What is exposure band in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: exposure band

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Part of a scale for the loss at default at business partner level. The loss at default divided by the loss unit, rounded to the next natural number determines to which exposure band a business partner is assigned. In Default Mode Credit Portfolio Model, the calculations can be discretized into exposure bands, or they can be continuous.

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• Key Concepts: 
  Exposure band is a feature of the Credit Risk Management component of SAP Financial Services Business Applications (FS-BA-PM-CR). It is used to define the risk level of a customer or counterparty based on their credit exposure. The exposure band is determined by the customer's credit rating, the amount of credit they have been granted, and other factors such as their payment history. 
  
  How to use it: 
  The exposure band is used to determine the risk level of a customer or counterparty. This information can then be used to set appropriate credit limits and determine the terms of any credit agreements. The exposure band can also be used to monitor customer activity and identify any changes in their risk profile. 
  
  Tips & Tricks: 
  It is important to regularly review and update the exposure band for each customer or counterparty. This will ensure that the risk level is accurately reflected and that any changes in their risk profile are identified quickly. 
  
  Related Information: 
  The Credit Risk Management component of SAP Financial Services Business Applications (FS-BA-PM-CR) also includes features such as credit scoring, credit limit monitoring, and collateral management. These features can be used in conjunction with the exposure band to further manage customer risk.