented. This is a very vital part and should be |
| to your clients is enough to put your company at | | | | included in credit risk management notes. What is |
| financial risk. Imagine what would happen if all of your | | | | important here is to check on the borrower's present |
| borrowers would suddenly decide to default their | | | | credit standing as well as his financial background. The |
| loans. This would jeopardize the status of the | | | | borrower's liabilities should also be matched against his |
| financial institution, not to mention it can also shake | | | | assets, to check if he does have sufficient income to |
| the very foundation of the institution itself. Thus, | | | | pay off his debt. |
| there has to be a certain framework developed, and | | | | Bear in mind that financial institutions are not the only |
| all processes implemented should adhere to this | | | | enterprises that are prone to credit risk. This is |
| framework. | | | | precisely why there has to be a properly defined |
| Knowing your customers is a very important part of | | | | system implemented to deal with credit risk |
| your framework. In any industry, it is almost always | | | | management accordingly. |