financial asset management
TRANSCRIPT
Financial Asset Management Introduction to Analyzers and New Strategic
Developments
Christian Kupper, Julia Schäfer SAP
Leipzig, June 10, 2008
sample for a picture
in the title slide
© SAP 2008 / SAP International Forum for Insurance / Page 2
1.
Introduction to Analyzers1.1. Market Risk Analysis1.2. Performance Calculation and Benchmarking1.3. Limit Management
2.
New Developments in Financial Asset Management
Agenda
© SAP 2008 / SAP International Forum for Insurance / Page 3
SAP Investment Management for Insurance Is Part of SAP for Insurance
Market data
supply
Technical infrastructure: SAP NetWeaver
Front office,
trading
Payment
transactions
Master dataSettlement
Multi-GAAP valuationRegulatory reporting
LoansSecurities
Cash, currencies, derivatives
SAP Investment Management for Insurance
General ledger
Market risk analysis
Performance analysisBenchmarking
Limit management
SAP Investment Controlling for Insurance
Consolidation Reporting
SAP NetWeaver Business Intelligence
Planning and projections
© SAP 2008 / SAP International Forum for Insurance / Page 4
Company structure Asset classes
Balance sheet classification
Different Areas of the Company Generally Have Different Risk Perspectives
Portfolio manager hierarchy
© SAP 2008 / SAP International Forum for Insurance / Page 5
Real estate
Asset class
Total
Fixed income
Country
DE CHUS CHDE
Stocks
USDE
Data is classified and shown from different perspectives: Example of a possible portfolio hierarchy with two levels
The Central Element of Analyzers Is the Portfolio Hierarchy
© SAP 2008 / SAP International Forum for Insurance / Page 6
FINANCIAL OBJECTPredefined, product-
type dependent characteristicsISINNominalRatingBusiness partner…
User-defined analysis characteristicsTrader APortfolio X…
The Analyzers Can Be Supplied by Different Systems
Asset managementMoney market tradingSecuritiesLoansDerivativesCurrencies
External dataSpecial funds single valuesReal estateThird-party systems…
Investment controllingMarket risk analysisStress testsSensitivitiesVaRPerformance measurementBenchmarkingLimit management…
© SAP 2008 / SAP International Forum for Insurance / Page 7
Risk Key Figures and Reporting in the Market Risk Analyzer
Risk key figuresNPVSensitivities
DurationPVBPConvexity
Value at risk (historic, Monte Carlo, VarCovar)
VaR contributionMarginal VaRMean excess loss
Risk reportingPortfolio hierarchiesCurrent and historic dataStress tests/market data shiftsWhat-if analysisReporting of fair value difference
Any parameterization with regard to holding period and confidence level of the VaR key figures
2.03.04.05.06.07.08.09.0
10.0
1 M 2 Y 4 Y 6 Y 8 Y 10 Y
TS 5 (+) Current TS TS 6 (long-)
© SAP 2008 / SAP International Forum for Insurance / Page 8
The Analyzer Information System Stores All Key Figures for the Long-Term and Ensures Auditing Acceptability
© SAP 2008 / SAP International Forum for Insurance / Page 9
Yield Calculation Methods and Key Figures in the Portfolio Analyzer
Yield calculation methods
Time weighted rate of returnMoney weighted rate of returnApproximation methods
DietzModified Dietz
Portfolio key figuresTreynor RatioSharpe RatioInformation RatioSortino RatioJensen’s Alpha
Any parameterization according to monthly, quarterly, and annual yields or “to-date”
key figures
© SAP 2008 / SAP International Forum for Insurance / Page 10
40%
60%
30%
70%
Benchmark Definition and Assignment
Example of a possible assignment variantNUS
NDX
DAX
MDAX
Stocks
US
Stocks
GER
Stocks total
60%
40%
Basis benchmarks Composite benchmarks
IndexFX rateReference interest ratePortfolio (hierarchy node)
Weighted combinations of existing basis and other composite benchmarks
Benchmark
© SAP 2008 / SAP International Forum for Insurance / Page 11
Portfolio Analyzer –
Performance Calculation and Benchmarking
© SAP 2008 / SAP International Forum for Insurance / Page 12
SAP Limit Management Fulfills Various Customer Requirements
Limits with trading focus
Online limit check during entry of transactionsWarning if limit utilization reaches a critical pointWorkflow if limit is exceededEntered as an absolute amountNo risk key figures
Downstream limit controllingCan be structured flexibly with portfolio hierarchiesAbsolute and relative limits are possibleLimitation of NPV or risk key figuresBatch – processing in the results database
Limit management
© SAP 2008 / SAP International Forum for Insurance / Page 13
Limit Management: Example of Different Limit Types
Transaction
100,000,000.--No exceedanceFree limit: 98,000,000.--
10,000,000.--No exceedanceFree limit:8,000,000.--
2,000,000.--No exceedanceWarning due to critical limitFree limit: 0.--
1,000,000.--Limit exceedance- 1,000,000.--LoggingWorkflow
Net present value Nominal
Company code Company code/
business partner
CoCode/BP/
asset class
CoCode/BP/ACSmith
AttributionAnrechnung
Fixed-termdeposit2,000,000.--Deutsche BankTrader: Smith
Attribution
Limit types
Limits
© SAP 2008 / SAP International Forum for Insurance / Page 14
Limit Exposures
© SAP 2008 / SAP International Forum for Insurance / Page 15
SAP Limit Management Considers Group Relationships in Limit Attribution
© SAP 2008 / SAP International Forum for Insurance / Page 16
Limit definition:50m--20%30%EURPH2
node 1PH2
node 11Fair valueFair value
Lower absol. limit
Upper absol. limit
Lower limit %
Upper limit %
CurrencyDenom-
inator nodeNumerator
nodeDenom-
inatorNumerator
Derivatives
FV, VaR, …
All assets FV, VaR, TWRR, book value, …
Fix-int. secur.
FV, VaR, …
DE CH CHDE
Stocks
FV, VaR, …
CHDE
Industry
FV, VaR, …
Fixed-interest securities
FV, VaR, TWRR, book value, …
Government
FV, VaR, …
Municipal
FV, VaR, …
11 12 13
1
With the Portfolio Hierarchy, Even Complex Limits Can Be Mapped to Risk Key Figures
Limit description1. The proportion of government bonds in the portfolio should be
between 20% and 30%.
2. This proportion should never be less than 50m EUR.
node11 PH2,
!!
node1 PH2,
node11 PH2,!
FV50m AND 0.3FVFV
0.2 ≤≤≤Limit
formula:
1
11 12 13
Portfolio hierarchy 1 Highest node:
All assets
Further levels:
Asset class, country
Portfolio hierarchy 2 Highest node:
Fixed-interest securities
Further levels:
Issuer class
© SAP 2008 / SAP International Forum for Insurance / Page 17
1.
Introduction to Analyzers1.1 Market Risk Analysis1.2 Performance Calculation and Benchmarking1.3 Limit Management
2.
New Developments in Financial Asset Management
Agenda
© SAP 2008 / SAP International Forum for Insurance / Page 18
Preview: SAP Enhancement Package 4 for SAP ERP Insurance
Financial Asset ManagementEnd-to-end hedge management process to eliminate market price risks of securities
New financial instruments: forward securities transactions
New correspondence monitor for end-to-end process support for the MT300 and MT500 series
Business functionsFIN_TRM_INS_HN:
Hedge management for FAM
FIN_TRM_LR_FI_AN_2:
Hedge and exposure management for commodities, SWIFT, forward securities transactions
© SAP 2008 / SAP International Forum for Insurance / Page 19
Hedge Management Process for FAM
Hedged item: Stock in local currency
Hedge transaction:
Forward stock transaction
Effectiveness method:
Dollar offset method
Mapping of the life cycle of a hedging relationship of designation, dedesignation, effectiveness measurement, and documentation
Accounting in accordance with IFRS
Fair value hedge
© SAP 2008 / SAP International Forum for Insurance / Page 20
Forward Securities Transactions
Definition: A forward securities transaction is a transaction for
which the price is determined when the contract is concluded, but contract performance takes place at a later date.
New product type: 740 forward securities transactions
Mapping of the entire product life cycle, from entry of the transaction to early delivery and delivery on due date
Delivery types: cash settlement or physical delivery
Accounting in accordance with various accounting regulations
© SAP 2008 / SAP International Forum for Insurance / Page 21
Settlement Process I
New correspondence monitor for initiating and managing correspondence in relation to settlement
Outbound correspondence types: Deliver free (MT542)Deliver against payment (MT543) Receive free (MT540)Receive against payment (MT541)
Inbound correspondence types:Deliver free confirmation (MT546)Delivery against payment confirmation (MT547)Receive free confirmation (MT544)Receive against payment confirmation (MT545)Settlement status and processing advice (MT548)
© SAP 2008 / SAP International Forum for Insurance / Page 22
Settlement Process II
Flexible output channels: SWIFTFax
Master data management for determining settlement instructions
Monitoring using status concept with correspondence object
Supporting processes:Securities account reconciliation
© SAP 2008 / SAP International Forum for Insurance / Page 23©
SAP 2007 / Page 23
Legal Disclaimer
This presentation is not subject to your license agreement or any other agreement with SAP. SAP has no obligation to pursue any course of business outlined in this presentation or to develop or release any functionality mentioned in this presentation. This presentation and SAP's strategy and possible future developments are subject to change and may be changed by SAP at any time for any reason without notice. This document is provided without a warranty of any kind, either express or implied, including but not limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-infringement. SAP assumes no responsibility for errors or omissions in this document, except if such damages were caused by SAP intentionally or grossly negligent.
© SAP 2008 / SAP International Forum for Insurance / Page 24
Thank you!
Christian KupperRegional Product Management InsuranceSAP EMEA
Hasso-Plattner-Ring 769190 Walldorf, Germany
T
+49 6227 7-41282M
+49 160 88 96 301E
[email protected]://www.sap.com/insurance
Julia SchäferSolution Management Financial Asset ManagementIBU Insurance
Dietmar-Hopp-Allee 1669190 Walldorf, Germany
T
+49 6227 7-61068F
+49 6227 78-41017E
[email protected]://www.sap.com/insurance
© SAP 2008 / SAP International Forum for Insurance / Page 25
SAP INTERNATIONAL FORUM FOR INSURANCE
After the event, the presentations will be available at: www.sap.com/community/insurance2008
© SAP 2008 / SAP International Forum for Insurance / Page 26
Copyright 2007 SAP AG All rights reserved
No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice.
Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors.
SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver, Duet, Business ByDesign, ByDesign, PartnerEdge and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world.
All other product and service names mentioned and associated logos displayed are the trademarks of their respective companies. Data contained in this document serves informational purposes only. National product specifications may vary.
The information in this document is proprietary to SAP. This document is a preliminary version and not subject to your license agreement or any other agreement with SAP. This document contains only intended strategies, developments, and functionalities of the SAP®
product and is not intended to be binding upon SAP to any particular course of business, product strategy, and/or development. SAP assumes no responsibility for errors or omissions in this document. SAP does not warrant the accuracy or
completeness of the information, text, graphics, links, or other items contained within this material. This document is provided without a warranty of any kind, either express or implied,
including but not limited to the implied warranties of merchantability, fitness for a particular purpose, or non-infringement.
SAP shall have no liability for damages of any kind including without limitation direct, special, indirect, or consequential damages that may result from the use of these materials. This limitation shall not apply in cases of intent or gross negligence.
The statutory liability for personal injury and defective products is not affected. SAP has no control over the information that
you may access through the use of hot links contained in these materials and does not endorse your use of third-party Web pages nor provide any warranty whatsoever relating to third-party Web pages
Weitergabe und Vervielfältigung dieser Publikation oder von Teilen daraus sind, zu welchem Zweck und in welcher Form auch immer, ohne die ausdrückliche schriftliche Genehmigung durch SAP AG nicht gestattet. In dieser Publikation enthaltene Informationen können ohne vorherige Ankündigung geändert werden.
Einige von der SAP AG und deren Vertriebspartnern vertriebene Softwareprodukte können Softwarekomponenten umfassen, die Eigentum anderer Softwarehersteller sind.
SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver, Duet, Business ByDesign, ByDesign, PartnerEdge und andere in diesem Dokument erwähnte SAP-Produkte und Services sowie die dazugehörigen Logos sind Marken oder eingetragene Marken der SAP AG in Deutschland und in mehreren anderen Ländern weltweit. Alle anderen in diesem Dokument erwähnten Namen von Produkten und Services sowie die damit verbundenen Firmenlogos sind Marken der jeweiligen Unternehmen. Die Angaben im Text sind unverbindlich und dienen lediglich zu Informationszwecken. Produkte können länderspezifische Unterschiede aufweisen.
Die in diesem Dokument enthaltenen Informationen sind Eigentum von SAP. Dieses Dokument ist eine Vorabversion und unterliegt nicht Ihrer Lizenzvereinbarung oder einer anderen Vereinbarung mit SAP. Dieses Dokument enthält nur vorgesehene Strategien, Entwicklungen und Funktionen des SAP®-Produkts und ist für SAP nicht bindend, einen bestimmten Geschäftsweg, eine Produktstrategie bzw. -entwicklung einzuschlagen. SAP übernimmt keine Verantwortung für Fehler oder Auslassungen in diesen Materialien. SAP garantiert
nicht die Richtigkeit oder Vollständigkeit der Informationen, Texte, Grafiken, Links oder anderer in diesen Materialien enthaltenen Elemente. Diese Publikation wird ohne jegliche Gewähr, weder ausdrücklich noch stillschweigend, bereitgestellt. Dies gilt u. a., aber nicht ausschließlich, hinsichtlich der Gewährleistung der Marktgängigkeit und der Eignung für einen bestimmten Zweck sowie für die Gewährleistung der Nichtverletzung geltenden Rechts.
SAP übernimmt keine Haftung für Schäden jeglicher Art, einschließlich und ohne Einschränkung für direkte, spezielle, indirekte oder Folgeschäden im Zusammenhang mit der Verwendung dieser Unterlagen. Diese Einschränkung gilt nicht bei Vorsatz oder grober Fahrlässigkeit.
Die gesetzliche Haftung bei Personenschäden oder die Produkthaftung bleibt unberührt. Die Informationen, auf die Sie möglicherweise über die in diesem Material enthaltenen Hotlinks zugreifen, unterliegen nicht dem Einfluss von SAP, und SAP unterstützt nicht die Nutzung von Internetseiten Dritter durch Sie und gibt keinerlei Gewährleistungen oder Zusagen über Internetseiten Dritter ab.
Alle Rechte vorbehalten.