What is credit risk in SAP ORG-LX-T9N - Team: Corporate Translation?

SAP Term: credit risk

• Component: ORG-LX-T9N

• Component Name: Team: Corporate Translation

• Description: The risk that one party to a loan agreement will be unable to discharge its obligations.

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• Key Concepts: 
  Credit risk is the risk of loss that a business may incur if a customer or counterparty fails to meet their contractual obligations. It is the potential that a customer or counterparty will not be able to fulfill their obligations to pay for goods or services. Credit risk can also refer to the risk of a company’s own creditworthiness being downgraded due to financial difficulties. 
  
  How to use it: 
  Businesses can manage credit risk by assessing the creditworthiness of customers and counterparties before entering into any agreements. This can be done by obtaining credit reports, conducting background checks, and monitoring customer payment histories. Businesses can also limit their exposure to credit risk by setting credit limits and requiring customers to provide collateral or security deposits. 
  
  Tips & Tricks: 
  It is important for businesses to regularly monitor their customers’ creditworthiness and payment histories in order to identify any potential risks. Businesses should also review their own creditworthiness and take steps to maintain a good credit rating. 
  
  Related Information: 
  Credit risk is closely related to other types of financial risks, such as liquidity risk, market risk, and operational risk. It is important for businesses to understand how these risks are interconnected in order to effectively manage them.