What is full expected loss approach in SAP FS-BA-PM - Processes and Methods?

SAP Term: full expected loss approach

• Component: FS-BA-PM

• Component Name: Processes and Methods

• Description: A calculation procedure for determining risk provision. It uses the complete calculation process to determine the expected loss, including the collateral distribution based on the Basel II infrastructure. In contrast to this, the percentage expected loss approach uses a simplified calculation procedure.

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• Key Concepts: 
  The full expected loss approach is a method used in the FS-BA-PM Processes and Methods component of SAP. It is a risk management technique that helps to identify and quantify potential losses that may occur in a given situation. This approach takes into account all possible scenarios and their associated risks, allowing for a more comprehensive assessment of potential losses. 
  
  How to use it: 
  The full expected loss approach can be used to assess the potential losses associated with a given situation. This approach requires the user to consider all possible scenarios and their associated risks, and then calculate the expected loss for each scenario. The total expected loss is then calculated by summing up the individual expected losses for each scenario. 
  
  Tips & Tricks: 
  When using the full expected loss approach, it is important to consider all possible scenarios and their associated risks. This will help ensure that the total expected loss is accurately calculated. Additionally, it is important to consider any external factors that may affect the potential losses, such as changes in market conditions or changes in regulations. 
  
  Related Information: 
  The full expected loss approach is closely related to other risk management techniques, such as value at risk (VaR) and stress testing. These techniques can be used in conjunction with the full expected loss approach to provide a more comprehensive assessment of potential losses. Additionally, the full expected loss approach can be used in conjunction with other financial analysis techniques, such as discounted cash flow analysis, to provide a more accurate assessment of potential losses.