Limit management

[Former Member]

Hi Experts,

I need to set a credit limit for my business partner (counterparty) and per product type (FX/MM/Options/Int. rate instruments), but I am not familiar with Limit management.

Do I need to create new Limit Types or is it possible to use the standard types already in the system? Also, how do I relate these Limit Types to my Co.Code and Bus.Partner and product types?

Thanks,

David

[jitesh_chawla · Accepted solution]

Dear Kalyan,

It doesn't depend which business partner you are using with which roles. Roles have no impact on the limit management. You set the roles for the business partner in BP transaction.

Regards,

Jitesh

[Former Member · Accepted solution]

Hi Jitesh,

My client has a limit for Commercial Paper. They cannot invest more than 50M USD in CP issued by one issuer. So when they invest, for example in CP issued by Microsoft, they keep track of this and stop once they reach the limit of 50M. In Transaction manager the counterparty will be Bank of America, but the issuer of the CP will be Microsoft. We manage Commercial Paper in Securities module and not Money Market because in Money market we can give only one Business Partner (Counterparty role). But in Securities when I create class data I can give Microsfot as the issuer (BP in the role of 'Issuer'). When I enter the transaction using FTR_CREATE, I give BofA as the 'counterparty'.

Is this possible(checking limit aginst the issuer) in Credit Risk Analyzer?

Thanks

Kalyan.

[Former Member · Accepted solution]

Hi Kalyan,

As Jitesh specified you can give it in Trader, but functionally trader is only for internal purposes.

In money market itself, for commercial paper for your requirement specify Microsoft as the Guarantor under administration, then limits utilization will be for Microsoft and will not be for your counter party.

Regards,

Ravi

Edited by: Ravishankar Ramamurthy on Oct 13, 2009 2:05 PM

[jitesh_chawla]

Hi Kalyan,

Commercial paper is a money market transaction with a period of typically between 1 to 9 months. It has fixed interest with it and could typically have an interest payout every month or tri-monthly. This looks similiar to a short term Fixed Interest Bond. I think you may try it once to see the results.

Regards,

Jitesh

[jitesh_chawla]

Hi Kalyan,

Obviously BofA is your counterparty in such a case, and you are absolutely right about it. However; you may use Microsoft as your trader and set a limit on trader. If you don't want to use Microsoft as a trader according to business, then you may make a derivation strategy in Default Risk and Limit for securities automatic financial object integration in form of an enhancement. This enhancement should pick issuer of the CP and set this as a free characteristic in the limit system. You may create a limit type for this free characteristic to utilize this.

Regards,

Jitesh

[Former Member]

Hi Jitesh,

This is an excellent idea. Thanks for your insight.

I cannot use Trader because we are already having separate limits by trader.

Secondly your derivation will work only if I use Securties module. In Money market I cannot assign a Issuer (Microsoft) in the trasaction. But in Securities module, I can do this in the class master data. But in Securities module, I do not see any product type for Commercial Paper. Can you suggest which Product type to use in Securities module for Commercial Paper?

I can use Ravi's suggestion and create these issuers as Gurantors and drop them in the 'Admin TAB'. But it will be a hard sell with a demanding client.

Thank you guys. You guys are really great.

Kalyan.

[Former Member]

Hi Kalyan,

I was just reading this thread posted by you. I have some points to tell you.

I have delivered Commercial Paper in my 3 implementations under security module even though SAP provided it in MM area. The product type Zero Coupon Bonds (04J) is typically matching the kind of functionality of a Commercial Paper and it will solve all the other CRA related issues by defining a Limit Type against Issuer (micorsoft).

Further, since Commercial Paper is a issue in the market its logically fitting in Security module itself.

I hope you may already taken this decision.

Regards

Prasad AV

[jitesh_chawla]

Hi,

Default Risk and Limit work on financial deals. These financial deals have to be identified using set of characteristics.

The basic customizations required are:

1) Define Determination Procedure

a) Credit Risk

b) Settlement Risk

Financial Supply Chain Management -> Treasury and Risk Management -> Credit Risk Analyzer -> Basic Settings -> Definitions -> Define Determination Procedures

2) Define Default Risk Rule

a) Credit Risk

b) Settlement Risk

Financial Supply Chain Management -> Treasury and Risk Management -> Credit Risk Analyzer -> Basic Settings -> Definitions -> Define Default Risk Rule

3) Assign Determination Procedure to Default Risk Rule

Financial Supply Chain Management -> Treasury and Risk Management -> Credit Risk Analyzer -> Attributable Amount Determination -> Edit Settings for Determination Procedures

4) Define Limit types with following limit characteristics

a) Country Code

b) Business Partner

c) Product Type

Financial Supply Chain Management -> Treasury and Risk Management -> Credit Risk Analyzer -> Limit Management -> Define Limit Types

5) Define Limits with characteristic values

This should help you with the credit risk. There are obviously much more setting and are explained in detail in the help documents as well.

Regards,

Jitesh

[Former Member]

Hi,

Thank you for all your help! I was able to check the customizing areas indicated above and saw that there is already a standard set up in the system except for the Limit Types.

Is it possible to create a limit type for a specific company code and business partner and product type? Also, how can I set the actual limit amounts per limit type?

Your advice will be greatly appreciated!

Thanks,

David

[Former Member]

Limit amount can be set up under tcode TBL1

You can set up limir per company code and per business partner as well.

In the limit management you can create a Limit groups per each product type. Further in the definition of the transaction types you can assign this Limit group. And finally in the configuration of limit type you can assign Limit group as additional limit criteria.

Now in the Tcode TBL1 you could enter general limit amount for Business partner, company code and product type

Edited by: Vitaliy Tischenko on Oct 7, 2009 8:27 AM

[Former Member]

Hi,

How can I assign the Limit product group to my limit type?

Thanks,

David

[Former Member]

You can do this by assigning new filter criteria in the configuration of limit type in SPRO under Limit management-Define limit type

Here you should choose your limit type and made double click on Assign limit characteristic. Here you should add new entires and choose there Limit Product group.

Then when you go to the tcode tbl1 and choose your limit type you will be asked to enter definitions for your defined limit characteristic (Limit product group, company code and bp in your case but make sure that all these 3 characteristic you have entered in customizing of limit type under node Assign limit characteristic)

Edited by: Vitaliy Tischenko on Oct 7, 2009 1:34 PM

[Former Member]

Hi Vitaly,

Can we check limits on Business Partners in the role of 'Issuer' and not the one in the role of 'Counterparty'?

Kalyan

[Former Member]

Hi.

Take a look at:

Treasury and Risk Management -> Credit Risk Analyzer -> Limit Management

You can define limit types (e.g. limit per business partner or company code) and limit groups here

Then you could assign limit goup to the definition of the transaction type in TRM

Tcode TBL1 is used for limit maintenance