What is 'expected exposure' in SAP IS-B-RA-CL - Default Risk and Limit System?

expected exposure - Overview

• Component: IS-B-RA-CL

• Component Name: Default Risk and Limit System

• Description: Current utilizatin, including the part of a potentially free external line of committed credit that is expected to be used as the time the default occurs. The proprotionate attribution of the free limit results from the product of the free line and the loss equivalent.

expected exposure - Details

• 
  Key Concepts: 
  Expected exposure is a term used in the IS-B-RA-CL Default Risk and Limit System of SAP. It is a measure of the expected financial loss that a company may incur due to a customer defaulting on their payments. It is calculated by taking into account the customer’s creditworthiness, the amount of credit extended, and the probability of default. 
  
  How to use it: 
  Expected exposure can be used to assess the risk associated with extending credit to a customer. Companies can use this information to decide whether or not to extend credit, and if so, how much credit to extend. It can also be used to set limits on the amount of credit extended to customers. 
  
  Tips & Tricks: 
  When calculating expected exposure, it is important to consider all factors that may affect the customer’s ability to pay back their debt. This includes their financial history, current financial situation, and any other factors that may affect their ability to pay back their debt. 
  
  Related Information: 
  Expected exposure is closely related to other terms such as credit risk and limit system, creditworthiness, and probability of default. Understanding these terms can help companies better assess the risk associated with extending credit to customers.