Written by Student Reporter, Evita Sonny (Management 2020)

“Every business has their own inherent risk. And a good business, has to do improvement each day. We can not stay in the same place from year to year. Therefore, we should manage to take risks to improve,” Sandra Heliola said. Sandra Heliola is an expert in this matter since she has 24 years experience as credit manager at CIMB Niaga Bank. On 24th February 2020, Sandra Heliola shared her experience in front of SBM students about credit management in Business Risk and Venture Capital class.

There are four nature of risks. They are dynamic, meaning risk follows at the speed of business movement. It also intensity, surely risk has severity or strength of the impact of risk. Risk also has a changeable impact and has a very high dependency between one risks with another risk.

Actually, there are many kinds of risks which all companies have facing. They are credit risk, market risk, liquidity risk, operational risk, law risk, reputation risk, strategic risk, and compliance risk. Credit risk is the potential loss due to the counterparty not fulfilling its obligations. Activities that create credit risk are lending (mortgage, loan, terms payment), treasury (option, swap, forward transaction), investment, and trade financing (letter of credit).

The system of credit risk management is cyclical. First is the credit application, then proceed with credit analyzed, credit approval, credit administration, monitoring, and recovery problem loan. After all processes are complete, it will return to the initial step all over again. There are also five important credit elements, among them are: trust, period, risk, revenue, and agreement. Credit management then divided into three kinds of risk. They are payment default risk, exposure risk, and recovery risk.

To mitigate the payment default risk, credit management usually uses 5C analysis. 5C has stands out for Character, Capacity, Capital, Collateral, and Condition. Character is rated from the historical records, willingness to pay, and moral hazard. Capacity is confirmed by current ratio, cash, efficiency, and other financial ratio. Capital has been checked by debt to equity ratio and loan amount. Collateral is considered by checking the collateral legal status and collateral liquidity. Last is condition, it rated from the macro conditions and external intervention.


Exposure risk is about the portfolio concentration. It contains attractiveness, diversification, and expertise. A good lender should have a good industry prospect, good supply and demand, nice industry structure, as well as a favorable competition.

The third credit management risk is the recovery risk. It is discussing collateral risk, third party guarantee risk, and legal risk. For collateral risk, it is usually measured by the liquidity, execution, legal status, and fluctuation in asset price while legal risk is checked by debt rescheduling and debt to equity swap.

“For 24 years I have worked at a bank, I am sure if the all procedure has all made up well, there will be no NPL (Non Performing Loan). NPL is technically caused by only two things. Either the process is not doing well or there is fraud within the process. Thus, we must be very careful in managing this credit risk. First thing first, we must gain the trust,” Sandra concluded.