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Department, Board Area or Team Date
1. Market Trends and Value Proposition 2. Solution Offering
2.1. Overview 2.2. Transaction Management 2.3. Exposure Management 2.4. Hedge Management 2.5. Risk Analyzers
© SAP AG 2009. All rights reserved. / Page 4
The Evolving Role of Corporate Treasury
Management / Guidance
Management / Guidance
Decisions regarding strategy of financing and asset allocation Governance Risk and Compliance activities
Value increasing activities
Value increasing activities
„Business Impact“ Liquidity Management Management of Financial risks Bank Relationship Management Asset und Pension Management
Transaction based activities
Transaction based activities Strategic partner of the CFO
supporting transactional activities Payment transactions Money market, FX and Derivative deals
Source: „ Der Finanzbereich im Umbruch“ (Dr. Michael Kieninger, Horváth AG, SAP Infotage 2007)
© SAP AG 2009. All rights reserved. / Page 5
Does this Scenario Look Familiar?
“Is our current approach process and risk effective and how do we benchmark ourselves against best in class treasuries?”
Treasury Risk Controller
“How much of our fx portfolio is hedged and are these hedges effective according to our hedge accounting policy”
“I‟m not sure if our forecast allows us to fund the upcoming acquisitions without external loans from our banks?”
“I cannot simulate risk scenarios and I am not able to generate ad-hoc overviews on key risk indicators. Furthermore I have to capture our deals manually three times in different systems”
Is this organization prepared to:
Increase process efficiency? Reduce finance operating costs? Optimize the global banking structure?
“It takes weeks to reconcile account data across multiple banks to determine our company cash position”
Inhouse Bank Mgr
“My intercompany reconciliation and netting process is not integrated, not transparent and contains often errors. We never can build a payment factory on this fundament”
“I don‟t have an integrated bank connectivity and this turns out to be a compliance issue. We need a higher degree of automation to be scalable”
© SAP AG 2009. All rights reserved. / Page 6
Challenges: Typical Barriers to Effective and Compliant Treasury Management
Lack of coordination across entities and departments Multiple payment locations and disbursement accounts Multiple charts of accounts in various locations Poor insight into overall company risk picture Poor insight into sources and uses of cash and their timing Incomplete insight into global cash positions
Fragmented and inefficient payment and cash management Paper-based and laborintensive Lack of standardization Fragmented, stand-alone systems Limited bank communications integration Weak integration with GL and AR systems
High Cost of Finance Operations Risk Awareness
© SAP AG 2009. All rights reserved. / Page 7
What Our Customers Expect Financial Excellence in Treasury Operations! Treasury Requirements Transparency Accurate. All rights reserved. credible treasury reports Global cash visibility Segregation of duties Efficiency Accounting standards Compliant reporting Compliance Efficiency Streamline processes Automate systems Integrated communications © SAP AG 2009. auditable accounting Transparency Compliance Reliable. / Page 8 .
interest rate and commodity risk and comply to regulatory standards Automation of internal controls (SOX) IT Systems End-to-end ERP-based treasury integration into purchase. sales. All rights reserved. production and finance Reduce number of bank integrations and support costs through open standards © SAP AG 2009.Overcome Your Treasury Barriers with SAP Insight & Control Pinpoint risks and mitigate them Gain better insight into liquidity requirements Manage cash and improve returns Efficiency Create central „payment factories‟ Real straight-through processing for financial transactions Capture financial risk exposures from operational systems Compliance Establish greater control over outgoing payments Manage FX. / Page 9 .
we can fund our next merger without external borrowings” SALARIES Trader “Great reports and one single deal entry screen are supporting my day-to-day work efficiently” Inhouse Bank Manager “Our central payment factory is up and running and all processes are highly automated !” Timely cash and liquidity Forecasts Greater control over payments Reliable global cash management data Electronic bank integration Standardization and automation Integrated systems and processes Cash Manager “We reconcile our account data across multiple banks to determine our company cash position in minutes” AP/AR Manager “Our payment process is transparent due to seamless integration from our ERP system into our banking software” Banks Subsidiaries © SAP AG 2009. Our FX exposure is hedged and our sales revenue safe” “I believe my treasury department is doing a great job!” Group Treasurer “Our liquidity is excellent . All rights reserved. / Page 10 .SAP Streamlines Finance Processes and Treasury Operations CFO Treasury Risk Manager “All lights are green.
Risk Analyzers 3. Solution Offering 2. Overview 2.1.2. Market Trends and Value Proposition 2.3. Transaction Management 2. Summary © SAP AG 2009. Hedge Management 2. All rights reserved.5. Exposure Management 2.Agenda 1. / Page 11 .4.
Forex. Derivatives Credit Risk Analyzer R/3 Enterprise IS-IS/DARWIN Project Market release for Loans.Treasury Applications from SAP Where we Came from … In-House Cash SAP Business Suite Liquidity Planner SAP ERP Market Risk Management Portfolio Analyzer Money Market. Securities. Real Estate Audit R/3 Launch 1996 1994 1993 1992 2001 2000 Today R/2 Treasury Cash Management Money Market. Forex. Loans © SAP AG 2009. / Page 12 . All rights reserved.
/ Page 13 SAP Bank Communication Management . All rights reserved.Financial Excellence with Treasury Applications from SAP Treasury applications from SAP SAP Treasury and Risk Management Risk Analyzers Manage Global Financial Risks Optimize Debt and Investment Strategies Credit Risk Analyzer Market Risk Analyzer Portfolio Analyzer Exposure Management Money Market Foreign Exchange Derivatives Hedge Management Debt Mgmt Securities Commodities Transaction Manager Manage Cash and Liquidity SAP Cash and Liquidity Management Cash Management Liquidity Planning SAP In-House Cash Optimize Payments and Bank Communication © SAP AG 2009.
References. Accounting according to many international accounting standards Money Market Foreign Exchange Derivatives Debt Mgmt Securities Commodities Middle office: Risk exposure. All rights reserved. Online limit check Back office: Standing instructions.SAP Treasury and Risk Management Risk Analyzers Credit Risk Analyzer Utilization: Formulas. Position. Unified databases. Corporate actions. FX). Process monitors Management reports: Positions. Compliance Fixed –term deposits Commercial Paper Repo Spot Forward Swaps Options Futures Cap Floor FRA Swaps Options Futures Bonds Bank loans Commercial Paper Facilities Bonds Warrants Stocks Certificates Repo Sec. Monte Carlo Simulation Simulate rates: What-if scenario. Exercise. Netting. hedge items and hedging relationships Reporting tools: SAP Query. ABAP List. lending Futures Forwards Traded Options Data export: Excel. Multidimensional limits Reporting Portfolio Analyzer Yield calculations: Money weighted. Modified Dietz method Benchmarking: Performance Indicators xxxxxxxxxxxxxxxxxxxxxxxx Ad-hoc reporting: Point & click. Compliance Accounting: Flexible accounting determination. Time weighted. Settlement. Flat files. BI. Controlling. Deal capture. Prices. Ratios. Historic results Transaction Manager Front office: Position and deal reporting. Cash Flow Market Risk Analyzer Price calculator: NPV. Relative. Historic. Valuation tools. Drill-down. Dealer slip. BI © SAP AG 2009. exposures. Other 3rd-party providers. Period. Sensitivities Value at risk: Variance/covariance. Absolute Exposure Management Centralized Database to gather group and version data and transfer to Hedge Management Hedge Management Administration of hedge plans. / Page 14 . Rate fixing (interest. Business Object Xcelsius and Dashboards Results database: Portfolio Hierarchy. Correspondence Monitor. Credit risk. Settlement risk Limit management: Limits freely definable. P&L. Performance.
2. Summary © SAP AG 2009. Market Trends and Value Proposition 2.Agenda 1.4.3. Overview 2. Transaction Management 2.5. Hedge Management 2. Risk Analyzers 3. Solution Offering 2. Exposure Management 2.1. / Page 15 . All rights reserved.
overnight deposits at notice) Commercial paper Repo Floating rate Any cash flows Spot Forward Swap Vanilla options Barrier options (single and double) Compound options Delayed Delivery options Average rate options Basked options Exchange-traded options Issued bonds Fixed/ floating/ zero interest. Exotics (e.g. Bullet repayment/ with repayment/ ABS structures Fixed rate loans Floating rate loans Annuity loans Commercial Paper Facilities (bilateral or syndicated) Cap Floor FRA Swaps Payer/Receiver. / Page 16 . All rights reserved.Instrument Support Foreign Exchange Money Market Debt Management Interest & Equity Derivatives Securities (Investments) Commodities Fixed-term deposits (e.g. IRG Futures Exchange traded options Bonds ABS /MBS /CMO Index-linked bonds Dual currency bonds Drawable bonds Warrant Bonds Stocks Shareholdings Subscription rights Investment certificates Repo/ Reverse Repo Security lending Futures Forwards Traded Options Transaction Manager Market Risk Analyzer Credit Risk Analyzer Portfolio Analyzer Reporting © SAP AG 2009. Fixed/Basis.. roller coaster) OTC options Security. Swaption.
/ Page 17 .Process Overview Front Office Mid Office Back Office Accounting Reporting Exposure analysis Decision support Comfortable deal entry Standing instructions On-line limit check Position reporting Instrument pricing Risk analysis Sensitivity analysis Flexible process definition Settlement Correspondence Interest rate adjustments Payments Alert monitor Valuation according to several GAAP‟s in parallel areas Support for IAS 39 / US-GAAP and Hedge Accounting Standard reporting Ad-hock reporting Controlling Limit reporting Management reporting © SAP AG 2009. All rights reserved.
/ Page 18 .Transaction Manager – Fully Integrated Automatic posting Valuation (parallel) Automatic creation of correspondence Automatic accrual/ deferral © SAP AG 2009. All rights reserved.
Real-Time update of your accounting position Automatic posting incl. / Page 19 write-up no write-up 9800 9000 9000 IAS / US GAAP German GAAP (HGB) . All rights reserved. flexible account determination Hedge Accounting (e. FAS133/138. IAS39) Support of several accounting standards in parallel Simple Example Purchase of 100 shares at USD 90 per share = USD 9.g.Accounting Straight-Through Processing Straight-through processing of financial deals is achieved in combination with a highly flexible accounting engine.000 9000 Stock price on valuation key date: USD 98 (market value) © SAP AG 2009.
MT320 and free text MT399 Tracking of incoming correspondence use customer defined channels. / Page 20 . print and swift file transfers are preconfigured Predefined format (incoming and outgoing) for MT300. mediums and formats Fax. email. print and swift file transfers are preconfigured Predefined format (incoming and outgoing) for MT300. email. mediums and formats Fax. All rights reserved. Deal capturing Create / send correspondence Receive incoming correspondence Automatic matching Error handling / manual matching Release process use customer defined channels.g. MT320 free text MT399 Customizable matching proposal Automatic matching when message is coming in or going out possible Correspondence monitor e. Navigate in all directions Improved status tracking for the messages Show all correspondence objects assigned to one deal Show matches Manual assignment of correspondence to deals Receive ACK and NACK messages © SAP AG 2009.Gain Efficiency with Correspondence Monitor Real Straight-Through Processing from deal capturing via new integrated Correspondence Monitor to parallel accounting with a highly sophisticated authorization concept behind.
/ Page 21 . All rights reserved. © SAP AG 2009.Process of Incoming and Outgoing Messages Using SWIFT Integration Package from SAP Data from file adapter uploaded to TRM SWIFT Integration Package put data on file adapter Open SWIFT file envelope Get file from SWIFT alliance gateway Automatic matching process is triggered automatically whenever a file appears PI saves file on file adapter Integration package for SWIFT Integration package for SWIFT Create message and send SWIFT Integration Package picks up data Create SWIFT file envelope Send file to SWIFT alliance gateway Creation of MT message automatically or manually in the correspondence monitor Save message on file server PI picks up the data from the file server in predefined time intervals Integration package for SWIFT Integration package for SWIFT SWIFT Integration Package is a PI box and the SWIFT gateway is another separate box.
FXall or Currenex Available for FX spot. / Page 22 . All rights reserved.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. FX forward and FX options Possible to enter all data for the FX transaction with one interface Bank A SAP Treasury and Risk Management Market Place Bank B Bank C © SAP AG 2009.
soybean Coffee. gas. coal Metals including noble metals Corn. maize. / Page 23 . sugar Orange juice. lemon juice Cattle (cows. cotton. cacao. pigs) Certificates on emission Hedging Instruments Futures and Traded Options Forwards Swaps (planning status) OTC Options (planning status) © SAP AG 2009.Managing Commodities and Financial Instruments Risk All kinds of commodity types and hedging instruments can be managed in SAP Commodities (examples) Crude Oil. All rights reserved.
Exposure Management 2.3.Agenda 1. Overview 2. Hedge Management 2. Risk Analyzers 3. Transaction Management 2. Market Trends and Value Proposition 2. Summary © SAP AG 2009. All rights reserved. / Page 24 .18.104.22.168. Solution Offering 2.
/ Page 25 .if needed Treasury and Risk Management SAP ERP Operations SD. All rights reserved.Exposure Management – Example for Commodities Commodity front office system . MM or GTM Exposure Management Hedge Management Excel Spreadsheets Market Risk Analyzer Transaction Manager Other sources of Exposures SAP ERP Financials © SAP AG 2009.
All rights reserved. / Page 26 .Financial Risk Management Process Using Exposure Management Risk identification Build exposure positions Lifecycle of Exposure Position Deal request Hedge Management NPV /VaR calculation Risk Dashboard Gathering Data from from various source systems Classify Exposure as forecasted transaction firm commitment and link to different risk factors like commodity price or foreign exchange risk (EUR-USD) Storage and update of the lifecycle of the Exposure positions Possibility to generate deal requests out of the Exposure position and send it to marketplace or front office system Calculated exposures are available as hedged item in hedge management Possibility to calculate various risk key figures like Net Present Value and Value at Risk on Exposure positions as well as financial transaction Risk dashboard combining operational and financial Exposures © SAP AG 2009.
1.3.4. Summary © SAP AG 2009. Transaction Management 2.2.5. / Page 27 . Risk Analyzers 3.Agenda 1. Market Trends and Value Proposition 2. Exposure Management 2. All rights reserved. Hedge Management 2. Solution Offering 2. Overview 2.
/ Page 28 .Hedge Management Hedging Item (Exposure) Hedging Instrument (Derivative) Hedging Relationship Effectiveness test /valuation Hedge Accounting © SAP AG 2009. All rights reserved.
g.Scope of SAP‘s Hedge Management Fair Value Hedge Hedging Instruments FX swap. Commodity Swaps) are in planning status Effectiveness Calculation Methods Net Present Value Method / Dollar offset Method¹ Hypothetical Derivative Method Benchmark Method Regression Analysis (EhP 4) © SAP AG 2009. FX forward FRA Interest rate swap Cross currency interest rate swap Commodity Futures and Forwards (EhP4) Other Product Types (e. All rights reserved. / Page 29 .
CAP. Collar FRA. / Page 30 . FLOOR Interest rate swap Cross currency interest rate swap Commodity Futures and Forwards (EhP4) Other Product Types (e. All rights reserved.g. FX options (plain vanilla and average rate).Scope of SAP‘s Hedge Management Cash Flow Hedge Hedging Instruments FX swap. FX forward. Commodity Swaps) are in planning status Effectiveness Calculation Methods Net Present Value Method / Dollar offset Method ¹ Cash Flow Method Hypothetical Derivative Method Regression Analysis (EhP 4) © SAP AG 2009.
All rights reserved.Scope of SAP‘s Hedge Management Hedge of a Net Investment Hedging Instruments Money Market Instruments Forward Exchange Transactions FX and Cross Currency Swaps (note 967104 for ERP2004/ERP2005) FX Options (note 967104 for ERP2004/ERP2005) Effectiveness Calculation Methods Net Present Value Method Cash Flow Method Spot Method Forward Method / All critical Terms match (note 967104 for ERP2004/ERP2005) © SAP AG 2009. / Page 31 .
All rights reserved.0 Generation from FX Forwards (or from a rollover or premature settlement of an FX-Forward) © SAP AG 2009.Hedged Items Hedged Items are Exposures From a manual entry Upload from Money Market Instruments Upload from Risk Objects Upload from FX-Exposure Management Upload from Exposure Management 2. / Page 32 .
/ Page 33 . If the assessment has shown an effective hedging relationship.Process Start date of the Hedging Relationship Is the Hedging Relationship expected to be highly effective in the future? 1 1. 3 3. 2 2. Run the retrospective effective assessment to prove the past effectiveness of the hedging relationship. © SAP AG 2009. Run the prospective effective assessment to prove if the hedging relationship is expected to be highly effective. Balance sheet date time Was the Hedging Relationship highly effective in the past? Is the Hedging Relationship expected to be highly effective in the future? 4 4. run the Effective Measurement to determine the exact amount to be posted to OCI/Equity or P/L. Run the prospective effective assessment to prove if the hedging relationship is expected to continue to be highly effective. All rights reserved.Effectiveness Testing .
Regression basic statistics.Effectiveness Test .Regression Analysis Report Regression report contains – Data used for analysis. All rights reserved. ANOVA and Confidence interval and range © SAP AG 2009. / Page 34 .
Integration into Accounting Classification of the valuation results Effective portion Ineffective portion Free standing portion Time value Reclassification when exposure hits earning Manual reclassification Automatic distribution over a user defined time interval Partial reclassification (if exposure changes or is overhedged) © SAP AG 2009. / Page 35 . All rights reserved.
00 1 Delta NPV 3 4 5 P/L 2 4 5 © SAP AG 2009.Valuation Posting Logic with FAS133/IAS39 1 2 3 4 Determine derivative´s fair value Determine value of any free-standing portion of the derivative Determine OCI/Equity target balance and amount to be posted to OCI/Equity Post remainder of clearing OCI/Equity distribution account to P/L (ineffective portion of the hedge) Distribution FX . All rights reserved. / Page 36 OCI/Equity Free-standing portion Ineffective portion [ Delta time value ] 3 Effective portion .Balance Sheet Account 1 Delta NPV 2 OCI/Equity .00 0.Distribution Account Free-standing portion Effective portion Ineffective portion [ Delta time value ] 0.
Expiration and Reclassification When? Hedge accounting ceases prospectively when any of the following occurs: hedge fails an effectiveness test the hedged item is sold or settled the hedging instrument is sold. terminated or exercised management decides to revoke the designation for a hedge of a forecasted transaction. In customizing you can define. All rights reserved. What happens with the hedged item? Future changes in the fair value of the hedged item are accounted for as they would be without hedge accounting © SAP AG 2009. / Page 37 . what should happen with the hedge relationship in the case of infectivity – to dissolve or to dedesignate How? Manually – by reclassifying all or parts of the equity capital balances at once or one-off the part of it or Automatically – by reclassifying over multiple periods on a linear basis What happens with the hedging instrument? As in IAS 39: All future fair value changes in a derivative hedging instrument are recognized in the income statement. the forecasted transaction is no longer highly probable. Future changes in the fair value of any non-derivative hedging instrument are accounted for as they would be without hedge accounting.
2. Introduction 2.3.5. All rights reserved. Portfolio Analyzer 3. Hedge Management 22.214.171.124.5. Transaction Management 2. Market Trends and Value Proposition 2. Credit Risk Analyzer 2. Market Risk Analyzer 2. Exposure Management 2. / Page 38 . Solution Offering 2.5.1. Risk Analyzers 2. Overview 2.3.5.Agenda 1. Summary © SAP AG 2009.2.4.
All rights reserved.Risk Analyzers – Risk Analytics “ Risk analytics is clever maths. / Page 39 . Risk Magazine Value-at-risk Net present value Exposures Multidimensional limit management Portfolio Returns What-if analysis Back-Testing Sensitivity analysis Market data shifts and scenarios Portfolio Benchmarking © SAP AG 2009. but the hard slog is the integration.
All rights reserved. / Page 40 General Ledger . Integration © SAP AG 2009.SAP Modules in Treasury Analyzers Market Risk Analyzer Portfolio Analyzer Credit Risk Analyzer Analyzers Market Data FX Rates Yield Curves Indices Volatilities Transaction Manager Money Market Securities Derivatives Forex Commodities REPORTING: Externally maintained transactions Businesspartner Cash Managem.
Agenda 1.5. Market Trends and Value Proposition 2. Portfolio Analyzer 3. Summary © SAP AG 2009. Introduction 2. / Page 41 . Credit Risk Analyzer 2.5.3. Risk Analyzers 2. Solution Offering 2. Transaction Management 2.2. All rights reserved.5.2.5. Market Risk Analyzer 2. Overview 126.96.36.199. Exposure Management 2.5. Hedge Management 2.1.1.
Limit Deal Reporting Exposure Limit Partner 8.3% m e n t © SAP AG 2009.7 Carlton 12.3 4. All rights reserved.8 Brightline Free Limit 2.1 716.K.0 68.0% 256.4 28. / Page 42 Start of workflow.5 Euro Bank 632.6 -7.3 700.7 United Bank 688.5 Util.3% 96.Process in Credit Risk Management End-of-Day Processing T r a n s a c t i o n M a n a g e Request Limit check Attributable amount O.5 10. when limit is ‘Breached’ .9% 90. in % 80.
Can compare same key figures from different portfolios or Different key figures from the same portfolio Limits can be defined as „Percentage‟. „Absolute‟ Or „Both Percentage and Absolute‟ © SAP AG 2009.Relative Limits Choose Utilization Portfolio Utilization Key Figure Choose Reference Portfolio Reference Key Figure Define Limits Percentage Define Limits Absolute Can choose the „Utilization Portfolio‟ and the „Reference Portfolio‟. They can be same or different. / Page 43 . All rights reserved.
3. Exposure Management 2. Transaction Management 2. Summary © SAP AG 2009. Hedge Management 2.5. All rights reserved.Agenda 1. Overview 188.8.131.52. / Page 44 . Market Trends and Value Proposition 184.108.40.206. Portfolio Analyzer 3.5. Risk Analyzers 2. Credit Risk Analyzer 2.3. Solution Offering 2.2. Introduction 2.2. Market Risk Analyzer 2.4.
VaR . / Page 45 . VaR.Market Risk Analyzer – Risk Controlling SAP EDT CM CML TM Datapool NON SAP External Market data Results NPV.. All rights reserved. Exposures … Analysis/Reporting/Planning Online data feed Simulated Shifts Scenarios Pricing Engine NPV.. © SAP AG 2009.
Risk Hierarchy Defining the risk hierarchy and evaluation structure Consolidation LEVEL Risk factors Consolidation LEVEL 1 Money market EUR Interest EUR Consolidation LEVEL 2 ... / Page 46 . All rights reserved. 3-month 6-month FIBOR FIBOR EUR EUR EUR 12-month FIBOR 1-year 3-year SAP USD GBP FIBOR FIBOR Stock Spot Spot EUR EUR Capital market EUR Stocks Currencies GBP GBP Currency 3-month LIBOR 6-month LIBOR Interest GBP Interest Swap USD 1-year 1-year Swap Swap USD USD © SAP AG 2009.
/ Page 47 ..0 9.. LEVEL 1 Trading: Bonds LEVEL 1 Trading: Swaps Base portfolio Bonds/Frankfurt Base portfolio Bonds/New York Market data 10.0 Yield curve 5 (+) Current.0 5.0 8..0 4.0 7. Non-linear Options Caps .0 6.0 3.. yield curve Yield curve 6 (long-term) Risk management NPV 1M 2Y 4Y 6Y 8Y 10 Y Saved market prices Real-time market prices Flexible scenarios Rule shifts Risk Price calculator (user exit) © SAP AG 2009.0 2.Net Present Value Concept Transaction data Calculation Mark-to-market Sensitivities Duration Convexity Exposure Crash/stress tests Evaluations Company Portfolio Profit center Product LEVEL 2 Trading: Interest products Linear Debts Assets ... All rights reserved.
9 -52.6 -58.3 -57. sheet Debts Assets .0% 30 25 20 15 10 5 0 < 500 <-75 <-45 <-35 <-25 < -95 < -85 < -65 < -55 <-15 < 15 < 25 < 35 < 45 < 55 < 65 < 75 < 85 <-5 <5 Market interest rates Exchange rates Stock prices Volatilities Correlations Price calculator (user exit) © SAP AG 2009.7 -55..3 -93.8 560.5 -53..2 565. Non-linear Options Caps .0 Confidence Interval 99.3 -60.5% 50 45 40 35 95.5 -79.8 546. 1 2 3 4 5 6 7 8 9 10 11 12 13 Company Portfolio Profit center Product LEVEL 2 Trading: Interest products LEVEL 1 Trading: Bonds LEVEL 1 Trading: Swaps Base portfolio Bonds/Frankfurt Base portfolio Bonds/New York Historical market parameters Date Feb 81 May 81 Mar 80 Feb 90 Feb 80 Feb 74 Jun 82 May 83 Oct 72 Feb 94 May 79 Oct 79 Feb 85 NPV 483.Value at Risk Transaction data Calculation Historical simulation Monte Carlo Evaluations Bal.6 564. All rights reserved.2 -74. Full valuation Delta method Delta/gamma method Variance/covariance Backtesting No.3 -71.6 538..8 557.9 524.5 569.1 Risk -134... / Page 48 .8 530.6 -49.3 -87..9 543.5 562.0% Risk management 97.5 559.
Fixed-rate loans. All rights reserved. Variable loans © SAP AG 2009.Calculation of future cash flows 3. FRAs Straight bonds. for example: Black & Scholes Binomial (C-R-R) Garman/Kolhagen Hull-White Caps/Floors Options Swaptions Floating rate bond. Money market Uncertain cash flows Option price formulas.Discounting Swaps.Calculation of forward rates using the assigned yield curve 2.Market Risk Analytics – Net Present Value (NPV) Calculation Net Present Value Calculation Linear Instruments Non-Linear Instruments Fixed cash flows Discounting with zero bond discounting factors of the relevant yield curves Variable cash flows 1. / Page 49 .
All rights reserved.Market Risk Analytics – Value at Risk Calculation Alternatives Value at Risk Methods and Algorithms Historical Simulation Monte Carlo Simulation VarianceCovariance (aka „Analytical Method“) Full Valuation Delta Approach Delta-Gamma Approach X X X X X X X X Reporting & Backtesting Analysis of risk factor contributions © SAP AG 2009. / Page 50 .
All rights reserved.VaR Simulation Approaches Simulated changes to risk factors Changes to present values of positions Distribution of position changes USD interest rate Frequency Present value EUR/USD Confidence interval Risk Opportunity Delta/Gamma DowJones VaR 1 2 3 4 © SAP AG 2009. / Page 51 Position .
Market Risk Analytics – Reporting Results Database (RDB) Analyzer Information System (AIS) Results Database (RDB) RDB is used to store calculated key figures for later evaluation Key figures are calculated in an endof-day batch run Stored results remain available and can be archived Key figures are stored for individual transactions as well as aggregated according to desired portfolio hierarchies RDB reports are based on the AIS 02-28-05 Portfolio Hierarchy B Key Figure Set 2 Portfolio Hierarchy B Portfolio Hierarchy B Portfolio Hierarchy A Key Figure Set 1 12-19-05 12-18-05 Key Figure Set 2 Key Figure12-17-05 Set 2 Portfolio Hierarchy B Portfolio Hierarchy B 01-31-05 Key Figure12-31-05 Set 2 Key Figure Set 2 © SAP AG 2009. All rights reserved. / Page 52 .
Results Database – Risk Cockpit © SAP AG 2009. All rights reserved. / Page 53 .
All rights reserved.Compliance Reporting – IFRS 7 Reporting Categories – Market Risks Standard reports for compliance to IFRS 7 –Market risk section. Reports related to exposures for: Currency risks Interest rate risks Fair Value Changes reports for risks: Currency risks Interest rate risks Commodity price risks Security price risks © SAP AG 2009. / Page 54 .
Risk Analyzers 2. All rights reserved. Transaction Management 2. Exposure Management 2. Market Risk Analyzer 2. Summary © SAP AG 2009. Portfolio Analyzer 3.3.1.Agenda 1. Solution Offering 2. Market Trends and Value Proposition 2.1.2. Hedge Management 2. Introduction 2. Overview 220.127.116.11.4. / Page 55 .5. Credit Risk Analyzer 18.104.22.168.5.
Portfolio Analyzer Investment strategy Determination of benchmark Improvement and alignment Building organizational structures 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 56 .
/ Page 57 .Performance Analytics – Benchmarking Reporting © SAP AG 2009. All rights reserved.
Overview 2.4.2. Summary © SAP AG 2009. / Page 58 . Risk Analyzers 3.3.1. Transaction Management 2. Hedge Management 2. Market Trends and Value Proposition 2. Exposure Management 2. Solution Offering 2.5.Agenda 1. All rights reserved.
the application helps to comply with legal regulations and compliance requirements . as well as state of the art risk management capabilities Furthermore.Quick Facts – SAP Treasury and Risk Management The SAP Treasury and Risk Management application is part of Treasury applications from SAP The application helps you make more effective decisions utilizing timely information on current market conditions It lets you optimize your hedging and risk management processes through exposure management for operational FX and commodity exposures SAP Treasury and Risk Management increases transparency by having operational and treasury exposures evaluated for market risk It supports standard financial instruments and offers integrated and automated straight-through processing.
asug. All rights reserved.sap.com/communities/usergroups.sap.com (SAP ERP >> SAP ERP Central Component >> SAP ERP Enhancement Packages) Training / SAP Education http://www.com/treasury (log-on required) SAP Service Marketplace https://service.com/education User Groups http://www.de http://www.sap.epx for more Contact Your SAP Account and Consulting Engagement Manager © SAP AG 2009.Further Information SAP Public Web http://www.com/erp-treasury Documentation on SAP Help Portal http://help.sap.sap.com http://www.dsag. / Page 60 .
Thank you! © SAP AG 2009. All rights reserved. / Page 61 .