Treasury Management Forex

SAP AG

R

SAP AG

R/3 Treasury

R

SAP AG

R

Overview of Treasury Functions

bank data

businesspartner

market data

CMCM

Financial AccountingFinancial Accounting

US$DEM

MRM MRM Download

Market Risk Management:• interest/currency exposure• mark-to-market valuation• risk analysis/simulation• value-at-risk

Cash Management:• electronic banking• liquidity status• integrated operational systems• control functions

Treasury/Loans Management• managing financial deals and positions• transfer to Financial Accounting• flexible reporting• datafeed interface

Logistics DD

C C

DD

CC100 100

100 100

TM / LOTM / LO

ForexForexMoney MarketMoney Market

DerivativesDerivatives

SecuritiesSecurities LoansLoans

SAP AG

R

Market RiskManagement

TR-MRMTR-MRM

InformationInformationprocurementprocurement

Information systemInformation system

SAP TREASURY

TreasuryManagement

CashManagement

TR-CMTR-CMTR-TMTR-TM

Liquidity/Liquidity/risk analysisrisk analysis

and simulationand simulationTradingTrading Back officeBack office

ControlControland and auditaudit

Transfer toTransfer toFinancialFinancial

AccountingAccounting

Treasury Process

SAP AG

R

Industries

1980

R/3 Launch

IS-IS/DARWIN project for Loans, Securities, Real Estate

today

R/2:R/2:Cash ManagementCash ManagementMoney Market, Forex,Money Market, Forex,LoansLoans

R/3: R/3: Cash ManagementCash ManagementMoney Market, Forex, Derivatives, Securities, Loans, Money Market, Forex, Derivatives, Securities, Loans, Market Risk ManagementMarket Risk Management

Insurance companiesInsurance companies

Mortgage banksMortgage banks

CorporatesCorporates

1992 1993 19941996

Money Market, Forex, Derivatives project

Market Risk Management project

Audit

Market release

SAP AG

R

Countries

1980

R/3 Launch

IS-IS/DARWIN project for Loans, Securities, Real Estate

R/2:R/2:Cash ManagementCash ManagementMoney Market, Forex,Money Market, Forex,LoansLoans

R/3: R/3: Cash ManagementCash ManagementMoney Market, Forex, Derivatives, Securities, Loans,Money Market, Forex, Derivatives, Securities, Loans,Market Risk ManagementMarket Risk Management

Germany, Austria, SwitzerlandGermany, Austria, Switzerland

1992 1993 19941996

Money Market, Forex, Derivatives project

Market Risk Management project

Audit

Market release

English-speaking countriesEnglish-speaking countries

OtherOther

today

SAP AG

R

Customers Trade and industry

Multinational corporations:

Broad range of functions across the whole treasury area

Various organizational structures, such as centralized/decentralized treasury

Covers special national features, such as electronic banking formats

Customers: Shell, Daimler Benz, Petrofina, Burda, ......

Medium-sized companies

All functions available, regardless of company size

Uniform user interface simplifies training and usability

The Treasury workstation concept allows scaled integration into the existing system environment using predefined interfaces

SAP AG

R

Customers Providers of financial services

Insurance companies

Management of securities, loans and real estate

Integrated portfolio and risk management

Customers: Munich Re, Schweizer Rente, Aachener Münchner, .....

Banks

Treasury master data used by SAP Banking

Treasury Management is used as a basis for managing loans given and loans taken by mortgage banks (customer project)

SAP AG

R1) % of all companies surveyed Source: Price Waterhouse Top 500 Survey (Germany)

Main Targets of Treasury

1 To ensure liquidity 95

2 To optimize financing costs 92

3 To optimize yields on financial assets 74

4 To hedge costs (e.g. against possible exchange rate fluctuations) 61

5 To hedge sales (e.g. against possible exchange rate fluctuations) 52

6 To contribute to profit through active management of open positions 30

1)Priority Priority Target Target % % 1)1)

SAP AG

R

1 To ensure liquidityTo ensure liquidity

using SAP Cash Management

TR-CMTR-CM

Liquidity Management

PriorityPriority Target %

SAP AG

R

TR-CMTR-CMCash Management: Functions

Comprehensive analysis of liquidity situation

Data transfer from operative systems: Financials, Logistics and Treasury Management Electronic banking functions

Cash position: daily bank account balances by value date, payment advices

Cash concentration: concentrated bank accounts

Cash pooling: interest paid on bank accounts

Liquidity forecast: expected inflows/outflows from customers and vendors, planned data

Monitoring value dates, payment advices, conditions, checks cashed, ...

SAP AG

R

Area-specificArea-specificprocessingprocessing

BankBankpostingspostings

SubledgerSubledgeraccountsaccounts

BankBankdatadata

Manual Manual account account

statementstatement

SWIFT MT940SWIFT MT940

MultiCashMultiCash

LockboxLockbox

BACSBACS

ETEBACETEBAC

CODACODA

FIDESFIDES

CSB43CSB43

ZENGINKYOZENGINKYO

EUEU

EUEU

USAUSA

UKUK

FF

BEBE

CHCH

EE

JPJP

Czech. Rep.Czech. Rep.

SwedenSweden Cash position and Cash position and liquidity forecastliquidity forecast

BanksBanksSubledgerSubledger

03/1503/151001002525

Electronic Banking Link to payment program Manual/automatic account statements

Various formats supported Postings to G/L and customer/vendor accounts

Bank Polling Processes current bank information

SAP AG

R

Aim: Monitoring bank account movements

comparing value dates

reconciling payment advice andaccount or bank statement

cashed checks analysis

account interest

comparing bank conditions

Control Functions

Monitoring correct paymentsprocessing for planning

SAP AG

R

Grouping:Banks 09/01 09/02 09/03 ________________________________________BANKA 90 130 60BANKB 40- 20- 30- :

Cash Position

Accounts: Subledger 09/01 09/02 09/03 ___________________________________________Account 1 10 30 10-Account 2 20 70 20-Account 3 10 20- 50

Level: BANKA 09/01 09/02 09/03 _________________________________________F0 Subledger 40 80 20B2 Incoming checks 60 60 60B1 Outgoing checks 10- 10- 20-

Current bank account balances/balances per value date (bank postings, payment advices)Accounts managed in local/foreign currency Planning horizon 0-5 daysDocumentation and audit functions

Current liquidity position on bank accounts per specific date

SAP AG

R

Status before concentration after concentrationBank 1 1200 5Bank 2 100 5Bank 3 400 1337Bank 4 -350 3

1350 1350

Cash Concentration

Clearing proposal in accordance with selection criteriaInteractive manual adjustmentCredit transfers and correspondence

Concentrated bank accounts

SAP AG

R

Liquidity ForecastFrance (E4)France (E4)

Payer ofPayer ofcash discount (E2)cash discount (E2)

Payer of net amount (E3)Payer of net amount (E3)France(E4)France(E4)(E2)(E2)

Bank Bank collection(E1)collection(E1)

Payer of net Payer of net amount (E3)amount (E3)

FI =FI =Posting/SalesPosting/Sales

FW =FW =Bill of exchangeBill of exchange

XA = BlockingXA = Blockingreason 'A'reason 'A'

(E5)(E5)

Groups:- Customers with similar payment history - Customers of particular interest

Levels:- Balances specified according to level

Integrated data basis including customers, vendors and planned itemsExpected cash inflows/outflows over a planning horizon of 1-24 weeksSupport for optimizing financial investment and borrowing

Monitoring liquidity situation

SAP AG

R

Treasury Workstation

. . . . . R/2RFRF FDFD

R/3FIFI CMCM

R/3CMCM FIFI

Analysis

CMCM

Liquidity

MRMMRM

Market risks

TMTM

Financial transactions

Trading

Back office

FIFIFinancial Accounting

R/3Treasury

Workstation

FI-ALE FI-ALE

RFC TR-CM-ALE

SAP AG

R

Company 2Company code 2

External bank 2 External bank 2

External banks

External bank 2


Central TreasuryCompany code 1


Liquidity statusCompany codes 2+3

Liquidity statusCompany codes 1-4

internal financial transactions

external financial transactions

external financialtransactions

Corporate Group Evaluations

SAP AG

R

Implementation Strategies

Support for efficient Support for efficient liquidity managementliquidity management

Support for efficient Support for efficient liquidity forecastingliquidity forecasting

Advantage:Advantage:RationalizationRationalization

Advantage:Advantage:Integration Integration

Trad

itiona

l app

roac

h with

Finan

cial A

ccou

nting

Process-oriented with Logistics:

Materials Management / Sales & Distribution

TR-CMTR-CM

FIFIMM

SD

extended forecast horizon extended forecast horizon via link to the supply chain via link to the supply chain

automatic data transferautomatic data transfer reduced transaction costsreduced transaction costs

SAP AG

R

Automatic data transferAutomatic data transfer reduced transaction costsreduced transaction costs

Trad

itiona

l app

roac

h with

Finan

cial A

ccou

nting

Support for efficient liquidity Support for efficient liquidity managementmanagement

Advantage:Advantage:RationalizationRationalization

FIFI

TR-CMTR-CM

Area-Area-specific specific processingprocessing

Cash Cash positionposition

BankBankdatadata

BankBankpostingspostings

Sub-Sub-ledgersledgers

Rationalization: Electronic Banking

SAP AG

R

extended forecast horizon extended forecast horizon via link to the supply chain via link to the supply chain

Process-oriented with Logistics:

Materials Management / Sales & Distribution

Support for efficient liquidity Support for efficient liquidity forecastingforecasting

Advantage:Advantage:Integration Integration

MM

SD

Integration

Goods receipt

InvoiceInvoice

PaymentPayment

AccountAccountstatementstatement

Cash positionCash positionPayment after Payment after

arranged/forecast datearranged/forecast dateValue date based on Value date based on

bank statementbank statement

Order

CashCashManagementManagement

Delivery date and Delivery date and payment conditionspayment conditions

updated payment updated payment historyhistory

Liquidity forecastLiquidity forecast

TR-CMTR-CM

Integration of Logistics

SAP AG

R

Cash Position and Liquidity Forecast

Cash PositionCash Position Liquidity ForecastLiquidity Forecast

Bank accountsBank accountsin currency:in currency:Account 1Account 1 ::Account nAccount nTotalTotal

PaymentPaymenttransactionstransactionsin transit:in transit:- incoming - incoming - outgoing- outgoing

FinancialFinancialinvestmentsinvestmentsandandborrowingsborrowings

Subledgers:Subledgers:- A/R- A/R- A/P- A/P- Purchase - Purchase orders orders - Orders- Orders

SAP AG

R

TRADINGTRADINGCashCash

managementmanagementdecisiondecision

Marketinformation

Cash Position and Liquidity Forecast


Bank accountsBank accountsin currency:in currency:Account 1Account 1 ::Account nAccount nTotalTotal

PaymentPaymenttransactionstransactionsin transit:in transit:- incoming - incoming - outgoing- outgoing

FinancialFinancialinvestmentsinvestmentsandandborrowingsborrowings

Subledgers:Subledgers:- A/R- A/R- A/P- A/P- Purchase- Purchase orders orders - Orders- Orders

SAP AG

R

Cash Management Decision

FinancialsFinancials

G/LG/Laccountsaccounts

Customers/Customers/vendorsvendors

TreasuryTreasury

TR-TMTR-TM

MM/SDMM/SD

OrdersOrders

LogisticsLogistics

FIFIFIFI


Cash Cash managementmanagement

decisiondecisionMarket

information

TRADINGTRADING

SAP AG

R

Integration with other SAP modules

TR-TMTR-TM

TR-CMTR-CM

TR-TMTR-TM TR-TMTR-TM

FIFI

MM

SD

FinancialsFinancials

G/LG/Laccountsaccounts

Customers/Customers/vendorsvendors

TreasuryTreasury

TR-TMTR-TM

MM/SDMM/SD

OrdersOrders

LogisticsLogistics

FIFIFIFI

Cash Cash managementmanagement

decisiondecisionMarket

information


TRADINGTRADING

SAP AG

R

Treasury and Market Risk Management

Priority Target %1 To ensure liquidity 952 To optimize financing costs 923 To optimize yields on financial assets 744 To hedge costs (e.g. against possible

exchange rate fluctuations) 615 To hedge sales (e.g. against possible

exchange rate fluctuations) 526 To contribute to profit through active

management of open positions 30

SAP AG

R

Market RiskManagement

Implementation of SAP Treasury Management

Treasury and Market Risk Management

TR-TMTR-TM TR-TR-MRMMRM

Priority Priority TargetTarget1 To ensure liquidity 952 To optimize financing costs 923 To optimize yields on financial assets 744 To hedge costs (e.g. against possible

exchange rate fluctuations) 615 To hedge sales (e.g. against possible

exchange rate fluctuations) 526 To contribute to profit through active

management of open positions 30

SAP AG

R

Treasury Management: Functions TR-TMTR-TM

Complete financial transaction and position managementSupport of trading and back office functionsFunctions to track, check and release transactionsData transfer to Financial Accounting(including accrual/deferral and valuation)

Flexible settings to accommodate company-specific transaction and position managementprocesses

Financial transactions assigned to portfolios or managed in securities accounts

Flexible reporting and portfolio analysis

Datafeed interface

SAP AG

R

Selection of Product TypesProduct typesProduct types

Money market

Securities Loans Forex

Fixed-term

depositsDeposits at

noticeCommercial

Paper

StocksSubscript. rightsInvestment

certificates BondsConvertible

bonds Warrant bonds Warrants

Mortgage

loansBorrower's

note loansPolicy loans

Forexspotdeals

Forwardexchangedeals

Foreign exchangeswaps

Cap / Floor FRA Swaps

- Interest rate- Currency- Cross currency int.rate

OTC options / futures

- Currency- Currency barrier - Interest rate- Stock

Swaption, IRG

Hedginginstruments

Investment/Borrowinginstruments

Derivative

instruments

SAP AG

R

Targets Targets InformationInformationprocurementprocurement

AssessmentAssessmentof possible of possible solutionssolutions

InstrumentsMethodsMeasurements

Identificationof appropriatefinancialtransactionsSimulationof alternativeresults

Selection of analternative

TradingBack officeAccountingReporting

ControllingControlling

Processing /Processing /ControlControl

Internal:- liquidity status- risk positionExternal:- market data

Analysis and Trading Process

Earnings/riskEarnings/risktargetstargets

DecisionDecision

SAP AG

R

TradingTrading

Transaction and Position Management Process

PostingsPayment activitiesReversalsAccruals/deferralsValuation

Create order/contract Exercise/expiration Give notice Rollovers Exercise rights

User authorizationLimit management

BackBackofficeoffice

Release

AccountingAccounting

Settlement/Control Interest rate adjustment Netting References Confirmation letters Securities account transfers Corporate actions

SAP AG

R

Trading Support

Company-specific organizational structures represented in the system, internal and external transactions

Uniform trading screen with aids for data entry and processing as well as fast entry templates

Trader and user authorizations for financial instruments and functions, change documents

Limit management Standing instructions for specific business partners or

organizational units allow bank details and payment details to be assigned to transactions automatically

SAP AG

R

Trading SupportTrading Support

optional:optional:

OrderOrder ContractContract

Business partner Business partner managementmanagement

Partner data

MarketMarketdatabasedatabase

Market data

Standing Instructions

• Payment details• Correspondence• Derived flows

- Entry and editing functions - Valuation toolsstanding instructions NPV calculatorcopying functions option price calculator shortcuts and tree structures etc.fast entrycollective/fast processing

- Automatic checks - dealer slip working days - limit management

trader and business partner - change documentsauthorization

SAP AG

R

Basis forupdating Cash Management

updating Financial Accounting via flexible account determination

triggering payment

updating items

accrued/deferred interest

payment initiation

foreign currency valuation

yield calculation

Financial Transactions: Cash Flow

Amount Amount invested/invested/borrowedborrowed

ACTUALACTUAL

PLANNEDPLANNEDConditionCondition

TransactionTransaction

Investment 4/1/YY 1m DEM made

Interest 7/1/YY 10,000 DEM anticipated

Repayment 7/1/YY 1m DEM anticipated

Cash flow (example)

SAP AG

R

Financial Transaction ArchitectureFinancial Transaction Architecture

Product type

Transaction type

Business partner

Transfer flow

Valuation flow

Accrual/deferral flow

Flows describing structure characteristics

Paymentinformation

Postinginformation

Calculation bases

Curre

ncies

Bal. s

heet

acct

Trad

erTe

rm

General infoGeneral info HistoryHistory

Inte

rest

Repa

ymen

tConditionsConditions

SAP AG

R

Sequence Defined using Processing Categories

Order expiration Termination

Contract settlement Exercise/expiration

settlement Knock-in/knock-out

settlement Termination settlement

ContractContract

Exercise/expirationKnock-in/knock-outTermination

optional:optional:OrderOrder

with/withoutorder ContractContract

TradingTrading

Example: Derivatives

with/withoutsettlement

Back officeBack office

SAP AG

R

Contract

Contract

Exercise/expiration

ContractAlternative

without settlementwith/without

order

Example: Currency optionContract Contract

Alternativewith settlement

Trading Back office

Example: Currency barrier option with knock-in

Contract settlement

Knock-in settlement

Exercise/expiration settlement

Contract

Knock-in

Exercise/expiration

Other Examples for Processing Categories

with/withoutorder

SAP AG

R

Financial Transactions in Cash Management

51A

SAP AG

TB

0001

Assign Cash Management levels

Fixed-term deposit

Subledger time dep.

10 Contract

10/02 10/03 10/03 later10/05

Cash Management: Display Levels

Banks Banks Le Description

TB. . .. . . . . .. . .

OBOB Curr. optionCurr. option. . .. . . . . .. . .

DBDB Foreign exch.Foreign exch.

Balance xxx,xxx xxx,xxx xxx,xxxxxx,xxx xxx,xxxxxx,xxx

132,323 xxx,xxx xxx,xxx xxx,xxxxxx,xxx

. . . . . . . . . . . .. . .

. . . . . . . . . . . .. . .

xxx,xxx xxx,xxx xxx,xxx xxx,xxxxxx,xxx

xxx,xxx xxx,xxx xxx,xxx xxx,xxxxxx,xxx

Time deposits

10/02 10/03 10/04 10/05 later

SAP AG

R

Back Office Support Check financial transactions upon settlement

Structure characteristics and allocation to portfolios/finance projects

Payment details

Collective processing and editing functions Confirmation management / confirmation status

Outgoing confirmations, option of generating S.W.I.F.T. files and link to FX-Match via user exit

Enter and match incoming confirmations, evaluate overdue counterconfirmations

Monitor limit utilization as part of end-of-day processing Netting of financial transactions (payment netting)

SAP AG

R

Back Office Processing

Confirmation Confirmation

CorrespondenceCorrespondence

BackBackofficeoffice Accounting

Position Position managementmanagement

•Collective processing•Netting•References•Interest rate adjustments•Securities acct transfers•Corporate actions

•Confirmation management (incoming/outgoing)

Payment details

Curr. Bank Acct

. . . . . . . . .

ProcessingProcessingtransactionstransactions

• Settlement/control• Payment details

SAP AG

R

Correspondence

e.g. confirmation letter, SWIFT

Fax

e.g. dealing slip

External InternalConfirmation Confirmation

SAP AG

R

Transaction Settlement

Currency Payer/ee Partnerbank ID

Pmntmeth.

Paymentactivity

Housebank

Acct IDPaymentdetails ID

Payment detailsPayment details

Account assignment reference

DB000001 Deutsche BankFixed-term deposit

G/L account: 113113

DEM

USD

DEM

COUNTERP.

. . .

2

. . .

T

. . .

BANKB

BANKB

. . .

X

. . .

GIRO

USD

. . .

01

01

02

SAP AG

R

Business Partner - Payment DetailsFixed-term deposit in DEM at COUNTERPARTYForex purchase in USDOur house bank: Bank B

Currency Payer/ee Partnerbank ID

Pmntmeth.

Paymentactivity

Housebank

AcctID

Allocations Incoming Outgoing

Payment details ID

01

01

02

DEM

USD

DEM

COUNTERPARTY

. . .

2

. . .

T

. . .

BANKB

BANKB

. . .

X

. . .

GIRO

USD

. . .

Fixed-term dep.Deposit at notice

Money market

Forex . . .

01

01

01Foreign exchange

01

SAP AG

R

Transfer to Financial Accounting

Posting release option Flexible account determination at flow type level Flows transferred to Financial Accounting Direct posting to clearing accounts, clearing via account

statement Make payments using the extended payment program:

Generate and process payment requests

Payment netting, flexible settings for payment methods

Range of posting evaluations

SAP AG

R

Accounting


Fixed-term deposit 1 month 3.5%Fixed-term deposit 1 month 3.5%

FI interface

Sept 1stSept 1st 1100 -1100 - Fixed-term deposit Fixed-term deposit 1,000,0001,000,000Oct 1stOct 1st 1120 +1120 + Final repaymentFinal repayment 1,000,0001,000,000Oct 1stOct 1st 1200 +1200 + Nominal interestNominal interest 3,750 3,750

Selection of transactionsand flows relevant for posting

SAP AG

R

Posting : Account Determination

Fixed-term deposit 1 month 3.5% Acct assignment ref. DB000001

Fxd-term dep. acct 113113

Deposit

Finalrepayment

D1,000,000

C

1,000,000

Interest earned 273100

Nominalinterest

D C 3,750

Bank clearing acct 113100

FT depositNominal int.Finalrepayment

D C 1,000,000

3,750

1,000,000

Debit Bal.sht Credit Bank

Debit Bank Credit Bal.sht

Debit Bank Credit Int. earned

Flow type

Posting details

1100 -

1120 +

1200 +

Sept 1st 1100 - Fixed-term deposit 1,000,000Oct 1st 1120 + Final repayment 1,000,000Oct 1st 1200 + Nominal interest 3,750 Balance sheet account acc. to

account assignment reference

SAP AG

R

Posting using Clearing Accounts

fixed-term deposit via activity at fixed-term deposit level

post flows to clearing account

change to clearing accounts

change to bank account level

TR-TMTR-TM

clearing entry via account statement

TR-TMTR-TM

TR-CMTR-CM

TR-CMTR-CM

SAP AG

R

Payment Transaction Handling

Fixed-term deposit Account statement from bank

... using clearing accounts

Fixed-term dep. account(Deuba)

House bank account(Deuba)

100 m 100 m

SAPSAP

House bankDEUBA

fixed-termfixed-termdepositdeposit

Bank clearing account

100 m 100 m

SAP AG

R

Posting using Payment Program

PaymentadviceBank transfer

Eurocheck

Check

Proposal data setProposal data set

Print data setPrint data set

EditEditproposalproposal

MasterMasterrecordrecord

Payment Payment requestsrequests

CurrentCurrentparametersparameters

PaymentPaymentcontrolcontrol

Paymentsummary

Proposal runProposal run

Payment runPayment run

Print programPrint program

IDOC

DocumentsDocuments

SAP AG

R

Payment Transaction Handling

1st fixed-term deposit 2nd fixed-term deposit

...using a clearing account for payment requests

Fixed-term dep. account(Citi)

House bank account(Deuba)

100 m 150 m

SAPSAP

House bankDEUBA

paymentpaymentorderorder

Payment request clearing acct Bank clearing account

150 m 150 m

50 m

100 m50 m

150 m

payment (trigger payment request run)

account statement from bank

CitiCiti

paymentpayment

fixed-term depositfixed-term deposit

SAP AG

R

Cross-Application Reporting

Common reportingstructure

Data selection, definition oflayout

Individual reporting

Journal Maturitylist

Revenuelist

SAP AG

R

Drilldown reporting structures

PART

NER

PRODUCT TYPE Borrowing/sale

1

PRODUCT TYPE

2PA

RTNE

R

CURRENCY

PRODUCT TYPE

CURRENCY

Company codeTraderProduct typePortfolioSecurities account

X

PartnerTransactionCurrencyAccount assignment reference

X

X

Investm./purchaseX

PART

NER

CURRENCY

Multidimensional Flexible Reporting

3

PART

NER

PRODUCT TYPE

CURRENCY

Money marketMoney marketForexForex

DerivativesDerivativesSecuritiesSecurities

LoansLoans

SAP AG

R

Datafeed Architecture

SAP Datafeed Provider

Selectiverefresh Request

Request

Reply

Reply

RFC

R/3 ApplicationsR/3 ApplicationsTR-TMTR-TMTreasuryTreasuryManagementManagement

TR-RMTR-RMRisk Risk ManagementManagement

......

Informationproviders

Externalinterfaceprogram

DatafeedServer

Log

Datafeedserver

MarketMarketdatadatabufferbuffer

TranslationTranslationtabletable

OperativeSAP tables

SAP AG

R

AnalysisAnalysisAssessmentAssessmentof possible of possible solutionssolutions

EliminateEliminaterisksrisks

• Identify suitable financial transactions

• Simulate alternative results

Selection of analternative

Risk Management Process in R/3

TR-TMTR-TM

SD

US$DEM

Datafeed

TR-TMTR-TMTR-CMTR-CM

MM

TR-TM-TR-TM-MRMMRM

TR-TM-TR-TM-MRMMRM

TR-TM-TR-TM-MRMMRM

Risk controlling TR-TM-TR-TM-MRMMRM

• Trading• Back office• Accounting• Reporting• Value at risk

Processing /Processing /ControlControl

InformationInformationprocurementprocurement

• Mark-to-market• Sensitivities• Crash

scenarios

TR-TMTR-TM

• Internal:- risk position

• External:-market data

SAP AG

R

Risk Management TR-TMTR-TM TR-TR-MRMMRM

Market risk managementSelection of instrumentsAuthorization concept at user, business partner

and trader levelLimit management (money market, forex)Hedging strategies

Macro hedge Portfolio hedge Micro hedge (release not yet specified)

SAP AG

R

Information procurement Interest and currency exposure

Mark-to-market, effective interest

rate

Sensitivities, cash flow analyses

Value at risk

Assessment of possible solutions Simulation

What-if analyses

Crash scenarios

Transform risk using Treasury Management

Mark Risk Management: FunctionsTR-TR-

MRMMRM

Extensive risk valuation and control

SAP AG

R

Market Risk Management: System Overview

ValuesValues(IRR, NPV, option(IRR, NPV, option

premium, exposure...)premium, exposure...)

Calculation

ReportingReporting(graphics, list,...)(graphics, list,...)

MethodsMethods

Cash flowsCash flowsMarket dataMarket data

ScenarioScenariodatabasedatabase

MarketMarketdatabasedatabase

BufferBufferPortfolioPortfolioformation formation

bybyselectionselection

FictitiousFictitioustransactionstransactions

ActualActualpositionposition

SAP AG

R

Integrated Market Risk Management

Actual/scenarioActual/scenariomarket datamarket data

Actual transactionsActual transactions

Control panelIntegrates all

incoming data and resulting data

relevant for risk

ExposureHedging rate

Cash Management

Mark-to-market

valuation

Key ratios/ values

Data inflow Results

Fictitious cash flow update

SAP AG

R

Analysis and Simulation

Market data:Market data:PricesPricesInterest ratesInterest ratesVolatilitiesVolatilities

Key valuesKey valuesNPVNPVIRRIRREffective rateEffective rateExposureExposureHedging rateHedging rateCash flowsCash flows

Transactions: Transactions: Forward transactions, Forward transactions, options, swaps, caps/floorsoptions, swaps, caps/floors

Key values based on simulatedmarket data andsimulated financial transactions

SAP AG

R

Evaluation methods

Evaluation methods

Earnings/expense-Earnings/expense-orientedoriented

Risk-orientedRisk-oriented

Internal rate of return (IRR) Yield calculation (AIBD, Braess-

Fangmeyer, Moosmüller, US -Treasury)

Effective rate (cut-off rate) for FX

exposures Mark-to-market valuation

Changes in net present value FX and interest rate

exposures Sensitivities (delta, gamma,

duration, convexity) Value at risk for portfolios

TR-TR-MRMMRM

SAP AG

R

Hedging strategy based on values from Cash Management

No direct link between the hedging transaction and the hedged instrument

Delivery date/pmnt conditionsDelivery date/pmnt conditions Payment historyPayment history UpdateUpdate

Cash forecastCash forecast C/F USDC/F USD

CashCashFwdFwdBal.Bal.

Hedging strategyHedging strategy Exposure analysisExposure analysis Instrument selectionInstrument selection

Macro Hedge

Foreign exchangeForeign exchange

C/F USDC/F USD

CashCashBal.Bal.

05/2105/21100100 8080 2020

Purch-: Forward Purch-: Forward Curr.: USDCurr.: USDKey date 05/25/95Key date 05/25/95Rate 1.5500Rate 1.5500Amount 80Amount 80

05/2105/21100100100100

SAP AG

R

Traderauthorization

Business Partner and Trader Authorization

Business partnerauthorizationTrader and business partnerTrader and business partner

Authorization AuthorizationTreasuryMoney Market

Fixed-term deposit

51 A Fixed-term deposit100 investment200 borrowing

Deposit at notice

51 B Deposit at notice 100 investment 200 borrowing

SAP AG

R

Limit Management Limit update based on the following characteristics

(currently supported for money market and foreign exchange): company code

trader

business partner

currency

portfolio

limit product group

Example:

Limit utilizationTrader: FuchsLimit: 100 mUtilization.: 10 mSurplus/deficit 90 m

L1

Dres. 900

Deuba1,000

L2

FTDFTD400400

FTDFTD500500

L3700

L1

L1 : Partner

L2 L2 : Partner / limit product group

L3 : Limit product group

SAP AG

R

Overview of Treasury Functions

bank data

businesspartner

market data

CMCM


US$DEM

MRM MRM Download

Market Risk Management:• interest/currency exposure• mark-to-market valuation• risk analysis/simulation• value-at-risk

Cash Management:• electronic banking• liquidity status• integrated operational systems• control functions

Treasury/Loans Management• managing financial deals and positions• transfer to Financial Accounting• flexible reporting• datafeed interface

Logistics DD

C C

DD

CC100 100

100 100

TM / LOTM / LO

ForexForexMoney MarketMoney Market

DerivativesDerivatives

SecuritiesSecurities LoansLoans