The process that is implemented to reduce the credit risk of an exposure (e.g., investment, instrument, contract, etc.) by using techniques such as netting, collateralization, guarantee or provision, or instruments such as credit derivatives.

Credit risk represents the risk of financial loss that arises due to the failure of a customer or counterparty to meet its obligation to settle outstanding amounts as per contractual terms (on a timely basis and in full).

Credit risk mitigation (CRM) constitute the attempts by lenders/ creditors to minimize the risk of losing all or part of their original investment (loans or debt) due to borrowers’ or debtors’ potential default on their interest and principal payments. Mitigation involves the application or deployment of certain safeguards or precautions in advance.