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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
4
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
7
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
8
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
10
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
11
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
[email protected] [email protected]
THANK YOU