Objectives The purpose of this study is to find out how risk assessment can be used to minimize the losses that are occasioned by the risk and insecurity which are inherent of bad commercial loans that are extended to small and medium enterprises. This paper will discuss points that outline the good practices that risk assessment aims to accomplish. Using risk assessment to spot latent frauds Knapp and Knapp (2001, 28) state that: “explicit fraud risk assessment instructions resulted in more effective assessments of the presence of fraud” when it was carried out in the procedures that were used to analyze the possibility of fraud in financial statements. Risk assessment should, as a result be used to dig deeper into scenarios that may look satisfactory in the rating of credit worthiness, but whose particulars may not correspond to the prevailing economic environment of the SME or its financial standing in the concerned industry. Using risk assessment to predict the insolvency of an SME Risk assessment can employ predictive scoring to group SMEs into different credit categories. The category that has the lowest score is generally considered as the one posing the greatest risk of issuing slow payments and the one that can easily fall into bankruptcy (Dichev, 1998,1135 ). The lowly rated SMEs would call for a more assertive follow up on their payments and even an outright suspension of their accounts to avoid being burned with a bankrupt customer. Using risk assessment to make good use of technology Risk assessment should employ predictive scoring together with technological tools to create a more accurate picture of credit retrieval outcomes. Automated assistive technologies enable the bank to undertake comprehensive analysis of their accounts on a repetitive basis, and at the same time increase the overall efficiency without a corresponding increase in the costs. Using risk assessment to avoid uneconomical credit evaluations Risk assessment should be used to avoid the traditional approach of undertaking manual assessments of credit applications. These can easily be manipulated and more likely to become subjective, as the applicant is more likely to paint a particular credit picture with inaccurate data. Using risk assessment to avoid undertaking bad debt from established SMEs Existing customers who have passed the initial credit risk assessment procedures may fall into lower credit ratings due to the highly fluid nature of business environments. These SMEs pose risks to future credit relationships with banks and should be constantly monitored for risk. Methodology This paper discussed how risk assessment should be used by commercial banks to minimize the risks and uncertainty that is occasioned by bad commercial loans that are extended to SMEs. Risk assessment is an important part of risk management as it predicts potential bad credit of a small and medium sized enterprise and can also be used to forecast the occurrence of a loan default. This study has shown that the prediction of bad credit is important because it enables better use of a financial institutions monetary resource, and enables them to be channeled to those SMEs that would enable good business to be possible. Due to the recurring of financial crises, for exam