Professional Documents
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Solution Overview: Department, Board Area or Team Date
Solution Overview: Department, Board Area or Team Date
Solution Overview
Today Future
„Business Impact“
Value Value
Liquidity Management
increasing activities increasing activities Management of Financial risks
Bank Relationship Management
Asset und Pension Management
Transaction
Transaction based based
activities
supporting transactional activities
activities Payment transactions
Money market, FX and Derivative
deals
Strategic partner of
the CFO
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?
CFO
“Is our current approach process and risk effective and how do we
benchmark ourselves against best in class treasuries?”
Banks Subsidiaries
© SAP AG 2009. All rights reserved. / Page 6
Challenges: Typical Barriers to Effective and
Compliant Treasury Management
Treasury Requirements
Transparency
Accurate, auditable
accounting
Transparency Reliable, credible
treasury reports
Global cash visibility
Compliance
Segregation of
duties Efficiency
Accounting Compliance Efficiency Streamline
standards processes
Compliant Automate systems
reporting Integrated
communications
Banks Subsidiaries
© SAP AG 2009. All rights reserved. / Page 10 Timely cash and liquidity Forecasts
Agenda
Liquidity Planner
SAP ERP
R/3 Enterprise
Derivatives
IS-IS/DARWIN Project
2001
Market release
for Loans, Securities, 2000
Real Estate Audit
R/3 Launch
1996 Today
1992 1993 1994
R/2 Treasury
Cash Management
Money Market,
Forex, Loans
Front office: Position and deal reporting, Deal capture, Exercise, Dealer slip, Valuation tools,
Management reports:
Online limit check
Positions, Performance,
Back office: Standing instructions, Correspondence Monitor, Netting, Settlement, Rate fixing Ratios, Compliance
(interest, FX), References, Corporate actions, Process monitors
Accounting: Flexible accounting determination, Accounting according to many international
Middle office:
accounting standards
Risk exposure, Controlling,
Foreign Compliance
Money Market Exchange Derivatives Debt Mgmt Securities Commodities
Fixed –term Spot Cap Bonds Bonds Futures
deposits Forward Floor Bank loans Warrants Forwards
Commercial Swaps FRA Commercial Stocks Traded Options
Data export:
Paper Options
Swaps Paper Certificates Excel, Flat files, BI
Repo Options Facilities
Repo
Futures
Futures Sec. lending
Transaction Manager
Portfolio Analyzer
Reporting
© SAP AG 2009. All rights reserved. / Page 16
Process Overview
Automatic
posting
Valuation
(parallel)
Automatic creation
of correspondence
Automatic accrual/
deferral
Real Straight-Through Processing from deal capturing via new integrated Correspondence
Monitor to parallel accounting with a highly sophisticated authorization concept behind.
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 monitor intervals
Save message on file
server
SWIFT Integration Package is a PI box and the SWIFT gateway is another separate box.
© SAP AG 2009. All rights reserved. / Page 21
Straight-Through Processing for External
Deals
Bank A
Bank C
Hedging Instruments
Futures and Traded Options
Forwards
Swaps (planning status)
OTC Options (planning status)
Excel
Spreadsheets
Build Lifecycle
Risk Deal Hedge NPV /VaR Risk
exposure of Exposure
identification request Management calculation Dashboard
positions Position
Hedging Relationship
Effectiveness
test /valuation
Hedge Accounting
© SAP AG 2009. All rights reserved. / Page 28
Scope of SAP‘s Hedge Management
Fair Value Hedge
Hedging Instruments
FX swap, FX forward
FRA
Interest rate swap
Cross currency interest rate swap
Commodity Futures and Forwards (EhP4)
Other Product Types (e.g. Commodity Swaps) are in planning status
Hedging Instruments
FX swap, FX forward, FX options (plain vanilla and average rate), Collar
FRA, CAP, FLOOR
Interest rate swap
Cross currency interest rate swap
Commodity Futures and Forwards (EhP4)
Other Product Types (e.g. Commodity Swaps) are in planning status
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)
1.
1 Run the prospective 2
2. Run the retrospective 4.
4 Run the prospective
effective assessment effective assessment to effective assessment
to prove if the prove the past to prove if the
hedging relationship effectiveness of the hedging relationship
is expected to be hedging relationship. is expected to
highly effective. continue to be highly
3.
3 If the assessment has effective.
shown an effective hedging
relationship, run the
Effective Measurement to
determine the exact
amount to be posted to
OCI/Equity or P/L.
© SAP AG 2009. All rights reserved. / Page 33
Effectiveness Test - Regression Analysis -
Report
Regression report contains – Data used for analysis, Regression basic statistics,
ANOVA and Confidence interval and range
© SAP AG 2009. All rights reserved. / Page 34
Integration into Accounting
4 Ineffective portion
0,00 0,00
P/L OCI/Equity
2 Free-standing 3 Effective portion
portion
4 Ineffective portion
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, the forecasted transaction is no longer highly probable.
In customizing you can define, 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
“ Risk analytics is clever maths, but the hard slog is the integration.
Risk Magazine
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.
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 96.0%
Carlton 688.1 716.7 28.6
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 42
Relative Limits
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
SAP
EDT
CM CML TM Datapool
NON SAP - External
Market data
Results
NPV, VaR,
Exposures …
Analysis/Reporting/Planning
Online data feed
Simulated Pricing Engine
Shifts
Scenarios NPV,
VaR ..
.
© SAP AG 2009. All rights reserved. / Page 45
Risk Hierarchy
Convexity
Assets Caps Exposure Product
Base portfolio
Bonds/Frankfurt
Base portfolio
Bonds/New York
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)
20
15
Exchange rates 10
Stock prices
0
< 500
<-75
<-45
<-25
<-15
< -95
< -85
< -65
< -55
<-35
< 15
< 25
< 35
< 45
< 55
< 65
< 75
< 85
<-5
<5
Volatilities Price calculator
Correlations (user exit)
Calculation Alternatives
Value at Risk Historical Monte Carlo Variance-
Methods and Algorithms Simulation Simulation Covariance
(aka „Analytical Method“)
Full Valuation
X X
Delta Approach
X X X
Delta-Gamma
X X X
Approach
Analysis of
risk factor
contributions
USD interest
rate
Frequency
Present value
EUR/USD Confidence
interval
Risk Opportunity
Delta/Gamma
DowJones
VaR
Position
1 2 3 4
02-28-05
Portfolio Hierarchy B Key Figure Set 2
12-19-05
12-18-05 01-31-05
Key Figure12-31-05
Portfolio Hierarchy B Key Figure Set 2
Key Figure12-17-05
Portfolio Hierarchy B Set 2
Portfolio Hierarchy B Set 2
Portfolio Hierarchy A Key Figure Set 1
Portfolio Hierarchy B Key Figure Set 2
SAP Treasury
and Risk
Management
Reporting
and revision
Risk adjustment
Performance measurement
Benchmarking
Portfolio Analyzer
© SAP AG 2009. All rights reserved. / Page 56
Performance Analytics –
Benchmarking Reporting
User Groups
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Your SAP Account and Consulting Engagement Manager