What is risk hierarchy in SAP IS-B-RA - Risk Analysis?

SAP Term: risk hierarchy

• Component: IS-B-RA

• Component Name: Risk Analysis

• Description: Hierarchical grouping of risk factors for value-at-risk evaluations. It is used to calculate risk values on individual consoldiation levels, and aggregate them into a value for overall risk. Market data changes are calculated only those risk factors contained in the risk hierarchy.

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• Key Concepts: 
  Risk hierarchy is a component of the IS-B-RA Risk Analysis module in SAP. It is used to define and manage the risk levels associated with different activities and processes. The risk hierarchy is organized into four levels: low, medium, high, and critical. Each level has its own set of criteria that must be met in order to be classified as such. 
  
  How to use it: 
  The risk hierarchy can be used to identify potential risks associated with a particular activity or process. It can also be used to prioritize activities and processes based on their risk level. For example, activities or processes with a higher risk level may require more attention and resources than those with a lower risk level. 
  
  Tips & Tricks: 
  When using the risk hierarchy, it is important to consider all potential risks associated with an activity or process. This includes both internal and external risks. Additionally, it is important to regularly review and update the risk hierarchy in order to ensure that it accurately reflects the current risk levels associated with activities and processes. 
  
  Related Information: 
  The IS-B-RA Risk Analysis module also includes other components such as Risk Assessment, Risk Mitigation, and Risk Monitoring. These components can be used in conjunction with the risk hierarchy to further identify and manage risks associated with activities and processes.