Credit Risk Mitigation is the practice of reducing the likelihood or impact of counterparty default in financial and commercial transactions. In trade and treasury environments, this involves a range of mechanisms designed to protect payment flows, manage exposure, and enable institutions to operate with greater confidence — particularly in cross-border or emerging market contexts.

This can include using credit insurance, reinsurance, guarantees, standby letters of credit, risk participations, and legally enforceable collateral arrangements. These tools allow financial institutions and corporates to transfer or share risk, meet regulatory capital requirements, and support transactions that might otherwise be considered too risky. Effective credit risk mitigation underpins the smooth functioning of global trade and finance, providing the assurance needed to unlock liquidity and manage long-term counterparty relationships.