SAP S4HANA TRM

SAP Treasury and Risk Management

 Treasury Applications from SAP
Financial Excellence

Treasury applications from SAP

SAP Treasury and Risk Management

Risk Analyzers
Manage Global Credit Risk Analyzer Market Risk Analyzer Portfolio Analyzer
Financial Risks
Exposure Management Hedge Management
Optimize Debt and Transaction Manager
Investment Strategies Money Foreign Deri- Debt Secu- Com-
Market Exchange vatives Mgmt rities modities

SAP Cash and Liquidity Management

Manage Cash
and Liquidity Cash Management Liquidity Planning

SAP In-House Cash

Optimize Payments and
Bank Communication
SAP Bank Communication Management

© SAP AG 2009. All rights reserved. / Page 2

The SAP Treasury Solution Suite

1 Cash Management

2 Liquidity Forecast

3 Internal Banking

4 Bank Communication
Management

5 Treasury Management

6 Risk Analyzers
Managing Treasury and Risk Management at a glance
Credit Risk Analyzer
Utilization: Formulas, Credit
risk, Settlement risk
Limit management:
Limits freely definable,
Multidimensional limits
Exposure Management
Risk Analyzers Reporting
Market Risk Analyzer Portfolio Analyzer Ad-hoc reporting:
Point & click, Unified
Price calculator: NPV, Prices, Yield calculations: databases, Position, P&L,
Sensitivities Money weighted, Period, Cash Flow
Value at risk: Variance/covariance, Time weighted,
Historic, Monte Carlo Simulation Modified Dietz method
Simulate rates: What-if scenario, Benchmarking: Reporting tools:
Relative, Absolute Performance Indicators SAP Query, ABAP List, Other
xxxxxxxxxxxxxxxxxxxxxxxx 3rd-party providers, BI,
Business Objects Dashboards
Hedge Management and Xcelsius

Centralized Database to gather group and Administration of hedge plans, exposures, hedge
version data and transfer to Hedge Management items and hedging relationships Results database:
Portfolio Hierarchy, Drill-down,
Historic results
Transaction Manager
Front office: Position and deal reporting, Deal capture, Exercise, Dealer slip, Valuation tools,
Online limit check Management reports:
Positions, Performance, Ratios,
Back office: Standing instructions, Correspondence Monitor, Netting, Settlement, Rate fixing Compliance
(interest, FX), References, Corporate actions, Process monitors
Accounting: Flexible accounting determination, Accounting according to many international
accounting standards Middle office:
Risk exposure, Controlling,
Money Foreign Compliance
Derivatives Debt Mgmt Securities Commodities
Market Exchange
 Fixed –term  Spot  Cap  Bonds  Bonds  Futures
deposits  Forward  Floor  Bank loans  Warrants  Forwards
 Commercial  Swaps  FRA  Commercial  Stocks  Traded Options
Data export:
 
  Excel, Flat files, BI
Paper Swaps Paper Certificates Swaps
  
Options
Repo

Options  Facilities Repo

 
Futures OTC-Options
Futures Sec. lending
Transaction and Position Management Process

Front Mid Back Account- Re-

Office Office Office ing porting

 Exposure  Instrument pricing  Flexible process  Posting of  Standard

analysis  Risk analysis definition Treasury flows to reporting
 Decision support  Sensitivity  Settlement the G/L  Ad-hock reporting
 Comfortable deal analysis  Correspondence  Valuation  Controlling
 
entry according to
Interest rate Limit reporting
several GAAP’s in
 Standing adjustments  Management
parallel areas
instructions 

Payments reporting

Support for IAS
On-line limit  Alert monitor 39 / US-GAAP
check
and Hedge
 Position reporting Accounting
Selection of Product Types
Interest &
Foreign Debt Securities
Money Market Equity Commodities
Exchange Management (Investments)
Derivatives
 Fixed-term  Spot  Issued bonds  Cap  Bonds  Futures
deposits (e.g.,  Forward Fixed/ floating/  Floor  ABS /MBS /CMO  Forwards
 FRA 
 Swap  Traded Options
overnight zero interest, Index-linked
 Swaps
deposits at bonds
 Vanilla options  Swaps
Bullet repayment/
notice) with repayment/  Dual currency
 Commercial  Barrier options ABS structures Payer/Receiver, bonds  OTC-Options
paper (single and  Fixed rate loans
Fixed/Basis,  Drawable bonds
 Repo  Warrant Bonds
double) Exotics (e.g.,
 Floating rate
 Compound  Stocks
roller coaster)
 Floating rate  OTC options  Shareholdings
loans
options
 Any cash flows  Annuity loans  Subscription
 Average rate Security,
options  Commercial Swaption, IRG rights
 Futures  Investment
 Basked options
Paper
 Facilities  Exchange traded certificates
 Exchange-traded  Repo/ Reverse
(bilateral or options
options
 Total Return
syndicated) Repo
 Security lending
Swap

Transaction Manager

Market Risk Analyzer

Credit Risk Analyzer

Portfolio Analyzer

Reporting
© SAP AG 2009. All rights reserved. / Page 6
 Managing Commodities and Financial Instruments Risk

All kinds of commodity types and hedging

instruments can be managed in SAP
Commodities (examples)
 Crude Oil, gas, coal
 Metals including noble metals
 Corn, maize, soybean
 Coffee, cacao, cotton, sugar
 Orange juice, lemon juice
 Cattle (cows, pigs)
 Certificates on emission

Hedging Instruments
 Futures and Traded Options
 Forwards
 Swaps (planning status)
 OTC Options (planning status)

© SAP AG 2009. All rights reserved. / Page 7

 Exposure Management – Example for Commodities

Commodity front office system - if needed

Treasury and Risk Management

SAP ERP
Operations
SD, MM Exposure Hedge
or GTM Management Management

Excel
Spreadsheets

Market Risk Transaction

Other sources Analyzer Manager
of Exposures

SAP ERP Financials

© SAP AG 2009. All rights reserved. / Page 8

Transaction Processing - Trading:
Convenient Transaction Entry
Automatic calculation Automatic determination
of derived flows of payment instructions Automatic cash flow projection

Integrated online
limit check
Drill-down to class details and
business partner details

Pre-defined business
Class information calendars and automatic
retrieved automatically date checks

Display of corresponding
market rates and according
warnings

Configurable entry screen and Automatic transfer to Back Office

customizable default values per field Integrated effective
interest rate calculator
Page 9
Transaction Processing –
Back Office Processing: Settlement

•“Settlement“ is an optional transaction processing step

• The transaction is reviewed by a back office processor to satisfy the four-eyes
principle (segregation of duties)
• Optionally, information not entered by the trader can be supplemented by the back
office processor
• Only after the reviewer changes the status of a transaction to ‘settled’, it is cleared
for posting and payments.

Page 10
Transaction Manager
Efficiency with Correspondence Monitor (new with EhP4)
•Real Straight Through Processing  from deal capturing via new integrated
Correspondence Monitor to parallel accounting with a highly sophisticated authorization concept
behind.

Deal Create / send Receive incoming Automatic Error handling /

capturing correspondence correspondence matching manual matching

 Release process  Tracking of  Customizable  Correspondence

 use customer incoming matching monitor e.g.
defined channels, correspondence proposal  Navigate in all
mediums and use customer  Automatic directions

formats defined channels, matching when Improved status

mediums and message is
Fax, email, print formats tracking for the
and swift file coming in or messages


transfers are Fax, email, print going out possible
Show all
preconfigured and swift file  Update status of correspondence

transfers are the deal or trigger
Predefined format preconfigured objects assigned
(incoming and a automatic to one deal


outgoing) for Predefined format settlement of the
(incoming and deal Show matches

MT300, MT320
and free text outgoing) for Manual
MT399 MT300, MT320 assignment of
free text MT399 correspondence
to deals
 Receive ACK and
NACK messages
Transaction Manager
Incoming and Outgoing Messages Using SWIFT Integration Package

Data from file SWIFT Integration Get file from

Package put Open SWIFT file
adapter uploaded SWIFT alliance
data on file adapter envelope
to TRM gateway

 Automatic matching  PI saves file on file  Integration package for  Integration package for
process is triggered adapter SWIFT SWIFT
automatically
whenever a file
appears

Create message SWIFT Integration Create SWIFT file Send file to SWIFT
and send Package picks envelope alliance gateway
up data

 Creation of MT  PI picks up the data  Integration package for  Integration package for
message automatically from the file server in SWIFT SWIFT
or manually in the predefined time
correspondence intervals
monitor
 Save message on file
server
Transaction Manager
Straight-Through Processing for External Deals

Alternative deal capturing by connection to Market Places

 Automation of download of FX transactions made on market places
such as 360T, FXall or Currenex
 Available for FX spot, FX forward and FX options
 Possible to enter all data for the FX transaction with one interface

Bank A

SAP Treasury and

Market Place Bank B
Risk Management

Bank C
Accounting Straight-Through Processing

Straight-through processing of financial deals is achieved in combination with

a highly flexible accounting engine.
 Real-Time update of your accounting position

 Automatic posting incl. flexible account determination

 Hedge Accounting (e.g. FAS133/138, IFRS 39)
 Support of several accounting standards in parallel

Simple Example write-up no write-up

Purchase of 100
shares at USD 90
per share
= USD 9,000
9000 9800 9000 9000
Stock price on
valuation key date:
IAS / US GAAP German GAAP (HGB)
USD 98 (market value)

© SAP AG 2009. All rights reserved. / Page 14

Transaction Manager
Fully integrated

Automatic
posting

Valuation
(parallel)

Automatic
creation of
correspondence

Automatic
accrual/
deferral

© SAP AG 2009. All rights

The SAP Treasury Solution Suite

1 Cash Management

2 Liquidity Forecast

3 Internal Banking

4 Bank Communication
Management

5 Treasury Management

6 Risk Analyzers
SAP Modules in Treasury Analyzers

Market Risk Portfolio Credit Risk

Analyzer Analyzer Analyzer

Analyzers

Transaction
Market Data Manager REPORTING:
FX Rates Money Market Externally
Yield Curves Securities maintained
Indices Derivatives transactions
Volatilities Forex
Commodities Business-
partner

Cash
Managem.

Integration General Ledger

SAP Market Risk Analyzer
Process
SAP
EDT

CM CML TM Datapool

NON SAP -
External

Market data
Results
NPV, VaR,
Exposure, Keyfigures
Analysis/Reporting/Planning
 Online data feed
 Simulated Pricing Engine
 Shifts
 Scenarios NPV
VaR
Sensitivity
© SAP AG 2009. All rights reserved. / Page 18
SAP MRA: Net Present Value Concept

Transaction data Calculation Evaluations

 Mark-to-market
 Sensitivities  Company
 Duration 
LEVEL 2
Trading: Interest products

Linear Non-linear Portfolio

 Debts  Options  Convexity 
LEVEL 1 LEVEL 1
Trading: Bonds Trading: Swaps

Profit center
 Assets  Caps  Exposure 
Base portfolio Base portfolio

Product Bonds/Frankfurt Bonds/New York

 ....  ....  Crash/stress tests

Market data Yield curve 5 (+) Current. yield curve Yield curve 6 (long-term)
Risk management
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
NPV
2.0


1M 2Y 4Y 6Y 8Y 10 Y
Saved market prices
 Real-time market prices Risk
 Flexible scenarios
 Rule shifts Price calculator
(user exit)

© SAP AG 2009. All rights reserved. / Page 19

SAP MRA: Value at Risk

Transaction data Calculation Evaluations

 Historical simulation
 Monte Carlo  Company

LEVEL 2


Trading: Interest products

Bal. sheet Non-linear Full valuation Portfolio

 Debts  Options  
LEVEL 1 LEVEL 1
Trading: Bonds Trading: Swaps
Delta method Profit center
 Assets  Caps  Delta/gamma method  Product
Base portfolio Base portfolio


Bonds/Frankfurt Bonds/New York

 ....  .... Variance/covariance

 Backtesting
Historical market Confidence Risk management
No. Date NPV Risk
parameters 1 Feb 81 483.9 -134.3
Interval

2 May 81 524.8 -93.3 99.0%

3 Mar 80 530.6 -87.5
4 Feb 90 538.9 -79.2
5 Feb 80 543.8 -74.3
6 Feb 74 546.8 -71.3 97,5%
7 Jun 82 557.5 -60.6
8 May 83 559.8 -58.3
50
9 Oct 72 560.5 -57.7
45
10 Feb 94 562.6 -55.5
40
11 May 79 564.2 -53.9
12 Oct 79 565.5 -52.6 35


13 Feb 85 569.1 -49.0 95.0% 30

     25

    
Market interest rates     
20


     15

Exchange rates 10


5

Stock prices
0

< 500
<-75

<-45

<-35

<-25

<-15
< -95

< -85

< -65

< -55

< 15

< 25

< 35

< 45

< 55

< 65

< 75

< 85
<-5

<5
 Volatilities Price calculator
 Correlations (user exit)

© SAP AG 2009. All rights reserved. / Page 20

Credit Risk Management
Process

T Request End-of-Day Processing

r
a
n Limit check Attributable
s amount
a
c O.K.
t
i Limit
Deal
o
n

M
a Reporting
n Partner Exposure Limit Free Limit Util. in %
a Euro Bank 8.5 10.5 2.0 80.9%
g United Bank 632.3 700.7 68.4 90.3%
e Carlton 688.1 716.7 28.6 96.0%
m Brightline 12.3 4.8 -7.5 256.3%
e
n
t
Start of workflow, when limit is ‘Breached’
© SAP AG 2009. All rights reserved. / Page 21
SAP CRA: Relative Limits

Choose Utilization Key Choose Reference Key Define Limits

Utilization Reference Define Limits
Portfolio Figure Portfolio Figure Percentage Absolute

Can choose the ‘Utilization Can compare same key figures Limits can be defined as
Portfolio’ and the ‘Reference from different portfolios ‘Percentage’, ‘Absolute’ Or ‘Both
Portfolio’. They can be same or Percentage and Absolute’
different. or

Different key figures from the

same portfolio

© SAP AG 2009. All rights reserved. / Page 22

Portfolio Analyzer

 Investment strategy  Building organizational

 Determination of benchmark structures
 Improvement and alignment  Asset allocation
 Business transactions

SAP Treasury
and Risk
Management

 Reporting
and revision
 Risk adjustment
 Performance measurement
 Benchmarking

Portfolio Analyzer
© SAP AG 2009. All rights reserved. / Page 23
SAP PA: Performance Analytics –
Benchmarking Reporting

© SAP AG 2009. All rights reserved. / Page 24