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Unlocking the Hidden Gems of the SAP Credit Risk Analyzer 

June 2024
4 min read

Are you leveraging the SAP Credit Risk Analyzer to its full potential?


While many business and SAP users are familiar with its core functionalities, such as limit management applying different limit types and the core functionality of attributable amount determination, several less known SAP standard features can enhance your credit risk management processes.


In this article, we will explore these hidden gems, such as Group Business Partners and the ways to manage the limit utilizations using manual reservations and collateral. 

Group Business Partner Use

One of the powerful yet often overlooked features of the SAP Credit Risk Analyzer is the ability to use Group Business Partners (BP). This functionality allows you to manage credit and settlement risk at a bank group level rather than at an individual transactional BP level. By consolidating credit and settlement exposure for related entities under a single group business partner, you can gain a holistic view of the risks associated with an entire banking group. This is particularly beneficial for organizations dealing with banking corporations globally and allocating a certain amount of credit/settlement exposure to banking groups. It is important to note that credit ratings are often reflected at the group bank level. Therefore, the use of Group BPs can be extended even further with the inclusion of credit ratings, such as S&P, Fitch, etc. 

Configuration: Define the business partner relationship by selecting the proper relationship category (e.g., Subsidiary of) and setting the Attribute Direction to "Also count transactions from Partner 1 towards Partner 2," where Partner 2 is the group BP. 

Master Data: Group BPs can be defined in the SAP Business Partner master data (t-code BP). Ensure that all related local transactional BPs are added in the relationship to the appropriate group business partner. Make sure the validity period of the BP relationship is valid. Risk limits are created using the group BP instead of the transactional BP. 

Reporting: Limit utilization (t-code TBLB) is consolidated at the group BP level. Detailed utilization lines show the transactional BP, which can be used to build multiple report variants to break down the limit utilization by transactional BP (per country, region, etc.). 

Having explored the benefits of using Group Business Partners, another feature that offers significant flexibility in managing credit risk is the use of manual reservations and collateral contracts. 

Use of Manual Reservations 

Manual reservations in the SAP Credit Risk Analyzer provide an additional layer of flexibility in managing limit utilization. This feature allows risk managers to manually add a portion of the credit/settlement utilization for specific purposes or transactions, ensuring that critical operations are not hindered by unexpected credit or settlement exposure. It is often used as a workaround for issues such as market data problems, when SAP is not able to calculate the NPV, or for complex financial instruments not yet supported in the Treasury Risk Management (TRM) or Credit Risk Analyzer (CRA) settings. 

Configuration: Apart from basic settings in the limit management, no extra settings are required in SAP standard, making the use of reservations simpler. 

Master data: Use transaction codes such as TLR1 to TLR3 to create, change, and display the reservations, and TLR4 to collectively process them. Define the reservation amount, specify the validity period, and assign it to the relevant business partner, transaction, limit product group, portfolio, etc. Prior to saving the reservation, check in which limits your reservation will be reflected to avoid having any idle or misused reservations in SAP. 

While manual reservations provide a significant boost to flexibility in limit management, another critical aspect of credit risk management is the handling of collateral. 

Collateral 

Collateral agreements are a fundamental aspect of credit risk management, providing security against potential defaults. The SAP Credit Risk Analyzer offers functionality for managing collateral agreements, enabling corporates to track and value collateral effectively. This ensures that the collateral provided is sufficient to cover the exposure, thus reducing the risk of loss.  

SAP TRM supports two levels of collateral agreements:  

  1. Single-transaction-related collateral 
  2. Collateral agreements.  

Both levels are used to reduce the risk at the level of attributable amounts, thereby reducing the utilization of limits. 

Single-transaction-related collateral: SAP distinguishes three types of collateral value categories: 

  • Percentual collateralization 
  • Collateralization using a collateral amount 
  • Collateralization using securities 

Configuration: configure collateral types and collateral priorities, define collateral valuation rules, and set up the netting group. 

Master Data: Use t-code KLSI01_CFM to create collateral provisions at the appropriate level and value. Then, this provision ID can be added to the financial object. 

Reporting: both manual reservations and collateral agreements are visible in the limit utilization report as stand- alone utilization items. 

By leveraging these advanced features, businesses can significantly enhance their risk management processes. 

Conclusion

The SAP Credit Risk Analyzer is a comprehensive tool that offers much more than meets the eye. By leveraging its hidden functionalities, such as Group Business Partner use, manual reservations, and collateral agreements, businesses can significantly enhance their credit risk management processes. These features not only provide greater flexibility and control but also ensure a more holistic and robust approach to managing credit risk. As organizations continue to navigate the complexities of the financial landscape, unlocking the full potential of the SAP Credit Risk Analyzer can be a game-changer in achieving effective risk management. 

If you have questions or are keen to see the functionality in our Zanders SAP Demo system, please feel free to contact Aleksei Abakumov or any Zanders SAP consultant. 

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