What is haircut in SAP FIN-FSCM-TRM-TM - Transaction Manager?

SAP Term: haircut

• Component: FIN-FSCM-TRM-TM

• Component Name: Transaction Manager

• Description: A purchase/repurchase price discount on the market value of securities in repo transactions. The spot and forward rates of repo transactions are reduced by the haircut rate. This reduces the payment amount of securities.

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• Key Concepts: 
  Haircut is a term used in the Transaction Manager component of SAP FSCM. It is a risk management tool that allows users to set limits on the amount of credit they are willing to extend to customers. The haircut is the difference between the market value of a security and the amount of credit extended against it. 
  
  How to use it: 
  In order to use the haircut feature, users must first set up a risk profile for each customer. This profile will include information such as the customer’s credit rating, their payment history, and any other relevant information. Once this is done, users can then set a haircut limit for each customer. This limit will determine how much credit can be extended against a security. 
  
  Tips & Tricks: 
  It is important to remember that the haircut limit should be set based on the customer’s risk profile and not on their current financial situation. This will ensure that the customer is not overextended and that their creditworthiness is not compromised. Additionally, it is important to regularly review and update the customer’s risk profile in order to ensure that the haircut limit remains appropriate. 
  
  Related Information: 
  The haircut feature is part of SAP FSCM’s Transaction Manager component, which also includes features such as payment processing, dispute management, and fraud detection. Additionally, SAP FSCM also offers other risk management tools such as credit limits and collateral management.