Role of Financial Flexibility in Enabling Banks to Face Credit Risk an Applied Study on a Sample of Iraqi Banks

The study seeks to show the impact of financial flexibility in reducing credit risks in Iraqi banks, in light of the volatile operational and financing environment. A number of financial indicators were used to measure financial flexibility, (cash flow, leverage, and liquidity), while credit risk was used to measure four indicators, (employment index, non-performing loan coverage index, capital-linked credit risk index, and credit leverage ratios index). Using the data of sample of Iraqi banks, represented by (7) banks, which were selected for the availability of their financial data to cover the research years for the period (2015 to 2024), and the research hypotheses were tested using the statistical program (SPSS V.23), and the study reached a set of conclusions, the most important of which are: the existence of a correlation and the impact of is statistically significant between financial flexibility and low levels of credit risk, which indicates that enhancing financial flexibility contributes to raising banks' ability to manage credit risk efficiently. The study recommended banks should develop an investment policy that helps them stabilize their cash flows, use hedging in granting credit, maintain an acceptable level of flexibility, and adhere to instructions issued by the Central Bank of Iraq related to (cash flow ratios, leverage, liquidity, employment, and coverage of non-performing loans) to be able to maintain a level of financial flexibility that enables it not to be exposed to credit risks and bankruptcy.