With the global markets in the grip of severe financial crisis, the demand for credit analysts and risk managers is on an upswing. This is because in these uncertain times, companies across sectors want a thorough analysis of the financial health of corporations.
Credit analysis is the method by which one calculates the creditworthiness of a business or organisation. Credit analysts are employed by banks (commercial and investment), credit rating agencies, mutual funds, private equity firms and NBFCs (non-banking financial companies).
Says Naresh Thakkar, Managing Director, ICRA: “Credit analysis offers a variety of career opportunities within the increasingly diverse financial services sector. Credit analysts help these institutions make calculated decisions on lending money or making investments.”
At the micro level, the analysts assess the creditworthiness of various small and mid-size businesses. After analysing the companies’ financial statements, the analysts submit reports to the issuers—in most cases either a bank or an NBFC— and based on these reports, the banks take decisions on whether to sanction or renew commercial loans to those businesses.
Says Mohit Mohan, Managing Director, Gilbert Tweed Associates, a leading executive research firm: “Credit analysts create risk profiles of companies on the basis of their balance sheets, credit histories and past transactions.”
These professionals also sit with key management teams in order to evaluate the other risks involved, following which, they prepare a detailed report about the company, and based on this report, various types of lending decisions, from the straightforward to the very complex, are taken. Similarly, credit analysts hired by I-banks, MFs and PE funds help firms make informed investment decisions.
Credit rating agencies also hire risk managers and credit analysts in large numbers. Says Deshraj Dogra, Deputy Managing Director, CARE Ratings: “Whenever a company wants to raise money from the market, it needs credit rating agencies to rate those securities or papers. After the assessment is done, credit analysts certify the papers by giving them various grades depending on the risk involved.”