What is a Credit Risk Analysis?
Credit Risk, as the name suggests, is the study or analysis that is done with the motive of ascertaining the creditworthiness of a borrower. The main aim of this analysis is to determine the total amount of risk that the lender is exposed to.
The task of credit risk analysis is taken over by a specialized credit risk analyst in any of the lending institutions like lending houses, commercial banks or other financial institutions.
Generally, a lender has to deal with two types of credit risks namely the concentration risk and the institutional risk. The former involves the risk of money lent depending upon the performance of a particular sector or industry. To quote it as an example, a lender who has lent out money to various manufacturers like the cement manufacturer and the brick company must be receptive to risks in times of any shocks to the construction industry. The latter deals with risks involved with the functioning of an institution acting as the supervisor of the contract. It can be any legal entity.
Role of a Credit Risk Analyst
Apart from the basic role of analysing the financial statements of clients, a credit risk analyst has the following roles and responsibilities.
- Recommendations: After assessing the financial data of a client, it is the role of credit risk analysts to recommend the client to be lent out money based on the overall assessment conducted.
- Staying updated: Dealing with a variety of data, an analyst needs to stay updated about all the present-day changes and upgradations in the working pattern.
- Being observant: A credit risk analyst is required to be observant while assessing the financial data and must have a keen eye to figure out discrepancies or falsies in the information.
- Systematic functioning: Being systematic is important in this field of work. Maintaining data of past and present borrowers is important.
Qualification Required for Being a Credit Risk Analyst
For being a credit risk analyst, an associate degree is required in any field of studies like accounts, finance or economics. There may be fewer chances of the job options available just after an associate degree as different positions require a different educational qualification. Some positions in the same field may seek new-comers with a minimum of an under graduation degree in finance, accountancy or economics.
If you wish to work your way up in the same field, a master’s degree in business administration may be mandatory.
Although there isn’t any specific certification as a lawyer or a chartered accountant, after gaining a three-year experience in the same field of work, the Risk Management Association can provide you with a Credit Risk Certification (CRC) that can be a proof of your continuous experience in this particular field.
Along with this, an aspirant must possess comprehensive knowledge of financial terms, mathematical formulas and accounting ratios with a keen eye to decipher the discrepancies in the data. Being adroit in applications like MS office in addition to technical know-how is significant. For a streamlined banking and credit underwriting career, you should look up at the banking and credit underwriting course provided by Imarticus learning. Imarticus provides you with a detailed and professional insight about this field.
Credit Risk Analyst as a Career
Beginning from the basic level of job in this field with a basic level of qualification, one can be hired for the position of a junior analyst. A junior analyst has to go through the records and documents related to personal and consumer credit and analyse the risks. Candidates with an associate degree along with some experience can be recruited for such positions.
If you want to move up the hierarchy, a university degree is paramount. Getting a degree from a decent university will help you in getting positions involving business credit analysis. With considerable experience and good conduct, you can work in higher positions. Once you gain expertise, being a senior level analyst is not a far cry. Senior-level analysts generally have a team of junior analysts working under them. This role comes with great responsibilities and a knack for healthy supervision and coordination.
Higher-level analysts further get promoted to different positions in financial management which may involve overseeing departmental performances or making credit decisions.