Corporate Credit Assessment

The fundamentals of credit risk assessment do not change but they need to be thoroughly understood and appropriately applied to the prevailing business and banking context.

Our corporate credit assessment courses are based on thorough financial analysis, business assessment and understanding the banking “deal”.

Below is the outline content of a typical course programme in corporate credit assessment. Our courses, however, are tailored to a customer’s specific needs, balancing educational effectiveness, logistical constraints and cost.

Course programmes are tailor-made in terms of structure, and content.

The structure of courses will differ in terms of the overall length, varying from a few days to a longer integrated modular programme with or without pre-course or post-course work.

The content and sequencing of topics will reflect the level of participants’ experience and seniority and will typically incorporate in-house material and case studies.

Corporate Credit Assessment – Typical Course Content

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Review of the Credit Process

Review of the Credit Process
  • credit and relationship management
  • framework for risk analysis
  • lending against assets and cash flows
  • fundamental credit principles
  • credit danger signals

*Introductory case study

Financial Analysis

Financial Analysis – Ratios
Financial Analysis – Ratios
  • role of financial analysis in credit
  • understanding the financial profile
  • margins, cost structure, return on capital
  • working and fixed asset management
  • credit; security and repayment ability

*Practical exercises

Financial Analysis – Cash Flows
Financial Analysis – Cash Flows
  • cash flow quiz
  • role of cash flow analysis in credit
  • technical issues and strengths of cash flow analysis
  • understanding cash flow dynamics
  • cash flow profile of the “ideal” borrower
  • dangerous cash flow patterns
  • sustainability of cash flows

*Practical exercises

Derivation of Cash Flows
Derivation of Cash Flows
  • cash flow summaries from published accounts
  • deriving funds flows from balance sheets
  • replacement capital expenditure
  • working capital dynamics
  • credit; cash cover for servicing and repayment

*Practical exercises

Non-financial Analysis

Introduction to Non-financial Analysis
Introduction to Non-financial Analysis
  • understanding the business environment, the sector, the business and management
  • risk factors and value drivers
  • tools of analysis and subjective evaluations
  • assessment of management
Screening the Business – Environment
Screening the Business – Environment
  • “PEST” analysis
  • product/market life cycle
  • stability of demand

*Practical exercises

Analysis of the Competitive Environment
Analysis of the Competitive Environment
  • “Porter’s 5 Forces” framework
  • cost leadership versus differentiation
  • market environments matrix

*Practical exercises

Lending Structures

“Banking Risk”
“Banking Risk”
  • borrowers, multi-banking, deal structures, credit protection, bank control
  • Case Study
Credit Protection
Credit Protection
  • Case Study
Creative Accounting
Creative Accounting
  • consolidation example
  • note on pensions accounting
  • Case Study
Danger Signals & Problem Loans
Danger Signals & Problem Loans
  • Case Study
Writing Credit Applications
Writing Credit Applications
  • General principles of writing a good, focused, succinct credit application
  • Common weaknesses of poor credit applications
  • Focus on analysis not merely description
  • Identifying key risk issues from the financial analysis
  • Identifying key risk issues from the non-financial analysis
  • Identifying key risk issues from the size and structure of facilities
  • Exercises and case studies
New Lending Proposal Case Study
New Lending Proposal Case Study
  • Case Study preparation
  • Case Study summary
  • Case Study presentations and discussion