What is loss equivalent in SAP FIN-FSCM-TRM-CR - Credit Risk Analyzer?

SAP Term: loss equivalent

• Component: FIN-FSCM-TRM-CR

• Component Name: Credit Risk Analyzer

• Description: The share of an external committed line that is unused, but which you expect to be drawn upon at the time of the business partner's default.

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• Key Concepts: 
  Loss equivalent is a term used in the Credit Risk Analyzer component of SAP's Financial Supply Chain Management (FSCM) module. It is a measure of the expected loss that a company may incur due to a customer's default on a loan or other financial obligation. The loss equivalent is calculated by taking into account the probability of default, the amount of the loan, and the expected recovery rate. 
  
  How to use it: 
  The Credit Risk Analyzer component of SAP FSCM allows users to calculate the loss equivalent for a given customer or loan. To do this, users must enter the customer's credit score, the amount of the loan, and the expected recovery rate. The Credit Risk Analyzer will then calculate the loss equivalent for that customer or loan. 
  
  Tips & Tricks: 
  When calculating the loss equivalent for a customer or loan, it is important to consider all factors that could affect the expected loss. This includes not only the credit score and amount of the loan, but also any additional fees or charges associated with the loan, as well as any potential changes in market conditions that could affect the expected recovery rate. 
  
  Related Information: 
  For more information on how to use SAP FSCM's Credit Risk Analyzer component to calculate loss equivalents, please refer to SAP's official documentation on the topic. Additionally, there are many online resources available that provide detailed explanations and examples of how to use this feature.