What Does A Leveraged Finance, Senior Credit Risk Manager ACTUALLY Do? #Finance

what is going on YouTube Welcome Back to another CashNews.co so recently I reached out to someone in my network who works in leverage Finance as a Credit risk manager

and I asked them to tell me two of their favorite things about working in their role and two of their least favorite things about working as a Credit risk manager so what we’re going to do today in this new series where I talk about different roles and you know reach out to

people who actually work in the industry and can share some of their pros and cons about their roles today we’re going to talk about the role of a Credit risk manager what they do what you can expect if you’re interested in such a role and then if you stick around

towards the end of the CashNews.co I’ll share with you what they said were their two most favorite things about the role and two least favorite things about working in such a position so with that so also worth mentioning the person is a VP at a global bank and with that let’s get

straight into the CashNews.co quick note if you’re interested in a quick guide or one or two pages I haven’t finished it yet on Leverage Finance and

Credit Risk Management it’s in the link in the CashNews.co description down below the first link and you can get it download it for free so something I’ve created just in case it’s useful for you to print out put it on your wall whatever it might

be in case you’re going for an interview or you just want an overview of the role so that’s in the CashNews.co description down below alright so what is leverage Finance to start

off with so leverage Finance focuses on two things it focuses on providing Debt financing rather than Equity financing so Debt financing to

companies and it focuses on offering financing to companies that have high levels of Debt so offering financing to companies who aren’t in the most stable or financially sound position as a result these types of companies are typically willing to take on more risk in order to

achieve a higher reward so one leverage Finance focus is on Debt financing in order to get leverage you maximize you increase Debt you lever up so you take

on more Debt you borrow more money and then you can you know use that greater sum of money to invest or offer financing and that maximizes or enlarges the potential returns and two you’re focusing on companies that have high levels of Debt so they are

typically willing to take on more risk and have a higher risk profile compared to companies who don’t have as much Debt on their Balance Sheets now the financing in leverage text-decoration: none;">Finance offered to companies can be used for Mergers can be used for Acquisitions can be used for Leveraged Buyouts corporate restructuring so on and so forth but what exactly does a Credit risk manager specifically do

in this role so let’s go through them all right first things first they do a lot of Credit analysis so what is Credit analysis Credit analysis is when they are doing research into the Credit worthiness of the potential

borrower so let’s say you are the Credit risk manager that I reached out to and they are they’ve got a client that’s come to them to borrow some money right so they’re not just going to give them the money actually a better example let’s say I go to

the bank and I want to take out money for a mortgage they’re going to do background checks they’re going to check my Credit worthiness they’re going to see if I can pay them back the money that I’m going to borrow plus interest right and so the

Credit risk manager is responsible for doing that research that background Credit worthiness research on the client so that they know if their Bank gives them money they’ll be able to pay it back plus the interest and all the other terms that they agree to so

they do a lot of background checks on top of this as part of Credit analysis they are going to have to look into the inner workings of the company that wants to borrow money so what does that mean they’re going to need to look at the Financial Statements

Cash Flow projections uh industry Trends you know is now a good time for this type of company in a particular industry to borrow money or is it a bad time is the industry going for a negative Trend or is it going for a positive trend what do the you know forecasts for

Revenue look like five ten years down the line for this type of company all these types of things they need to do in order to analyze the Credit worthiness of the client that wants to borrow money and the reason for that essentially is you don’t want to give

out your bank’s money to a client who’s not going to pay you back so once the Credit analysis is done they’re going to do a Risk Assessment so what this focuses on is industry Dynamics market conditions and most importantly the specific terms of

the financing agreement so two parties are coming together right and there’s going to be lots of terms if we give you this much money you’re going to pay back this much plus this blah blah blah blah blah all these specific terms so the specific terms are very important because the bank

needs to make sure they are getting a good deal someone’s come to them for money they need to make money or make fees from it right and so the specific terms of the agreement is very important and that falls into the Risk Assessment you don’t want to give terms that

benefit the borrower so much so that it doesn’t benefit the lender and so the Risk Assessment will identify if the agreements that the client has come to you with are worth pursuing or not next we’ve got due diligence so due diligence just means basically tons of

background research so if I am applying to a job at an investment bank and I get the offer they’re going to hire another company to do a background search on me they search if I’ve got a criminal record um just anything and everything on my background so similarly the

Credit risk manager is going to do tons of due diligence on a company that wants to borrow money why are they going to do that let’s say a client comes to you to borrow money you give them money and then they go and spend that money two weeks down the road or two months down

the road you find out that they are funding terrorism or they’re funding something that isn’t ethically right or that you don’t agree with and so it puts your company your bank at risk the last thing you want to do is fund a borrower and end up on the front page of the financial

times for the wrong reason and that’s why very important to carry out due diligence so you know who you’re lending your money to you don’t want to just lend your money to anyone and everyone it’s important that you pick your clients wisely and that’s where due

diligence comes in over time let’s say I’m a Credit risk manager I’m going to work on lots of different deals and transactions and financing offerings right and so over time I build up a Portfolio of these deals that I’ve worked on now

it’s not like I do a financing transaction and it ends just there because these clients are borrowing money over 5 10 15 20 plus years they are going to stick around for a long time and so over time I or the Credit risk manager would go back into you know these different

deals that they’ve done and just see how they’re getting on is the borrower keeping up with their payments has anything changed in the market or with respect to the borrowers financial position that is going to impact the bank or our bank from getting the money that we’re owed the

reason to do the Portfolio management is just to ensure that you’re mitigating any risk so you’re keeping an eye on your previous deals so nothing so it’s never too late and then you look back and something’s gone there’s like a Madness going on and

you can’t fix it so you don’t lose out on money and you get what you owed and you just gotta manage the Portfolio so that you are not at risk of losing out for the bank basically if an issue does arise for example you would address it there might be penalties in the

contract this goes back to the specific terms of each deal but yeah the purpose of assessing or monitoring borrower performance is so that nothing goes belly up and just ruins a potential deal Credit Risk Managers also have to collaborate with other employees in the organization

this is very important they work closely with relationship managers sales people they work closely with people in Compliance legal all these contracts that are getting drawn up they need to work closely with them the legal team so on and so forth so in your role you’re going

to be working with lots of different people a lot of different people are going to be coming to you because you’re the expert on all things Credit risk right so anytime there’s a borrower anytime anyone needs advice on the Credit

href="https://cashnews.co/markets" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Markets or Credit risks specifically they’ll come to you because you’re the expert and you can give your expert advice knowledge to different teams different

individuals across the universities so that’s another component of the role last but not least Compliance and regulation so the industry is always going to be changing borrowing and lending is going to have lots of rules and regulations which are always adapting changing

progressing regressing and so it’s important for you as a Credit risk manager to kind of stay up to date with what’s going on in the Markets keep up to date with

the latest regulations so it requires a lot of reading so you’re up to date on the latest legislations and rules and regulations so that when you are working on your next transaction or deal you are up to date with what’s most relevant and most recent so you’re not so you

don’t fall behind basically so there’s a lot of staying up to date that’s needed sorry if that was long-winded but those are some of the key components of what a Credit risk manager in leverage #1a73e8; text-decoration: none;">Finance does now let’s go on to the two favorite things about the role that I asked the person who works in Credit Risk Management as a VP at a big bank and their two least favorite things all right so I’ve got them

here two favorite things all right the first one is intellectual curiosity you really get under the Bonnet to understand how a business works and your job is to identify the risks and assess the likelihood and how they may result in the business defaulting on their obligations the variety in

businesses is vast so you get to work with lots of different businesses different businesses of different sizes different Industries different regions one day you might work with a big

tech company the next day you might work with a toiletries company for example so it really does vary and they are all unique you will always be learning something new so if you’d like to be challenged intellectually and constantly learning something new that’s one of the pros the

second favorite thing they mentioned is purpose accountability and being empowered you’re responsible for what you’re responsible for making lending decisions which must be balanced between risk and gains with implications for your shareholders the businesses you lend to their employees

customers and Beyond that’s a good point so you know if you’re the key person making Credit risk or Credit lending decisions you hold the key to offer money to these organizations that need it as a result uh that organization can use that money to grow

to release new products to you know keep its shareholders happy it grows as a result of your financing offers new products it means it’s employees are happy its customers are happy and so because of your One Lending decision you have a lot of impact so you do get a lot of responsibility and

power being in such a position so that’s the second benefit they’ve mentioned all right two of their least favorite parts of the role first is the intensity it can be very intense and demanding as transactions are pressured by time and competition with a significant amount of

information to absorb and decisions to be made so this is basically alluding to the fact that a client might come to you with a request we want to borrow or x hundred thousand dollars or x million pounds whatever it is and they will specify their terms right so they’ve come to you you might

be working on you know all right let’s see let’s assess this uh is it worth us working on this but keep in mind that client has also probably gone to two or three or four other different banks with the same proposal and so obviously each Bank including yourself wants to win this

business because you get a fee you get interest payments whatever it is you make money from it and so a lot of work needs to be done and it needs to be done in a timely fashion so there’s a lot of pressure tons of information you need to gather analyze research due diligence all of that uh

and off come come up with a with the best offer uh do it within the deadline and then hopefully win that business and you’re competing with other top Banks so it’s very competitive and then the last point they mentioned the least favorite thing uh another least favorite thing is the

ambiguity and uncertainty so zero risk does not exist and we can’t crystal ball gaze for all potential unexpected risks example is covet there is also no one clear right or wrong answer you can only make decisions based on the information you have at that point in time you will have to deal

with the sense that your assessment might be flawed in this type of role there’s no perfect solution there’s no right or wrong answer there’s going to be tens of hundreds of different solutions that might work for the client and even if you think you’ve got the best solution

you could put it forward and then covet happens or you know there’s a recession or the market cycle changes and so all these external factors can just flip the script and so the best you can do is carry out your Credit analysis Risk Assessment due diligence

all these things to the best of your ability stay up to date with what’s going on from a regulatory perspective and then offer your best proposal to the client and then you know if something does happen like covid then you’ve got to be on the ball and you know act accordingly um but

yeah I guess that’s part of the exact treatment of such a role you’re not kind of going into the role and doing the same thing every single day each client is different it brings its own challenges I’m talking like I’ve done the role I haven’t done the role but you

know hopefully it’s clear and you’re understanding what I’m talking about anyway that was the overview and two most favorite and two least favorite things of a Credit risk manager and leverage #1a73e8; text-decoration: none;">Finance working at Big Bank who’s a VP next week or the next CashNews.co in this series is going to be on Equity research so I’ve reached out to VP in Equity research at a bank and this is where you can get involved

as well let me know in the comments down below which role which seniority which bank which person which division whatever it is more specifically which role you want me to cover in a future CashNews.co and I’ll add it to the list in the series because I realize look I’ve got lots of

people in my network in the industry and I think it’s useful to do this type of CashNews.co where you know get information from them and put it out in a CashNews.co most times they will want to be anonymous because Compliance at Banks don’t want people to talk on

YouTube or for whatever reason some of them are more happy more than happy not to be anonymous and so I might do interviews but we’ll see about that either way let me know in the comments what roles you want me to do next and I will see you in the next CashNews.co thanks for making it to the

end give the CashNews.co a thumbs up with that peace