As a credit manager, you have to know the various types of loans that your company offers businesses and the various benefits it has for clients and the pitfalls, if any, that offering these loans presents to the company. Consider the potential for adverse selection and moral hazard and how risk management can be used as a strategic approach to identify any opportunities or threats.
(25)
Discuss the three most common credit instruments offered by financial institutions and then thoroughly examine which asset would be most effective for a growing logistics company. Provide a practicable reason that demonstrates how this would work.
An attempt has been made to discuss asset financing options offered by the financial institution but does not make any sense or has been copied directly from the study guide.
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An attempt has been made to discuss asset financing options offered by the financial institution but barely plausible.
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Asset financing options have been discussed by student. Research has been done and research level considered. Attempt has been made to consider potential for adverse selection and moral hazard.
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Examine the asset which would be most effective
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No attempt has been made to examine the asset which would be most effective for the institution.
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An attempt has been made to examine the asset which would be most effective for the institution but barely plausible.
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Student has examined the asset which would be most effective for a credit provider that aligns with their institution’s business model. Research has been done and research level considered. Attempt has been made to consider potential for adverse selection and moral hazard.
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Provide a practicable reason
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No attempt has been made to provide a practicable reason of how this asset financing option would work in their setting.
HCBM (B)_CRM_ASG_2023
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An attempt has been made to provide a practicable reason of how this asset financing option would work in their setting but barely plausible.
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Practicable reason that demonstrates how this asset financing option would work in the company’s setting has been provided.
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A thorough and coherent discussion of asset financing options has been provided by the student. Thorough research has been done and research level demonstrated. A clear consideration of potential for adverse selection and moral hazard and the manner in which risk management can be used as a strategic approach to identify opportunities and threats has been provided. Answer also shows that student has drawn information from other courses. A thorough and methodical examination has been done of the asset which would be most effective for a credit provider that aligns with their institution’s business model. Thorough research has been done and research level demonstrated. A clear consideration of potential for adverse selection and moral hazard and the manner in which risk management can be used as a strategic approach to identify opportunities and threats has been provided. Answer also shows that student has drawn information from other courses. Logical and practicable reason that demonstrates how this asset financing option would work in the company’s setting has been clearly provided.
As a credit provider, it is important to have knowledge of all the different external and internal factors, which may affect your company and its operations. One such significant factor is the legal environment. Laws are there to protect you as a business and your customers, and to ensure fair business practices in an industry.
(15)
Go through the Banks Act and the National Credit Act and examine five ways in which both acts affect the laws of contract and agency when entering into a credit agreement with a business.
TOPIC
POOR = 0%-24%
ROOM TO DEVELOP = 25%50%
PROFICIENT = 51%-74%
MASTERLY = 75-100%
CRITERIA Go through Banks Act (BA) and National Credit Act (NCA) and examine how they affect law of agency and contract
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Student has somewhat attempted to go through the BA and NCA but examination of both acts and how they affect the laws of agency and contract makes no sense at all.
QUESTION 2
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Student has attempted to go through the BA and NCA but examination of both acts and how they affect the laws of agency and contract is barely plausible.
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Student has gone through the BA and NCA and examined how both acts affect the laws of contract and agency when entering into a credit agreement. Student has also attempted to consider asset financing options in their examination.
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Student has thoroughly and efficiently gone through the BA and NCA and has carefully examined how both acts would affect the laws of agency and contract when entering into a credit agreement with a client. A meticulous consideration of the financing options offered by the company has been provided.
[15 MARKS]
Using this link: https://www.legallegends.co.za/wp-content/uploads/2022/11/Loan-Agreement-TemplateRedacted-1.pdf Review the sample credit agreement provided and explain if this is a valid contract in terms of its adherence to: 1. Legal requirements, does this document clearly address the concepts of contract and obligation? 2. Consequences for failure to comply with legal requirements 3. The law of contract [Legal Legends.(2022). Loan Agreement Template Redacted. https://www.legallegends.co.za/wp-content/uploads/2022/11/Loan-Agreement-TemplateRedacted-1.pdf. Retrieved January 24, 2023.]
In your own words, explain the following key concepts as they relate to the assessment of creditworthiness: 1. 2. 3. 4. 5.
Screening and monitoring; Long-term customer relationships; Loan commitments; Collateral and compensating balances; and Credit rationing
QUESTION 4
[10 MARKS]
Elaborate on the steps taken before a quotation is given to a customer for a line of credit.
QUESTION 5
[10 MARKS]
“SA banks say latest Debt-IN data breach could have exposed customer data fail” Several South African banks have come forward to indicate that their customers’ data may have been exposed in the latest massive cyber-attack in the South African financial services industry. This comes after debt collector, Debt-IN Consultants, yesterday announced that a ransomware attack by cyber criminals had resulted in a significant data breach of consumer and employee personal information. Debt-IN said data of more than 1.4 million South Africans was illegally accessed from its servers in April this year but the data breach only came to light last week. Confidential consumer data and voice recordings of calls between Debt-IN debt recovery agents and financial services customers have been posted on the dark web. Debt-IN chief executive Mark Essey said they deeply regretted this cyber-attack, and “we apologise unreservedly for the inconvenience and anxiety it has caused”. “We reiterate that we view this attack as the act of malicious cyber criminals,” Essey said. “From the time this data breach was detected, our guiding principle has been to put our clients first, and we will continue to do so.” How do these banking data breach impact on the relationship between banks and their customers. •
Dludla, S. (2021, September 23). SA banks say latest Debt-IN data breach could have exposed customer data. https://www.iol.co.za/business-report/companies/sa-banks-say-latest-debt-in-data-breach-could-haveexposed-customer-data-9ab940a0-6d9e-451e-9a56-7da7a432d57e (accessed 16 March 2023)