What is counterparty/issuer default risk in SAP IS-B-RA-CL - Default Risk and Limit System?

SAP Term: counterparty/issuer default risk

• Component: IS-B-RA-CL

• Component Name: Default Risk and Limit System

• Description: Danger of an unexpected loss in the value of a receivable due to the default of a business partner. In contrast to counterparty/issuer risk, counterparty/issuer default risk refers only to the most extreme case of a worsening in the credit rating of the counterparty, meaning that of actual default.

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• Key Concepts: 
  Counterparty/issuer default risk is the risk of a counterparty or issuer not fulfilling their contractual obligations. This type of risk is typically associated with financial instruments such as bonds, loans, and derivatives. The IS-B-RA-CL Default Risk and Limit System is a component of the SAP Risk Management application that helps organizations manage counterparty/issuer default risk. 
  
  How to use it: 
  The IS-B-RA-CL Default Risk and Limit System allows organizations to set up and manage limits for counterparty/issuer default risk. It also provides tools for monitoring and analyzing counterparty/issuer default risk exposure. The system can be used to identify potential risks, assess the impact of those risks, and take appropriate action to mitigate them. 
  
  Tips & Tricks: 
  When setting up limits for counterparty/issuer default risk, it is important to consider the potential impact of the risk on the organization’s financial position. It is also important to ensure that the limits are appropriate for the organization’s risk appetite and that they are regularly reviewed and updated as needed. 
  
  Related Information: 
  The IS-B-RA-CL Default Risk and Limit System is part of the SAP Risk Management application, which also includes components for credit risk, market risk, liquidity risk, operational risk, and compliance risk management. The system can be integrated with other SAP applications such as SAP ERP and SAP S/4HANA to provide a comprehensive view of an organization’s risk profile.