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

SAP Term: risk category

• Component: IS-B-RA-CL

• Component Name: Default Risk and Limit System

• Description: Specifies whether the risk is a credit risk or a settement risk.

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• Key Concepts: 
  Risk category is a component of the IS-B-RA-CL Default Risk and Limit System in SAP. It is used to classify and group risks into categories, such as credit, market, liquidity, operational, and legal risks. Each risk category is assigned a risk weighting that determines the amount of capital that must be set aside to cover potential losses. 
  
  How to use it: 
  Risk categories are used to identify and manage potential risks associated with a particular business activity. The risk categories are used to assign risk weights to each risk category, which are then used to calculate the amount of capital that must be set aside to cover potential losses. The risk categories can also be used to identify areas of potential risk and develop strategies for mitigating those risks. 
  
  Tips & Tricks: 
  When setting up the IS-B-RA-CL Default Risk and Limit System in SAP, it is important to ensure that the risk categories are properly defined and assigned appropriate risk weights. This will ensure that the system is able to accurately calculate the amount of capital that must be set aside to cover potential losses. 
  
  Related Information: 
  The IS-B-RA-CL Default Risk and Limit System in SAP is part of the Basel III regulatory framework, which sets out requirements for banks and other financial institutions regarding their capital requirements. The system is designed to help financial institutions manage their risks more effectively by providing them with a framework for assessing and managing their risks.