In accordance with IFRS 9, for

• Deals assigned to stage 1 and stage 2 as well as
• Non-significant financial assets assigned to stage 3,

provisions for losses on loans and advances are applied collectively to various segments (groups of individual financial assets) with similar risk characteristics.

The solution supports the configuration of segments. Each segment will contain customers' individual deals with similar risk characteristics. It ensures that different models can be applied for deals with different credit risk characteristics during ECL calculation. 

This component is necessary if

•  segmentation has not already been performed in the source and has not been delivered from a source
• a heterogenous portfolio requires the application of various statistical methods for ECL calculation  

In FlexFinance segments can be configured taking criteria such as product type, cost center, type of customer, customer rating etc. into account.

The configuration is organised in sets. A set helps to determine, at a later point in time, which parameter and which characteristics were relevant for segmentation at the time when ECL calculation was performed.

A set contains the parameters and values for segmentation and can be used in a master scenario. Several sets can be maintained next to each other in parallel. For each master scenario, however, only one set can be assigned and is therefore valid. Different parallel master scenarios can take different sets into account.

For details on what needs to be considered during segment definition and how to configure segments, please read more in the manual: Segmentation.

On the basis of the combination of segment and stage, the appropriate parameters for ECL calculation can be identified, taking the availability and relevance of performance data into account. For details about stage assignment, please refer to Stage Assignment.