What is materiality limit in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: materiality limit

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Limit set in the context of collateral agreements. No payments are made if there is a loss in value that is below this limit.

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• Key Concepts: 
  Materiality limit is a concept used in Credit Risk Management (CRM) in SAP Financial Services (FS-BA-PM-CR). It is the maximum amount of credit that can be extended to a customer without requiring additional approval. This limit is determined by the credit risk manager and is based on the customer’s creditworthiness and the company’s risk appetite. 
  
  How to use it: 
  The materiality limit is used to determine the maximum amount of credit that can be extended to a customer. When a customer requests credit, the credit risk manager will review their creditworthiness and determine if they meet the materiality limit. If they do, then the credit can be approved without additional approval. If they do not, then additional approval must be obtained before the credit can be extended. 
  
  Tips & Tricks: 
  When setting a materiality limit, it is important to consider both the customer’s creditworthiness and the company’s risk appetite. It is also important to review the materiality limit periodically to ensure that it is still appropriate for the customer and company. 
  
  Related Information: 
  The materiality limit is just one part of Credit Risk Management in SAP Financial Services (FS-BA-PM-CR). Other components include credit scoring, collateral management, and fraud detection.