Inadequate risk management practices have produced consequences of epic proportions. The subprime meltdown in the late 2000s was primarily driven by insufficient management of credit risk.

 

Mortgage companies issued loans to individuals that lacked sufficient means to repay the loan and/or had poor credit. The global financial crisis brought corporate governance and corporate risk management to the focus of regulators who enacted more stringent guidelines.

For your discussion, think about the following:

• How can organizations identify credit risk?
• What is the significance of identifying and managing credit risk?
• What are the implications of a failure to properly manage this risk?

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In your opinion, which stakeholder is most adversely impacted by the above conditions? Employees, shareholders, debt holders, or society as a whole? Be sure to explain your answer using your thoughts on the above questions.