Portfolio Risk Identification and Mitigation Proposal

Context

You are evaluating a commercial/corporate lending portfolio. Assume you have loan-level data with: obligor ID, sector/industry, region, facility type, exposure at default (EAD), probability of default (PD, 12m), loss given default (LGD, downturn), maturity, collateral type and loan-to-value (LTV), rate type (fixed/floating), coupon/spread, covenant quality score, rating, and historical performance. You can run simple stress scenarios (e.g., GDP −2%, rates +300 bps, CRE prices −20%).

No raw dataset is provided; make reasonable, clearly stated assumptions. Use small numeric examples to justify your decisions.

Task

1. Identify the top five risk exposures in the portfolio (e.g., single-name concentration, sector/geography, collateral/LTV risk, covenant risk, interest-rate sensitivity, refinancing walls, FX mismatch, etc.).
2. For each exposure, propose specific mitigation actions (e.g., collateral adjustments, covenants, limits, hedging, pricing changes, sell-down/participations, risk transfer).
3. Justify each recommendation with quantitative and qualitative evidence (e.g., EL/UL/EC contributions, stress impacts, concentration indices, industry outlook), including formulas or small numeric examples where helpful.
4. State any assumptions and describe how you would validate the effect of your mitigations (monitoring, backtests, scenario checks).