Solution Overview Presentation SAP Treasury and Risk Management

SAP Treasury and Risk Management
Solution Overview
Department, Board Area or Team

Date
Agenda
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
3. Summary
© SAP AG 2009. All rights reserved. / Page 4

The Evolving Role of Corporate Treasury
Today Future
 Decisions regarding strategy of

Management / Guidance Management / Guidance financing and asset allocation
 Governance Risk and Compliance
activities
 „Business Impact“
Value Value
increasing increasing  Liquidity Management
activities activities  Management of Financial risks
 Bank Relationship Management
 Asset und Pension Management
Transaction
Transaction based  supporting transactional activities
activities based
 Payment transactions
activities
 Money market, FX and Derivative
deals
Strategic partner
of the CFO
Source: „ Der Finanzbereich im Umbruch“ (Dr. Michael Kieninger, Horváth AG, SAP Infotage 2007)
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?”
Treasury Risk Controller SALARIES Group Treasurer

“How much of our fx portfolio is hedged “I’m not sure if our forecast allows
and are these hedges effective according us to fund the upcoming
to our hedge accounting policy” acquisitions without external loans
from our banks?”
Trader Cash Manager

“I cannot simulate risk scenarios and “It takes weeks to reconcile
I am not able to generate ad-hoc
overviews on key risk indicators.
Is this organization prepared to: account data across multiple banks
to determine our company cash
Furthermore I have to capture our  Increase process efficiency? position”
deals manually three times in
different systems”  Reduce finance operating costs?
 Optimize the global banking structure?
Inhouse Bank Mgr AP/AR Manager

“My intercompany reconciliation and “I don’t have an integrated bank
netting process is not integrated, not connectivity and this turns out to be a
transparent and contains often errors. compliance issue. We need a higher
We never can build a payment factory degree of automation to be scalable”
on this fundament”
Banks Subsidiaries
Challenges: Typical Barriers to Effective and
Compliant Treasury Management
 Lack of coordination across  Fragmented and

entities and departments inefficient payment and
cash management
 Multiple payment locations
and disbursement accounts  Paper-based and labor-
High Cost of intensive
 Multiple charts of accounts
in various locations Finance Operations  Lack of standardization
Risk Awareness
 Poor insight into overall  Fragmented, stand-alone
Non-transparent
company risk picture systems
Processes
 Poor insight into sources and  Limited bank
uses of cash and their timing communications integration
 Incomplete insight into global  Weak integration with

cash positions GL and AR systems

What Our Customers Expect
Financial Excellence in Treasury Operations!
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

Overcome Your Treasury Barriers with SAP
 Pinpoint risks and mitigate them

Insight &  Gain better insight into liquidity requirements
Control  Manage cash and improve returns
 Create central ‘payment factories’

Efficiency  Real straight-through processing for financial transactions
 Capture financial risk exposures from operational systems
 Establish greater control over outgoing payments

 Manage FX, interest rate and commodity risk and comply to
Compliance regulatory standards
 Automation of internal controls (SOX)
 End-to-end ERP-based treasury integration into purchase, sales,

production and finance
IT Systems  Reduce number of bank integrations and support costs through open
standards

SAP Streamlines Finance Processes and
Treasury Operations
CFO
“I believe my treasury department
Treasury Risk Manager is doing a great job!” Group Treasurer
“All lights are green. Our FX exposure is “Our liquidity is excellent - we can fund
hedged and our sales revenue safe” our next merger without external
borrowings”
SALARIES
Trader  Timely cash and liquidity Forecasts Cash Manager

“Great reports and one single “We reconcile our account data
deal entry screen are supporting
 Greater control over payments across multiple banks to
my day-to-day work efficiently” determine our company cash
 Reliable global cash management data position in minutes”
 Electronic bank integration
 Standardization and automation
Inhouse Bank AP/AR Manager
 Integrated systems and processes “Our payment process is transparent
Manager due to seamless integration from
“Our central payment factory is up our ERP system into our banking
and running and all processes are software”
highly automated !”
Banks Subsidiaries

Agenda

2.1. Overview
2.5. Risk Analyzers
3. Summary

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, Forex,  R/3 Enterprise
 Credit Risk Analyzer
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

Financial Excellence with
Treasury Applications from SAP
Treasury applications from SAP

Risk Analyzers
Manage Global Financial Credit Risk Analyzer Market Risk Analyzer Portfolio Analyzer
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

Risk Analyzers Reporting

Credit Risk Analyzer Market Risk Analyzer Portfolio Analyzer Ad-hoc reporting:
Point & click, Unified
Utilization: Formulas, Credit Price calculator: NPV, Prices, Yield calculations: databases, Position, P&L,
risk, Settlement risk Sensitivities Money weighted, Period, Cash Flow
Limit management: Value at risk: Variance/covariance, Time weighted,
Limits freely definable, Historic, Monte Carlo Simulation Modified Dietz method
Multidimensional limits Benchmarking: Reporting tools:
Simulate rates: What-if scenario,
Performance Indicators SAP Query, ABAP List, Other
Relative, Absolute
xxxxxxxxxxxxxxxxxxxxxxxx 3rd-party providers, BI,
Business Object Xcelsius and
Dashboards
Exposure Management Hedge Management
Centralized Database to gather group and Administration of hedge plans, exposures, hedge
Results database:
version data and transfer to Hedge Management items and hedging relationships
Portfolio Hierarchy, Drill-down,
Historic results
Transaction Manager
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,
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:
Paper  Options
 Swaps Paper  Certificates Excel, Flat files, BI
 Repo  Options  Facilities
 Repo
 Futures
 Futures  Sec. lending

Agenda

2.1. Overview
2.5. Risk Analyzers
3. Summary

Instrument Support
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
overnight zero interest,  FRA  Index-linked bonds
 Swap  Traded Options
deposits at notice) Bullet repayment/
 Vanilla options  Swaps  Dual currency
 Commercial paper with repayment/
 Barrier options Payer/Receiver, bonds
 Repo ABS structures
(single and double) Fixed/Basis,  Drawable bonds
 Floating rate  Fixed rate loans
 Compound options
Exotics (e.g. roller  Warrant Bonds
 Any cash flows  Floating rate loans coaster)  Stocks
 Delayed Delivery
 Annuity loans  OTC options  Shareholdings
options
 Commercial Paper Security,  Subscription rights
 Average rate
 Facilities (bilateral Swaption, IRG  Investment
options
or syndicated)  Futures
 Basked options certificates
 Exchange traded  Repo/ Reverse
 Exchange-traded options
options Repo
 Security lending
Transaction Manager
Market Risk Analyzer
Credit Risk Analyzer
Portfolio Analyzer
Reporting
Process Overview
Front Mid Back Account- Re-

Office Office Office ing porting
 Exposure  Instrument pricing  Flexible process  Valuation  Standard

analysis  Risk analysis definition according to reporting
 Decision support  Settlement several GAAP’s  Ad-hock reporting
 Sensitivity
in parallel areas
 Comfortable deal analysis  Correspondence  Controlling
entry  Support for IAS
 Interest rate  Limit reporting
39 / US-GAAP
 Standing adjustments  Management
and Hedge
instructions  Payments reporting
Accounting
 On-line limit  Alert monitor
check
 Position reporting

Transaction Manager – Fully Integrated
Automatic
posting
Valuation
(parallel)
Automatic
creation of
correspondence
Automatic
accrual/
deferral

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, IAS39)
 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)

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.
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
mediums and
 Improved status
 Fax, email, print message is tracking for the
formats coming in or
and swift file messages
transfers are
 Fax, email, print going out
and swift file possible
 Show all
preconfigured correspondence
transfers are
 Predefined format preconfigured objects assigned
(incoming and to one deal
outgoing) for
 Predefined format
(incoming and
 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
Process of Incoming and Outgoing Messages
Using SWIFT Integration Package from SAP
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
SWIFT Integration Package is a PI box and the SWIFT gateway is another separate box.
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

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)

Agenda

2.1. Overview
2.5. Risk Analyzers
3. Summary

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

Financial Risk Management Process Using
Exposure Management
Build Lifecycle
Risk Deal Hedge NPV /VaR Risk
exposure of Exposure
identification request Management calculation Dashboard
positions Position
 Gathering  Classify  Storage and  Possibility to  Calculated  Possibility to  Risk

Data from Exposure as update of generate exposures calculate dashboard
from various forecasted the lifecycle deal are available various risk combining
source transaction of the requests out as hedged key figures operational
systems firm Exposure of the item in like Net and financial
commitment positions Exposure hedge Present Exposures
and link to position and managemen Value and
different risk send it to t Value at
factors like marketplace Risk on
commodity or front Exposure
price or office positions as
foreign system well as
exchange financial
risk transaction
(EUR-USD)

Agenda

2.1. Overview
2.5. Risk Analyzers
3. Summary

Hedge Management
Hedging Item (Exposure) Hedging Instrument (Derivative)
Hedging Relationship
Effectiveness
test /valuation
Hedge Accounting
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
Effectiveness Calculation Methods

 Net Present Value Method / Dollar offset Method¹
 Hypothetical Derivative Method
 Benchmark Method
 Regression Analysis (EhP 4)

Cash Flow Hedge
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

 Net Present Value Method / Dollar offset Method ¹
 Cash Flow Method
 Hypothetical Derivative Method
 Regression Analysis (EhP 4)

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)

 Net Present Value Method
 Cash Flow Method
 Spot Method
 Forward Method / All critical Terms match
(note 967104 for ERP2004/ERP2005)

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 2.0
 Generation from FX Forwards (or from a rollover or premature settlement of an FX-Forward)

Effectiveness Testing - Process
Start date of the Balance

Hedging Relationship sheet date
time
Is the Hedging Was the Hedging Is the Hedging
Relationship expected Relationship highly Relationship expected to
to be highly effective in effective in the past? be highly effective in the
the future? future?
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.
Effectiveness Test - Regression Analysis -
Report
Regression report contains – Data used for analysis, Regression basic statistics,
ANOVA and Confidence interval and range
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)

Valuation
Posting Logic with FAS133/IAS39
1 Determine derivative´s fair value

2 Determine value of any free-standing portion of the derivative
3 Determine OCI/Equity target balance and amount to be posted to OCI/Equity
Distribution
4 Post remainder of clearing OCI/Equity distribution account to P/L
(ineffective portion of the hedge)
FX - Balance Sheet Account OCI/Equity - Distribution Account

1 Delta NPV 2 Free-standing 1 Delta NPV
portion
3 Effective portion
4 Ineffective portion
5 [ Delta time value ]
0,00 0,00
P/L OCI/Equity
2 Free-standing 3 Effective portion
portion
4 Ineffective portion
5 [ Delta time value ]

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, 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
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. Future changes in the fair value of any non-derivative hedging instrument are accounted for as they
would be without hedge accounting.
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

Agenda

2.1. Overview
2.5. Risk Analyzers
2.5.1. Introduction
2.5.2. Credit Risk Analyzer
2.5.3. Market Risk Analyzer
2.5.4. Portfolio Analyzer
3. Summary

Risk Analyzers – Risk Analytics
“ Risk analytics is clever maths, but the hard slog is the integration.
Risk Magazine
Value-at-risk What-if analysis
Net present value Back-Testing
Exposures Sensitivity analysis
Multidimensional Market data shifts

limit management and scenarios
Portfolio Returns Portfolio

Benchmarking
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

Agenda

2.1. Overview
2.5. Risk Analyzers
2.5.1. Introduction
3. Summary

Process in Credit Risk Management
T Request End-of-Day Processing

r
a
n Limit
Attributable
s check 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’
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

Agenda

2.1. Overview
2.5. Risk Analyzers
2.5.1. Introduction
3. Summary

Market Risk Analyzer – Risk Controlling
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 ..
.
Risk Hierarchy
Defining the risk hierarchy and evaluation structure

Consolidation Consolidation Consolidation
...
LEVEL Risk factors LEVEL 1 LEVEL 2
3-month FIBOR EUR
6-month FIBOR EUR Money market EUR
12-month FIBOR EUR
Interest EUR
1-year FIBOR EUR
Capital market EUR
3-year FIBOR EUR
SAP Stock Stocks
USD Spot
Currencies Currency
GBP Spot
3-month LIBOR GBP

Interest GBP
6-month LIBOR GBP
Interest
1-year Swap USD
Swap USD
1-year Swap USD
Net Present Value Concept
Transaction data Calculation Evaluations

 Mark-to-market
 Sensitivities  Company LEVEL 2
Trading: Interest products
Linear Non-linear  Duration  Portfolio LEVEL 1 LEVEL 1
 Debts  Options Profit center

Trading: Bonds Trading: Swaps
 Convexity 
 Assets  Caps  Exposure  Product
Base portfolio
Bonds/Frankfurt
Base portfolio
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)

Value at Risk
Transaction data Calculation Evaluations

 Historical simulation
 Monte Carlo  Company LEVEL 2
Trading: Interest products
Bal. sheet Non-linear  Full valuation  Portfolio LEVEL 1 LEVEL 1
 Debts  Options  Delta method Profit center

Trading: Bonds Trading: Swaps

 Assets  Caps  Delta/gamma method  Product
Base portfolio
Bonds/Frankfurt
Base portfolio
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
 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)

Market Risk Analytics – Net Present Value
(NPV) Calculation
Net Present Value Calculation
Linear Instruments Non-Linear Instruments
Fixed cash flows Variable cash flows Uncertain cash flows

Discounting with zero 1.Calculation of forward rates Option price formulas,
bond discounting using the assigned yield for example:
factors of the relevant curve  Black & Scholes
yield curves 2.Calculation of future cash  Binomial (C-R-R)
flows  Garman/Kolhagen
 Hull-White
3.Discounting
Straight bonds, Caps/Floors
Floating rate bond, Swaps, Fixed-rate loans, Options
Variable loans FRAs Money market Swaptions
Market Risk Analytics – Value at Risk
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
Reporting & Backtesting
Analysis of
risk factor
contributions

VaR Simulation Approaches
Simulated changes Changes to present Distribution of

to risk factors values of positions position changes
USD interest
rate
Frequency
 Present value
EUR/USD Confidence
interval
Risk Opportunity
Delta/Gamma
DowJones
VaR
Position
1 2 3 4

Market Risk Analytics – Reporting
Results Database (RDB)
 RDB is used to store calculated key
Analyzer figures for later evaluation
Information  Key figures are calculated in an end-
System (AIS) of-day batch run
 Stored results remain available and
can be archived
 Key figures are stored for individual
transactions as well as aggregated
Results according to desired portfolio
hierarchies
Database
 RDB reports are based on the AIS
(RDB)
02-28-05
Portfolio Hierarchy B Key Figure Set 2
12-19-05
12-18-05 01-31-05
Key Figure12-31-05
Key Figure12-17-05
Portfolio Hierarchy B Set 2
Portfolio Hierarchy B Set 2
Portfolio Hierarchy A Key Figure Set 1

Results Database – Risk Cockpit

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

Agenda

2.1. Overview
2.5. Risk Analyzers
2.5.1. Introduction
3. Summary

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
Performance Analytics –
Benchmarking Reporting

Agenda

2.1. Overview
2.5. Risk Analyzers
3. Summary

Quick Facts –
 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,
as well as state of the art risk management capabilities
 Furthermore, the application helps to comply with legal
regulations and compliance requirements
Further Information
SAP Public Web

 http://www.sap.com/treasury
SAP Service Marketplace (log-on required)

 https://service.sap.com/erp-treasury
Documentation on SAP Help Portal

 http://help.sap.com
(SAP ERP >> SAP ERP Central Component >>
SAP ERP Enhancement Packages)
Training / SAP Education

 http://www.sap.com/education
User Groups
 http://www.asug.com
 http://www.dsag.de
 http://www.sap.com/communities/usergroups.epx for more
Contact
 Your SAP Account and Consulting Engagement Manager

Thank you!

Solution Overview Presentation SAP Treasury and Risk Management

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SAP Treasury and Risk Management

Department, Board Area or Team

1. Market Trends and Value Proposition

© SAP AG 2009. All rights reserved. / Page 4

 Decisions regarding strategy of

Treasury Risk Controller SALARIES Group Treasurer

Trader Cash Manager

Inhouse Bank Mgr AP/AR Manager

 Lack of coordination across  Fragmented and

 Incomplete insight into global  Weak integration with

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

Financial Excellence in Treasury Operations!

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

 Pinpoint risks and mitigate them

 Create central ‘payment factories’

 Establish greater control over outgoing payments

 End-to-end ERP-based treasury integration into purchase, sales,

© SAP AG 2009. All rights reserved. / Page 9

Trader  Timely cash and liquidity Forecasts Cash Manager

© SAP AG 2009. All rights reserved. / Page 10

1. Market Trends and Value Proposition

© SAP AG 2009. All rights reserved. / Page 11

 In-House Cash SAP Business Suite

© SAP AG 2009. All rights reserved. / Page 12

Treasury applications from SAP

SAP Treasury and Risk Management

SAP Cash and Liquidity Management

SAP In-House Cash

© SAP AG 2009. All rights reserved. / Page 13

Risk Analyzers Reporting

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

1. Market Trends and Value Proposition

© SAP AG 2009. All rights reserved. / Page 15

Market Risk Analyzer

Credit Risk Analyzer

Front Mid Back Account- Re-

 Exposure  Instrument pricing  Flexible process  Valuation  Standard

© SAP AG 2009. All rights reserved. / Page 17

© SAP AG 2009. All rights reserved. / Page 18

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

 Automatic posting incl. flexible account determination

Simple Example write-up no write-up

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

Deal Create / send Receive incoming Automatic Error handling /

 Release process  Tracking of  Customizable  Correspondence

Data from file SWIFT Integration Get file from

Alternative deal capturing by connection to Market Places

SAP Treasury and

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

All kinds of commodity types and hedging

© SAP AG 2009. All rights reserved. / Page 23

1. Market Trends and Value Proposition

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

Commodity front office system - if needed

Treasury and Risk Management

Market Risk Transaction

SAP ERP Financials

© SAP AG 2009. All rights reserved. / Page 25

 Gathering  Classify  Storage and  Possibility to  Calculated  Possibility to  Risk

© SAP AG 2009. All rights reserved. / Page 26

1. Market Trends and Value Proposition

© SAP AG 2009. All rights reserved. / Page 27

Hedging Item (Exposure) Hedging Instrument (Derivative)