What is third-party settlement risk in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: third-party settlement risk

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Describes a particular form of counterparty risk in the trading book from the Basel II perspective. Third-party settlement risk is the potential loss incurred if the counterparty does not make the return payment, even though no payment has yet been made. Third-party settlement risk is a subcategory of settlement risk.

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• Key Concepts: 
  Third-party settlement risk is a type of credit risk that arises when a third party is involved in a transaction. This type of risk occurs when the third party fails to settle the transaction or fails to meet its obligations. It can also occur when the third party does not have sufficient funds to settle the transaction. 
  
  How to use it: 
  The FS-BA-PM-CR Credit Risk Management component of SAP helps organizations manage third-party settlement risk. This component provides tools for assessing and monitoring credit risk, as well as tools for managing and mitigating risk. It also provides tools for analyzing and reporting on credit risk. 
  
  Tips & Tricks: 
  When assessing third-party settlement risk, it is important to consider the financial stability of the third party, as well as their ability to meet their obligations. It is also important to consider the potential impact of any changes in the market or economic conditions on the third party’s ability to settle the transaction. 
  
  Related Information: 
  The FS-BA-PM-CR Credit Risk Management component of SAP also provides tools for managing other types of credit risk, such as counterparty risk, liquidity risk, and market risk. Additionally, it provides tools for managing operational risks associated with credit transactions.