What is maximum risk in SAP FS-CMS - Collateral Management System?

SAP Term: maximum risk

• Component: FS-CMS

• Component Name: Collateral Management System

• Description: The highest possible loss to the bank, as on the current date and without the consideration of any collaterals, in the event of a default by a borrower. The maximum risk amount is calculated based on the contractual agreement between the debtor and the creditor of the receivable.

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• Key Concepts: 
  Maximum risk is a concept used in the FS-CMS Collateral Management System (CMS) of SAP. It is a measure of the maximum amount of risk that a company is willing to take on when entering into a transaction. The maximum risk is determined by the company's risk appetite and is used to set limits on the amount of exposure that the company is willing to accept. 
  
  How to use it: 
  The maximum risk can be set in the CMS by setting a limit on the amount of exposure that the company is willing to accept. This limit can be set for each transaction or for all transactions in aggregate. The maximum risk can also be adjusted over time as the company's risk appetite changes. 
  
  Tips & Tricks: 
  It is important to remember that the maximum risk should be set at a level that is appropriate for the company's risk appetite. Setting the maximum risk too low may result in missed opportunities, while setting it too high may result in excessive exposure and potential losses. 
  
  Related Information: 
  The maximum risk concept is closely related to other concepts such as credit limits, collateral requirements, and counterparty limits. These concepts are all used to manage and mitigate risk in financial transactions.