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

SAP Term: settlement risk

• Component: IS-B-RA-CL

• Component Name: Default Risk and Limit System

• Description: Risk of an unexpected loss in the value of a receivable during the settlement period, which is the time period between the receipt of the instructions for the advance payment and the actual receipt of the return payment. The extent of the settlement risk is also influenced by whether the transaction is settled directly or using a clearing house.

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• Key Concepts: 
  Settlement risk is the risk of a counterparty not fulfilling its contractual obligations to settle a transaction. In the context of the IS-B-RA-CL Default Risk and Limit System, settlement risk is managed by setting limits on the amount of exposure a company has to a particular counterparty. 
  
  How to use it: 
  The IS-B-RA-CL Default Risk and Limit System allows companies to set limits on their exposure to settlement risk. This system allows companies to set limits on the amount of exposure they have to a particular counterparty, as well as the total amount of exposure they have across all counterparties. Companies can also set limits on the types of transactions that can be conducted with a particular counterparty. 
  
  Tips & Tricks: 
  It is important for companies to regularly review their limits and adjust them as needed in order to ensure that they are adequately managing their settlement risk. Companies should also consider setting up automated alerts that will notify them when their limits are exceeded. 
  
  Related Information: 
  The IS-B-RA-CL Default Risk and Limit System is part of SAP's Risk Management Suite, which provides companies with tools for managing credit, market, liquidity, and operational risks. The suite also includes tools for monitoring and reporting on risk exposures.