Credit Risk (Wahrenburg)

Credit risk is the potential for loss due to the inability, unwillingness or non-timeliness of a counterparty to honour a financial obligation.

Whenever there is a chance that a counterparty will not pay an amount of money owed, there is credit risk.

The event of default requires that the inability or unwillingness to meet the financial obligation persists for a period of time.

The event is preceded by impairment, which requires objective evidence

Events of impairment are key points in the process from risk management and accounting perspectives

The events of impairment and default enable provisions and / or reserves to be taken against the possible loss.