What is risk parameter in SAP FS-LRM - Liquidity and Risk Management?

SAP Term: risk parameter

• Component: FS-LRM

• Component Name: Liquidity and Risk Management

• Description: A special kind of variable that quantifies a financial risk which is reflected in a liquidity scenario in order to simulate specific financial situations, e.g. a crisis.

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• Key Concepts: 
  Risk parameter is a term used in SAP FS-LRM Liquidity and Risk Management. It is a numerical value that is used to measure the risk associated with a particular financial instrument or transaction. The risk parameter is used to determine the amount of capital that must be set aside to cover potential losses from the instrument or transaction. 
  
  How to use it: 
  In SAP FS-LRM Liquidity and Risk Management, risk parameters are used to calculate the amount of capital that must be set aside for a particular financial instrument or transaction. The risk parameter is calculated based on the type of instrument or transaction, the amount of money involved, and other factors such as market volatility and creditworthiness of the counterparty. 
  
  Tips & Tricks: 
  When setting up risk parameters in SAP FS-LRM Liquidity and Risk Management, it is important to ensure that the parameters are set correctly. This will ensure that the correct amount of capital is set aside for each instrument or transaction. Additionally, it is important to regularly review and update the risk parameters as market conditions change. 
  
  Related Information: 
  SAP FS-LRM Liquidity and Risk Management also includes other features such as stress testing, portfolio optimization, and liquidity forecasting. These features can be used in conjunction with risk parameters to further manage risk in an organization’s financial instruments and transactions.