> ## Documentation Index
> Fetch the complete documentation index at: https://docs.axcess.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Risk Management

Axcess manages credit risk as a sequence of protections. Each stage addresses a different point in the life of a facility, and each later stage matters only to the extent the earlier ones have not been sufficient.

```mermaid placement="top-right" actions={false} theme={null}
flowchart LR
    A["Underwriting and Onboarding"] --> B["First-Loss Buffer"]
    B --> C["Monitoring"]
    C --> D["Delinquency and Termination"]
    D --> E["Recovery"]
```

## The Five Stages

**1. Underwriting and Onboarding**

**Before any capital is committed.** The borrower is independently assessed. Under the Credora Path, a three-pillar assessment produces a grade from A+ to D, and a borrower graded below C is not offered a facility. The grade also sets the size of the first-loss buffer.

**2. First-Loss Buffer**

**Before any capital is drawn.** The borrower transfers its own capital to the Issuer. Under the Credora Path, the amount is between 10% and 25% of drawn principal, according to the borrower's grade. No draw is processed beyond what the posted buffer supports. The Issuer owns this capital outright, and it stands ahead of lenders if the borrower defaults. See [First-Loss Buffer](https://docs.axcess.finance/first-loss-buffer.md).

**3. Monitoring**

**Throughout the life of the facility.** The vault tracks payment obligations on-chain. Separately, the borrower's solvency is read approximately every hour through a read-only exchange API and classified into one of four contractual states, each with a defined response. Where supported, solvency statements are attested through Reclaim Protocol and published on-chain for independent verification. See [Monitoring](https://docs.axcess.finance/monitoring.md).

**4. Delinquency and Termination**

**When an obligation is not met.** A payment shortfall stops new draws and deposits and, after a grace period, triggers penalty interest. An Event of Default accelerates the debt. A termination fixes the value of lender positions and begins an orderly wind-down. See [Delinquency and Termination](https://docs.axcess.finance/delinquency-and-termination.md).

**5. Recovery**

**After a default.** Recoveries are applied in a fixed order: the first-loss buffer, then undrawn funds in the vault, then legal enforcement against the borrower. Lenders share recoveries in proportion to their claims, regardless of when they claim. See [How Recovery Works](https://docs.axcess.finance/recovery.md).

## What Each Stage Provides

| Stage | Protection | Governed by |
| :- | :- | :- |
| Underwriting and Onboarding | A third-party credit view and, under the Credora Path, an eligibility floor. | Master Loan Agreement and Credora's methodology |
| First-Loss Buffer | Borrower capital that is owned by the Issuer and legally committed to lenders ahead of any loss. | Title Transfer Collateral Agreement and First-Loss Signing Mandate |
| Monitoring | Early warning, with defined responses to deterioration. | Master Loan Agreement and the vault contract |
| Delinquency and Termination | Defined consequences for shortfalls and defaults, and a controlled wind-down. | Master Loan Agreement, Note Subscription Agreement, and the vault contract |
| Recovery | An ordered set of recovery sources and equal treatment of lenders. | Master Loan Agreement, Title Transfer Collateral Agreement, and Note Subscription Agreement |

The stages describe the lifecycle of the protections, not a path that every incident must follow. An insolvency, for example, is an immediate Event of Default whatever the most recent monitoring state.

These protections reduce risk and define how a loss is handled. They do not remove the risk of delay or loss. The [Risk Disclosure Statement](https://docs.axcess.finance/risk-disclosure-statement.md) sets out the risks that remain.


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