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

SAP Term: percentage expected loss approach

• Component: FS-BA-PM

• Component Name: Processes and Methods

• Description: A calculation procedure for determining risk provision based on imported custom risk provision rates. The risk provision rates are typically assigned using subportfolios and the delinquency status or the rating.

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• Key Concepts: 
  The percentage expected loss approach is a method used in the FS-BA-PM Processes and Methods component of SAP. It is a risk management tool that helps to identify and quantify potential losses that may occur in a project. This approach uses a percentage of the total project cost to estimate the expected losses. 
  
  How to use it: 
  The percentage expected loss approach is used to calculate the expected losses for a project. The first step is to determine the total cost of the project. Then, a percentage of this cost is used to estimate the expected losses. This percentage can be determined based on the risk level of the project and other factors. 
  
  Tips & Tricks: 
  When using the percentage expected loss approach, it is important to consider all potential risks associated with the project. This will help ensure that an accurate estimate of expected losses is calculated. Additionally, it is important to regularly review and update the estimated losses as the project progresses. 
  
  Related Information: 
  The percentage expected loss approach is one of many risk management tools available in SAP FS-BA-PM Processes and Methods component. Other tools include scenario analysis, sensitivity analysis, and Monte Carlo simulation.