What is credit risk in SAP IS-B-RA-CL - Default Risk and Limit System?

SAP Term: credit risk

• Component: IS-B-RA-CL

• Component Name: Default Risk and Limit System

• Description: Risk that the business partner borrower, counterparty, issuer, guarantor will not meet the contractual obligations during the entire term of the transaction. The credit risk comprises the sub-areas of counterparty/issuer risk and county risk, as well as the risks from classic credit products and the counterparty risk from the trading book. It includes a term- and risk-related add-on to cover potential positive changes in the market value. Credit risk can consist in just a counterparty risk, or an issuer risk, depending on the transaction category. In addition to credit risk, settlement risk also falls under counterparty/issuer risk and country risk.

Smart SAP Assistant

• Key Concepts: 
  Credit risk is the risk of loss due to a customer's inability or unwillingness to pay for goods or services. In the context of SAP's IS-B-RA-CL Default Risk and Limit System, credit risk is managed by setting limits on the amount of credit that can be extended to customers. This system also allows for the monitoring of customer creditworthiness and the setting of appropriate credit limits. 
  
  How to use it: 
  The IS-B-RA-CL Default Risk and Limit System can be used to manage credit risk by setting limits on the amount of credit that can be extended to customers. This system also allows for the monitoring of customer creditworthiness and the setting of appropriate credit limits. The system can also be used to generate reports on customer creditworthiness and to track customer payment history. 
  
  Tips & Tricks: 
  When setting limits on the amount of credit that can be extended to customers, it is important to consider factors such as their payment history, financial stability, and other relevant information. It is also important to regularly review customer creditworthiness and adjust limits accordingly. 
  
  Related Information: 
  For more information on managing credit risk with SAP's IS-B-RA-CL Default Risk and Limit System, please refer to SAP's documentation on the topic. Additionally, there are a number of third-party resources available that provide further guidance on managing credit risk with SAP software.