Assessing the credit strength of counterparties can be quite challenging due to the need to create a credit risk assessment model. "The In-Practice Guide: Managing Counterparty Risk in the Supply Chain" sets out a four-part approach to developing an in-house counterparty credit risk assessment model that incorporates operational, financial, and subjective factors.
The guide, a companion piece to "The New Weakest Link in Your Supply Chain," provides practical steps and an illustrative Microsoft Excel-based workbook to help companies:
- Identify critical counterparties
- Determine the proper qualitative and quantitative metrics to assess creditworthiness
- Convert metrics into probabilities and estimates
- Evaluate the results into improved risk management decisions
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