How To Fix TPM_THX1421 - Upper limit of effectiveness ratio exceeds specified limit (140)

SAP Error Message - Details

• Message type: E = Error

• Message class: TPM_THX1 - Treasury: Message Class for P-HA

• Message number: 421

• Message text: Upper limit of effectiveness ratio exceeds specified limit (140)

Self-Explanatory Message

Since SAP believes that this specific error message is 'self-explanatory,' no more information has been given.The majority of messages in the SAP system have a message text, however this is frequently insufficient to comprehend or resolve the problem.

To make things easier, more detailed information is frequently added to describe the issue, how to fix it, and the necessary steps or configuration modifications.

Unfortunately, there isn't any extra information in this error notice.

What else can you do?

First, use our AnswerBot below to get a possible cause and solution (requires a premium subscription).

Also, review the in-depth Common Questions & Answers listed below; you could discover a solution there or be able to connect with others who have faced similar challenges.

You can also try searching the SAP support portal (support.sap.com) but you need a special user ID to access it. It is possible that an SAP support note exists that provides additional details about the mistake or even steps for fixing it.

Smart SAP Assistant

• What is the cause and solution for SAP error message TPM_THX1421 - Upper limit of effectiveness ratio exceeds specified limit (140) ?

  The SAP error message TPM_THX1421, which states "Upper limit of effectiveness ratio exceeds specified limit (140)," typically occurs in the context of Treasury and Risk Management, particularly when dealing with hedging transactions or financial instruments.
  Cause:
  This error indicates that the effectiveness ratio of a hedging relationship exceeds the maximum allowable limit set in the system. The effectiveness ratio is a measure of how well a hedging instrument offsets the risk of the underlying exposure. In this case, the upper limit is set to 140%, meaning that the hedging instrument is deemed too effective, which can lead to accounting and reporting issues.
  Solution:
  To resolve this error, you can take the following steps:
  
  
  Review the Hedging Relationship: Check the details of the hedging relationship to ensure that the effectiveness ratio is calculated correctly. This may involve reviewing the underlying exposure and the hedging instrument.
  
  
  Adjust the Hedging Strategy: If the effectiveness ratio is indeed too high, consider adjusting the hedging strategy. This could involve:
  
  Modifying the notional amount of the hedging instrument.
  Changing the terms of the hedging instrument to better align with the underlying exposure.
  Using a different hedging instrument that provides a more appropriate level of effectiveness.
  
  
  
  Check Configuration Settings: Review the configuration settings in the SAP system related to the effectiveness ratio limits. If necessary, consult with your SAP administrator or a functional consultant to determine if the limit can be adjusted based on your organization's risk management policies.
  
  
  Recalculate Effectiveness: After making any adjustments, recalculate the effectiveness of the hedging relationship to ensure it falls within the acceptable range.
  
  
  Consult Documentation: Refer to SAP documentation or help resources for additional guidance on managing effectiveness ratios and hedging relationships.
  
  
  Related Information:
  
  Effectiveness Testing: Understanding how effectiveness is tested and calculated in SAP is crucial. Familiarize yourself with the methods used for effectiveness testing (e.g., regression analysis, dollar-offset method).
  Hedge Accounting: Ensure that you are compliant with the relevant accounting standards (e.g., IFRS 9 or ASC 815) regarding hedge accounting, as these standards dictate how effectiveness should be measured and reported.
  SAP Notes: Check for any relevant SAP Notes that may address this specific error or provide additional guidance on managing effectiveness ratios.
  
  If the issue persists after following these steps, it may be beneficial to engage with SAP support or a consultant who specializes in Treasury and Risk Management within SAP.