From Insight to Action

Best Practice Treasury Transformation

Steffen Diel, Head of Global Treasury, SAP Global Treasury, SAP SE

Marc Astor, Global Centre of Excellence, Treasury & Finance, SAP SE

Financial Risk Management

2

SAP’s Global Treasury Organization

3

Group CFO

Assistant

Treasury Operations

and Processes

(Back Office)

Treasury Committee

SAP’s Global Treasury

Treasury Finance

(Middle Office)

Equity Programs

& Projects Further Treasury Units Front Office

Dealing (FX, MM,

Securities, Equities,

Derivatives)

Ariba Treasury

Subsidiary Service Center

FX, MM and Investments

FX Hedging &

Optimization

Share Buyback Strategy &

Execution

Interest Rate and Asset

Management

Financial Risk

Management

Capital Market Strategy &

Debt Investor Relations

Subsidiary Service &

Policy

Bank Relationship

Management

Support Post-Merger

Integration and Other

Projects

External & Internal

Funding

Cash Management

Deal Checking &

Settlement

Worldwide Bank

Connectivity

Bank Account

Administration

Stock Based

Compensation

Liquidity Planning

Projects with Subsidiaries

Projects with Global Tax

Regional Treasury

Center

Financial Market

Regulation

Forecast Finance Income

& FX Result

Treasury Center

Ireland

The Foundation: SAP‘s Treasury Guidelines

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Contents Rationale Scope

Framework for all

Treasury activities

throughout the Group

Definition of goals and

principles of SAP's

financial management

based on SAP's corporate

values, strategies and

policies

Support of SAP's global

strategy by enhancing

financial goals

Ensure compliance with

(legal) requirements

Risk of non-compliance:

loss of assets

reduction of financial

flexibility

insufficient view on financial

risks

wrong strategic decisions

Applies to:

all SAP Group companies

management of Corporate

and Business Services or

Finance Functions

all SAP employees who are

responsible for and / or

conduct Treasury activities

Enforced by:

Global Treasury, GIAS,

management and external

auditors

Foreign Exchange Rate Risk

Volatility of exchange rates can adversely impact SAP‟s operating performance and financial

stability

Interest Rate Risk

Interest rate movements can negatively influence SAP‟s financial performance on the asset

and liability side (e.g. bank deposits, bank loans, private placements, bonds)

Counterparty Risk

SAP has to protect itself against the default of its counterparties, i.e. banks. Strong increase in

importance since the financial market crisis and the bankruptcy of Lehman Brothers

Liquidity Risk

Liquidity has to be maintained at any time. Furthermore, SAP has to ensure that additional

funds (loans, bonds) can be raised when they are needed and debt can be repaid on time

Operating Risk

SAP has to ensure that internal and external systems for core processes (payments,

settlement of FX deals) are available and executable at all times

Financial Risk Management: Overview

One Single Source of Truth

ERP/

Treasury

Balance Sheet

Exposure Hedging

Forecasted

Exposure Hedging

Counterparty

Risks

Cash and

Liquidity Loans and

Receivables

Deals and

Investments

6

FX Management @ SAP

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Exposure (= amount at risk) definitions:

Economic

Exposure

Translation

Exposure

Transaction

Exposure

Hedging exchange rate fluctuations can result in a competitive advantage or a disadvantage compared to competitors

operating with a different currency mix

Accounting Exposure

The translation of a foreign entity„s financial statement (local currency) to the group„s financial statement (group„s

currency) can result in gains and losses

Balance Sheet Exposure: revaluation of balance sheet items in foreign currency

Forecast Exposure: exchange rate fluctuations can have negative impact on expected future cash flows (cash inflows

and outflows)

Goals and Principles of SAP’s FX Management:

Reduction of P&L volatility

Safeguard EPS

Use of appropriate and approved hedging instruments

No speculation

All balance sheet exposures across all companies and all currencies within SAP Group can be calculated fully

automated in SAP‟s ERP

This “single source of truth” ensures compliance with SAP‟s guidelines and a flexible calculation of FX balance sheet

exposures at any time

* AUD, CAD, CHF, GBP, JPY, USD, ZAR

Balance Sheet Exposures

@ SAP

Calculation of VaR in SAP‟s

ERP

Calculation of Hedge

Ratios in SAP‟s ERP

Calculation of absolute

EUR counter-values in

SAP‟s ERP

Calculation of absolute

EUR counter-values in

SAP‟s ERP

Fully automated in

SAP‟s ERP

Fully automated in

SAP‟s ERP

Fully automated in

SAP‟s ERP

7 main currencies* All currencies

(w/o main currencies*) All currencies

SAP SE SAP Group

(w/o SAP SE)

Exposure quantification

Risk management

approach

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Balance Sheet Exposure Hedging @ SAP

List shows the sum of the absolute

balance sheet exposure across all

currencies per CC in descending

order

Companies with high exposures can

be identified immediately

Significant time savings in analyzing

the exposures can be realized

Single companies and their

exposures can be analyzed with the

group exposure transaction (for all

currencies) and the single company

transaction (up to 10 currencies)

Drill-down function available for

detailed analysis of exposures

TOP 25 overview of total (absolute) Balance Sheet Exposures

9

Balance Sheet Exposure Hedging @ SAP

Calculation for Group

Hedging of expected I/Co license

revenues of SAP SE, focus on transaction

risk

Six main currencies are currently being

hedged on a rolling basis with max.

hedging horizon of 12 months

Hedge ratios of layers as sole criterion for

hedging decisions

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Forecasted Exposure Hedging

Layered Hedging of Expected Transactions

AUD JPY CHF GBP USD

Forecast provided by subsidiaries for the upcoming 12 months

Volume to be hedged = 70% of Forecasted Exposure

Hedge volume split into two hedges / layers

1st Layer: 12 months maturity

40%-60% of hedge volume

2nd Layer: 6 months maturity

80%-100% of hedge volume

BRL

Counterparty Risk: Management Reporting Today

Successful liquidity protection

during the financial crisis

Risk concept ensures broad

investment diversification between

business partners

No investment in complex financial

products

Professional credit risk

management

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EMIR: SAP Global Treasury

leverages SAP‟s treasury solution for

Central Reporting of all SAP group

treasury activities and collects data

that have to be sent to the transaction

register at “t+1” automatically

“By bringing intragroup payments in-

house with SAP In-House Cash, we

have been able to reduce bank fees,

minimize costs associated with

foreign exchange rates, and

significantly lower our risk as an

enterprise operating globally”

Payment Factory with Global

Formats for payments/ reporting.

Automated 24x7 posting of p.a.

> 800.000 payments

> 100.000 bank account statements

> 800.000 statement transactions for

> 250 subsidiaries globally

> 700 bank accounts globally

Gerd Klevenz,

Head of Treasury Operations, SAP AG Andreas Hartmann

Head of Treasury Front Office , SAP AG

We practice what we preach

Every day

Simplify IT &

Processes

Drive Growth

& Innovation

Transform the

business

Enable our people

Finance Transformation at SAP

The “Finance Run Better Together” Program

Business Suite on HANA

SAP HANA Platform

Integrated

Business Planning New capabilities and enhanced

integration for ERP and BPC.

New SAP Cash

Management New product for

Group Cash Management

New SAP Accounting Alternative in-memory

functionality for ERP customers

10,000x Faster

Process massive amounts of data, and

deliver information at unprecedented

speeds

Vastly Simplified IT

Deployable on-premise or in the cloud, SAP

HANA dramatically simplifies complex and

expensive IT architectures

All Applications

Run all transactional and analytical

applications on the same set of data at

the same time in real-time

Bringing Applications & Analytics together

New innovation in Finance powered by a new technology platform

55 days To implement and go live

65,000 Users on a single instance of SAP ERP

>400 hours Cut from financial close processes

“The financials add-on for SAP Business Suite powered by SAP HANA was

deployed in less than two months without any disruption to our business. We

now have one common platform for both regulatory and managerial accounting

as well as on-the-fly financial processes. This innovation will help us deliver

stronger financial leadership through better advice on strategic and operational

plans that impact the business performance and effectiveness of SAP.”

Luka Mucic, Chief Financial Officer, SAP AG

Transforming Financial Management with SAP HANA Our achievements

Real-time Insight to Action

New user experience

• Daily Cash Operations

• Cash Positions

• Short-Term Cash Forecasting

• Bank Transfers and Payment Approval

• Analyze Payment Details

• Payment Statistics

• Bank Account Management

• Liquidity Management

• Mid-term Liquidity Forecast

• Actual Cash Flow Analysis

• Embedded Liquidity Plan and Variance

Analysis

Practicing what we preach

New Cash Management @ SAP Group Treasury

Steffen Diel Marc Astor Head of Global Treasury Global COE Finance & Treasury

steffen.diel@sap.com marc.astor@sap.com

THANK YOU