Differentiate the dimensions of credit risk and their impact on the aggregate economy.
Risk management practices within the financial sector are of particular interest to regulators. This is because the failures within this sector disrupt the functionality of the financial system and derail economic growth and efficiency. A historical reference point is the subprime meltdown of 2007 because it is the most prominent example of a massive risk management failure. In this assignment, you will evaluate the consequences of such a failure.
You have been hired by the board of Financial Leaders to facilitate a presentation on this topic. You must submit the items you intend to cover to the event planner by next week. Your presentation should be in PowerPoint and should address the bullet points below. You must also submit your presentation notes that you intend to use during the presentation using the Notes feature at the bottom of the PowerPoint slides.
- Discuss why credit risk management within the financial sector is so essential.
- Why do you think so many banks failed to properly manage risk prior to the financial collapse?
- What are the consequences of failing to manage credit risk and whom do they affect?
- What measures can banks employ to mitigate credit risks?
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