What is order of seniority in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: order of seniority

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Multiple collateral agreements can be assigned to one asset. The order of seniority is in this case the order used in a fictitious liquidation and in which multiple collateral agreements liquidate one common asset or part of one asset.

Smart SAP Assistant

• Key Concepts: 
  Order of seniority is a concept used in Credit Risk Management (CRM) within the Financial Services (FS) Business Application (BA) Project Management (PM) component of SAP. It is a way of determining the order in which creditors are paid in the event of a default. The order of seniority is based on the creditor's legal rights to repayment and is determined by the terms of the loan agreement. 
  
  How to use it: 
  In SAP, order of seniority is used to determine which creditors should be paid first in the event of a default. This information is used to calculate the expected loss for each creditor and to determine the amount of capital that must be set aside to cover potential losses. The order of seniority can also be used to determine which creditors should receive priority when distributing assets in a bankruptcy or liquidation. 
  
  Tips & Tricks: 
  When setting up an order of seniority in SAP, it is important to ensure that all creditors are included and that their legal rights are accurately represented. It is also important to ensure that any changes to the order of seniority are properly documented and communicated to all parties involved. 
  
  Related Information: 
  Order of seniority is closely related to other concepts such as subordination, priority, and collateralization. Subordination refers to the process by which one creditor agrees to accept a lower priority than another creditor in the event of a default. Priority refers to the order in which creditors are paid in the event of a default, while collateralization refers to the use of assets as security for a loan or other debt obligation.