What is aggregation approach in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: aggregation approach

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Specifies whether the top-down approach or the bottom-up approach is used.

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• Key Concepts: 
  The aggregation approach in SAP FS-BA-PM-CR Credit Risk Management is a method of combining multiple credit exposures into a single risk exposure. This approach allows for the calculation of a single risk measure, such as the probability of default (PD) or expected loss (EL), for a portfolio of exposures. This approach is used to reduce the complexity of managing multiple exposures and to provide a more accurate assessment of the overall risk. 
  
  How to use it: 
  The aggregation approach in SAP FS-BA-PM-CR Credit Risk Management is used to calculate the overall risk of a portfolio of exposures. The first step is to identify the individual exposures and their associated risk measures, such as PD or EL. These individual risk measures are then combined into a single measure using an appropriate aggregation method, such as the weighted average or the maximum loss approach. The resulting measure is then used to assess the overall risk of the portfolio. 
  
  Tips & Tricks: 
  When using the aggregation approach in SAP FS-BA-PM-CR Credit Risk Management, it is important to ensure that the individual exposures are accurately identified and that an appropriate aggregation method is used. Additionally, it is important to consider any correlations between exposures when calculating the overall risk measure. 
  
  Related Information: 
  For more information on the aggregation approach in SAP FS-BA-PM-CR Credit Risk Management, please refer to the official SAP documentation. Additionally, there are many online resources available that provide further information on this topic.