EXPLORING CREDIT RISKS AND RISK MANAGEMENT IN BUSINESS: A FINANCIAL PERSPECTIVE

Credit risk is a fundamental element of financial risk management, as it involves the risk of a borrower defaulting on their financial obligations, potentially resulting in substantial losses for lenders, companies, and financial institutions. This paperfocuses on the credit risk and its management in emerging economies. Credit risk can manifest in many scenarios, including loans and bonds, trade credit, and financial derivatives. This necessitates that financial institutions and businesses create strong strategies to evaluate, minimize, and keep track of these risks, asfailure to do so can potentially lead to losses and hinder the financial stability of an institution. In the context of today's unstable financial environment, credit risk management is an essential component for enterprises. When a borrower fails to satisfy their financial responsibilities, which might result in possible losses, credit risk is something that can occur. Within the scope of this article, the fundamental aspects of credit risk are investigated, with a particular emphasis on the methods of identification, assessment, and management. An examination is conducted on important tactics such as credit scoring, diversification, and collateral, as well as the significance of these strategies in the business and financial settings. The research also investigates the improvement of credit risk assessments through the examination of the impact that macroeconomic conditions, regulatory frameworks, and technological improvements, notably machine learning, play in the process. The purpose of this article is to illustrate the necessity of a complete risk management strategy by evaluating industry practices and academic research. It also provides practical advice for businesses to limit credit risks and guarantee financial stability in an environment that is becoming increasingly unpredictable