What is recovery rate in SAP IS-B-RA-CL - Default Risk and Limit System?

SAP Term: recovery rate

• Component: IS-B-RA-CL

• Component Name: Default Risk and Limit System

• Description: Estimation for the unsecured part of a receivable that will still be earned even if the counterparty or country defaults expected loss. The term "loss given default" LGD is also frequently used in this context. The LGD relates to the recovery rate in the following way: LGD = 1-RR

Smart SAP Assistant

• Key Concepts: 
  Recovery rate is a term used in the IS-B-RA-CL Default Risk and Limit System of SAP. It is a measure of the expected percentage of a loan or debt that will be recovered in the event of default. It is used to calculate the expected loss on a loan or debt, and is an important factor in determining the risk associated with a loan or debt. 
  
  How to use it: 
  The recovery rate is used to calculate the expected loss on a loan or debt. The expected loss is calculated by multiplying the amount of the loan or debt by the recovery rate. For example, if a loan has an amount of $100 and a recovery rate of 50%, then the expected loss would be $50. 
  
  Tips & Tricks: 
  When calculating the expected loss on a loan or debt, it is important to consider other factors such as interest rates, repayment terms, and other costs associated with the loan or debt. These factors can affect the recovery rate and thus the expected loss. 
  
  Related Information: 
  The IS-B-RA-CL Default Risk and Limit System also includes other terms such as credit limit, credit exposure, and credit risk. These terms are related to recovery rate and can help to better understand how it works. Additionally, understanding these terms can help to better manage risk associated with loans and debts.