credit risk

**Credit Risk**

Credit risk refers to the potential that a borrower or counterparty will fail to meet their financial obligations as agreed, resulting in a loss for the lender or investor. It is a key consideration in banking, finance, and lending industries, where assessing and managing credit risk helps minimize defaults and protect against financial losses. Understanding credit risk involves evaluating the borrower’s creditworthiness, repayment capacity, and external economic factors that might impact their ability to pay. Effective credit risk management strategies include credit scoring, risk-based pricing, diversification, and continuous monitoring.