CREDIT RISK MANAGEMENT AUGUST 2023 PAST PAPER

TUESDAY: 22 August 2023. Afternoon Paper. Time Allowed: 3 hours.

Answer any FIVE questions. ALL questions carry equal marks. Do NOT write anything on this paper.

QUESTION ONE

1. Explain the following types of credit risks:

Country risks. (2 marks)

Institutional risks. (2 marks)

2. Discuss FOUR factors of production. (8 marks)

3. Define the term “economic conditions”. (2 marks)

Examine THREE reasons why a credit analyst should understand the economic conditions of a country.
(6 marks)

(Total: 20 marks)

 

QUESTION TWO

1. Enumerate FOUR factors to consider during risk identification process. (4 marks)

2. Explain FOUR components of market risk. (8 marks)

3. Describe FOUR factors to consider in evaluating business strategy matrix. (8 marks)

(Total: 20 marks)

 

QUESTION THREE

1. Discuss FOUR reasons for managing credit exposures. (8 marks)

2. Identify THREE ways in which a company could enjoy cost advantage under cost leadership strategy. (6 marks)

3. Explain SIX elements that a credit analyst should consider for comprehensive credit risk management. (6 marks)

(Total: 20 marks)

 

QUESTION FOUR

1. Distinguish between “risk assessment” and “risk management”. (4 marks)

2. Describe FOUR factors that a credit analyst should consider when coming up with credit risk mitigation plans. (8 marks)

3. Explain the acronym, SWOT analysis. (8 marks)

(Total: 20 marks)

 

QUESTION FIVE

1. Explain THREE advantages of using Probability of Default (PD) measurement in risk management. (6 marks)

2. Discuss THREE contents of a risk appetite statement. (6 marks)

3. Desccribe FOUR responsibilities of bank’s risk management committee. (8 marks)

(Total: 20 marks)

 

QUESTION SIX

1. Summarise THREE layers of business risks. (3 marks)

Outline FOUR elements of liquidity policy. (4 marks)

2. State FIVE reasons for efficient credit risk review. (5 marks)

3. Examine FOUR factors that a credit analyst should consider when assessing credit risk of a corporate. (8 marks)

(Total: 20 marks)

 

QUESTION SEVEN

1. Outline FOUR red flags in a credit applicant’s character assessment. (4 marks)

2. Describe FOUR methods of mitigating against challenges of credit risk. (8 marks)

3. Explain FOUR factors that influence market interest rates. (8 marks)

(Total: 20 marks)

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