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Credit Risk Management: How to Avoid Lending Disasters and Maximize Earnings Hardcover – 1 August 2007
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- Publisher : McGraw-Hill Education; 1st edition (1 August 2007)
- Language : English
- Hardcover : 372 pages
- ISBN-10 : 0071446605
- ISBN-13 : 978-0071446600
- Dimensions : 18.8 x 3.05 x 25.4 cm
- Best Sellers Rank: 926,858 in Books (See Top 100 in Books)
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About the Author
JoEtta Colquitt is a professor at Mercy College and FT Knowledge and a professional trainer who has worked in higher education, training firms, and Fortune 500 companies. A specialist in financial credit risk training, she has over 20 years of experience in analyzing international transactions, companies, and risk exposure.
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Commentators repeatedly encourage bankers to go beyond financial statements when issuing credit. If you're unfamiliar with the various ways to analyze an industry, Chapter 6 of this book is a must-read.
Among the frameworks the author describes are:
The Porter Model: How to evaluate the threats of new entrants to an industry, the bargaining power of buyers, the bargaining power of sellers, threats of substitutes, and intensity of rivalry within each industry.
Pestel Analysis: An examination of the Political, Economic, Societal, Technology, Environment, and Legal issues for each industry.
SWOT Analysis: Stanford Research Institute's (SRI) analysis of the Strengths, Weaknesses, Opportunities, and Threats facing each industry.
Industry Life Cycle: How each industry goes from emerging/early development phase, to rapid expansion phase, to growth shakeout and consolidation phase, to mature growth phase, and then stabilizing and declining phase.
Management: The author then asserts, "An industry analysis would not be complete with the assessment of a firm's management."
She summarizes her survey of approaches, "A company's industry dynamics are unique to the fundamental characteristics that drive it. Industry fundamentals vary significantly among individual sectors and are predicated on the industry market environment in which it operates."
As Buffett famously put it, "Beware of geeks bearing formulas." While this book contains a comprehensive discussion of the various quantitative methods of evaluating credit risk, it's her qualitative methods that I found most enlightening.