Putting
a 'cap' on risk
Lending can be risky business. But lendingand leasingis
exactly Boeing Capital Corporation's business. That's why managing risk
is a major objective. The market values any company's earning less when
there's greater uncertainty. Greater stability, though, leads to greater
confidence, better bond ratings, more financial strengthyou get
the picture.
Where does risk come from? Consider these hypothetical scenarios.
An airline's passenger traffic and revenues are up, and it needs
more airplanes. How does the lender value the aircraft to ensure its
value stays above the amount of the loan over the full term of the
loan? FULL STORY >>
Let's talk about risk
Here's a glossary of terms you might hear in risk-management discussions.
Risk management: Understanding and managing the risk or exposures within
Boeing Capital's current or future customer-financing portfolio. Those
risks include a customer's ability to pay, the value of an underlying
asset and the volatility of the market. The risk management process also
can be used to decide whether to divest an asset.
Portfolio: For Boeing Capital, this includes the airplanes BCC owns
and leases, plus outstanding loans or security investments.
Financial exposure: The amount of Boeing or BCC investment or financing
that may be subject to a loss should a customer go into default. If the
investment is in an airplane, for example, it would be any difference
between the amount of the investment and the amount that can be recovered
by BCC's selling or re-leasing the airplane.
Volatility: Variability in the value of assets or the financial health
of customers.Or instability or unpredictability in earnings or portfolio
value.
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