Businesses can employ several strategies to mitigate credit risk:
Diversification: Spreading credit exposure across various borrowers, industries, and geographic locations. Credit Limits: Setting limits on the amount of credit extended to individual borrowers or groups. Collateral Requirements: Requiring borrowers to pledge assets as collateral to secure the loan. Credit Insurance: Purchasing insurance to protect against potential losses from borrower defaults. Regular Monitoring: Continuously monitoring the financial health of borrowers and adjusting credit terms as needed.