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

SAP Term: standardized approach

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Standard method for calculating the capital requirement, as stipulated in Basel II. The standard approach is divided into two methods: the simple standardized approach, and the comprehensive standardized approach.

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• Key Concepts: 
  Standardized approach is a method of credit risk management used in the FS-BA-PM-CR Credit Risk Management component of SAP. It is a risk-based approach that uses a set of predefined criteria to assess the creditworthiness of customers. This approach helps to reduce the amount of manual work required to assess credit risk and allows for more efficient and accurate decision making. 
  
  How to use it: 
  The standardized approach is used to assess the creditworthiness of customers. It uses a set of predefined criteria such as customer financials, industry sector, and other factors to determine the risk associated with a customer. The criteria are then used to assign a risk rating to each customer, which can be used to determine the appropriate level of credit exposure. 
  
  Tips & Tricks: 
  When using the standardized approach, it is important to ensure that the criteria used are up-to-date and relevant. Additionally, it is important to review the criteria regularly to ensure that they are still applicable and accurate. 
  
  Related Information: 
  The standardized approach is just one method of credit risk management used in SAP. Other methods include internal ratings-based (IRB) approach and advanced measurement approaches (AMA). Each method has its own advantages and disadvantages, so it is important to consider which one is best suited for your organization’s needs.