Evaluating credit risks across the Asian portfolio

April 20203 min readFinancial InclusionRisk

Hong Kong-based Béatrice Pradel is the regional credit officer for financial institutions in Asia. Covid-19 finds her closely monitoring exposures as financial institutions in India shut down and Chinese portfolio companies re-open their branches.

Working out of Hong Kong, you were affected by Covid-19 early on. How did you readjust your working routine?

Yes, it’s been a while! My children have been home from school since the end of January. Since the Hong Kong government had advised work from home since the end of January, I have installed myself at my husband’s office, a few minutes’ walk from our home. This allows me to work without being disturbed but see my family over lunch – the nice side of this situation.

How does the Covid-19 situation impact your work?

The Credit Analysis and Risk Management teams are closely monitoring the situation. We are more cautious with investment decisions that, under normal circumstances, would be fairly standardized. This is equally true for most portfolio companies who are busy figuring out how Covid-19 will impact their activities. Our portfolio companies are at different stages: while most of them are adjusting to restrictions imposed – India declared a full lockdown last week – Chinese institutions are going back to business. In February, one Chinese counterparty had to close all branch offices; as of today, they are at 90% operational and disbursing new loans again.

“We are more cautious with investment decisions.”

Béatrice Pradel

What keeps you busy under these circumstances?

I am doing a lot of stress testing, evaluating the risk that our investees may not be able to fulfill their obligations under different scenarios. I started off with the most affected geographies: China, obviously, but also Cambodia or Mongolia. I’m now expanding the scope to all of the markets I am looking after, especially keeping a close eye on developments in India, Sri Lanka and Indonesia.

Are there any learnings from this extraordinary situation?

In this crisis, the value of pro-active communication is becoming very apparent. I am amazed at how well some of our portfolio companies are handling the situation by keeping us constantly updated on what’s happening at their end, sometimes in a very detailed way. While Covid-19 is what it is, this is creating a lot of trust in that financial institutions are responsibly handling the situation – for themselves and, above all, for their clients who often are among the most vulnerable parts of the population.