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Risk Management Types 9

Managing Risk

Mitigating credit risk Involves four main strategies

RISK AVOIDANCE

When an MFB decides to avoid some business with risk element or totally cancel it. It has been able to avoid the consequences of having to incur some loss (es) which would have been devastated to the organization. Policies that assist the MFB to avoid risk situations are also what should be introduced so as to guide in decision making

RISK REDUCTION

One of the best risks reducing strategy is to diversify the MFBs solution into mix, products, markets and areas or region. This limits the risk of concentrating an MFB portfolio in a single area.
Other risk reduction strategy includes decision-making meant to improve accuracy of policies which are aimed at reducing failure rate for the MFB.

RISK TRANSFER

MFBs can get insurance for their loans and customers business through insurance companies or agencies. This lets them transfer risk other professional organizations whose take responsibility in event of loss. Risk transfer process should be carefully analyzed before engagement in other to avoid the technicalities underlined in the agreement.

RISK ACCEPTANCE

This is also known as risk retention in which no action is undertaken by the MFI to address the risk before or after its occurrence because of the level of its impact and the fact the risk has been accepted.

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