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Credit Decision Making: Is it Art or Science?
A credit executive in today's competitive marketplace understands that business credit decision-making is part art and part science. All the tools available cannot take the place of experience. It is essential to possess a fundamental, analytical approach to the credit decision process. In the 1970s and the 1980s, many international transactions were accomplished on a secured basis, e.g., letter of credit. However, expanded markets and elimination of trade barriers have caused credit professionals to look at a variety of ways to complete the sale.
The "art" form of the credit process includes an understanding of how different country's culture and negotiation process become part of the arsenal of tools in making an intelligent decision. How the culture of each country or region impacts the credit risk is material to the ultimate business decision.
The answer to the question asked in the title is: Credit Risk Management and Credit Decision Making is part science and part art. That said, the more disciplined the approach to decision-making, the better the decisions will be.
Edited by Michael C. Dennis, author of "1001 Collection Tools and Tips."