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Working Capital Management
Notes Risks: Risks are usually defined by the adverse impact on profitability of several distinct sources
of uncertainty.
Unexpected losses: Unexpected losses are those associated with unforeseen events.
5.7 Review Questions
1. What is risk? Discuss risk management.
2. Write down the functions of risk management.
3. What are the various categories of risk?
4. Describe credit risk.
5. What are the tools of credit risk management?
6. What are the principles for the management of credit risk?
7. Briefly explain the approaches to credit risk measurement.
Answers: Self Assessment
1. Risks 2. Liquidity
3. True 4. True
5. True 6. True
7. Portfolio 8. Risk management
9. Unsystematic 10. Credit Metrics
11. True 12. True
5.8 Further Readings
Books Caouette, Altman, and Narayanan (1998), “Managing Credit Risk: The Next
Great Financial Challenge”, John Wiley & Sons, New York
Saunders (1999), “Credit Risk Measurement: New Approaches to Value at
Risk and Other Paradigms”, John Wiley & Sons, Inc.
Simon Hills (2004), “Explaining Credit Risk Elements in Basel II”, in The Basel
Handbook: A Guide for Financial Practitioners, (Ed.,) Michael Ong, Risk Books
Subramanian and Umakrishnan (2004), “Is Bank Debt Special? An Empirical
Analysis of Indian Corporates”, Economic and Political Weekly, Vol. XXXIX,
No. 12, March 20, 2004
Online links www.bis.org/
www.creditriskmgt.com
www.crisil.com
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