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How to Include Counterparty Risk in Your Analysis
How to Include Counterparty Risk in Your Analysis

Counter-party Risk, Risk Factor, Subjective, Add, Include, CCR, Credit Risk, Market Risk, Contractual Obligation Risk

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Counterparty risk can be considered in the following qualitative sections:

  • Reliance on Key Customers – If a business depends heavily on a few key customers, there's a risk they might default, reduce orders, or stop doing business, impacting revenue.

  • Reliance on Distribution Partners – If a business relies on third-party distributors, there's a risk these partners could fail to deliver, default on agreements, or experience operational issues.

  • Customer Lock-In – If customers are locked into long-term contracts or face high switching costs, counterparty risk may be reduced. However, if a business is overly dependent on locked-in customers, a sudden default or contract termination could have significant financial consequences.

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