| The
number-one duty of a credit manager
is to make every sale a reality. But,
of course, this doesn’t mean that
credit should be extended on every sale.
Deciding where to draw this line is
an issue credit professionals must deal
with each day. Credit Risk Management,
published by John Wiley & Sons,
reveals the thought processes and decision-making
criteria of credit professionals. Author
H.A. Schaeffer, Jr., a certified credit
executive with 28 years of credit experience,
illustrates his ideas with real-life
case studies. While the book was written
primarily for credit professionals,
it can be used as a supplement for an
upper-level or MBA finance course. The
book is divided into two parts. The
first covers some of the tools that
credit professionals use to arrive
at a sound business decision. Schaeffer
begins with the numerous sources of
credit information, both domestic
and international, and how professionals
must weigh their reliability, soundness,
and cost-effectiveness. The sections
on international sources reflect the
impact of rapid economic globalization
on the credit community.
The book moves on to discuss staples
of managerial finance curricula such
as common-size, trend, and ratio analysis.
Even more useful to students and professors
may be chapter three, where the author
skillfully assembles and organizes
the numerous factors that impact the
business credit decision. The chapter
explains how to assign weights to
the value of different types of information
uncovered through investigation and
evaluation of data. After reading
this chapter, you get the impression
that a mind-set of creativity allows
the successful credit manager to find
solutions where others only see obstacles.
Part one concludes with a review
of the decision-making process that
includes developing alternatives as
a fallback safeguard. This final chapter
covers the issue of a rejected decision
overridden by top management and the
steps to take afterward.
Part two is a collection of 12 case
studies drawn from a seminar developed
by the author. With their detail and
variety, the cases should add to the
knowledge and perspective of credit
analysis and serve to sharpen the
decision-making skills of credit professionals
at all levels of experience. Schaeffer
omits specific facts to make the cases
as true to life as possible—in
many cases credit managers have to
make some assumptions. He supplies
a narrative for each case along with
(if applicable) a credit report, one
bank and three trade references, and
a two-page financial analysis report.
As a rather unique touch, the thought
processes and sometimes contradictory
conclusions of three students from
the seminar follow. The cases conclude
with a summary of their real-life
resolutions.
Credit Risk Management shows readers
how to carry out a credit professional’s
most important directive—maximize
sales yet minimize risks—while
remaining a “team player.”
Aside from the lack of a case study
illustrating the impact of e-commerce
on credit risk management, this book
has no obvious shortcomings and is
recommended for those interested in
the management of credit risk.
J.
Tim Query, Ph.D.
Illinois Wesleyan University
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