sap treasury and risk mgmt - intro

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September 2011

SAP Treasury and Risk Management

An Introduction


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SAP AG 2009. All rights reserved. / Page 2

Treasury applications from SAP

SAP Treasury and Risk Management

Risk Analyzers

Transaction ManagerMoneyMarket

ForeignExchange

Secu-rities

Com-modities

Deri-vatives

DebtMgmt

Manage GlobalFinancial Risks

Optimize Debt andInvestment Strategies

Manage Cash

and Liquidity

SAP Cash and Liquidity Management

Cash Management Liquidity Planning

Optimize Payments andBank Communication

SAP In-House Cash

SAP Bank Communication Management

Exposure Management Hedge Management

Credit Risk Analyzer Market Risk Analyzer Portfolio Analyzer

Treasury Applications from SAPFinancial Excellence


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Cash Management

Bank CommunicationManagement

Liquidity Forecast

Internal Banking

Risk Analyzers6

Treasury Management

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The SAP Treasury Solution Suite

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Managing Treasury and Risk Management at a glance

Credit Risk Analyzer

Utilization: Formulas, Creditrisk, Settlement risk

Limit management:Limits freely definable,Multidimensional limits

Market Risk Analyzer

Price calculator: NPV, Prices,Sensitivities

Value at risk: Variance/covariance,Historic, Monte Carlo Simulation

Simulate rates: What-if scenario,Relative, Absolute

Portfolio Analyzer

Yield calculations:Money weighted,Time weighted,Modified Dietz method

Benchmarking:Performance Indicatorsxxxxxxxxxxxxxxxxxxxxxxxx

Front office:Position and deal reporting, Deal capture, Exercise, Dealer slip, Valuation tools,Online limit check

Back office:Standing instructions, Correspondence Monitor, Netting, Settlement, Rate fixing(interest, FX), References, Corporate actions, Process monitors

Accounting:Flexible accounting determination, Accounting according to many internationalaccounting standards

Spot

Forward

Swaps

Options

Futures

ForeignExchange

Bonds

Bank loans

CommercialPaper

Facilities

Debt Mgmt Securities

Bonds Warrants Stocks Certificates

Repo Sec. lending

Derivatives

Cap Floor FRA Swaps

Options Futures

MoneyMarket

Fixedtermdeposits

CommercialPaper

Repo

Commodities

Futures

Forwards

Traded Options

Swaps

OTC-Options

Transaction Manager

Hedge ManagementExposure Management

Centralized Database to gather group andversion data and transfer to Hedge Management

Administration of hedge plans, exposures, hedgeitems and hedging relationships

Risk Analyzers

Reporting tools:SAP Query, ABAP List, Other3rd-party providers, BI,Business Objects Dashboards

and Xcelsius

Middle office:Risk exposure,Controlling,

Compliance

Management reports:Positions, Performance, Ratios,

Compliance

Ad-hoc reporting:

Point & click, Unifieddatabases, Position, P&L,Period, Cash Flow

Results database:Portfolio Hierarchy, Drill-down,Historic results

Data export:Excel, Flat files, BI

Reporting


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Transaction and Position Management Process

BackOffice

Account-ing

FrontOffice

MidOffice

Exposureanalysis

Decision support

Comfortable dealentry

Standinginstructions

On-line limitcheck

Position reporting

Posting ofTreasury flows tothe G/L

Valuationaccording toseveral GAAPs in

parallel areas

Support for IAS

39 / US-GAAPand HedgeAccounting

Flexible processdefinition

Settlement

Correspondence

Interest rateadjustments

Payments

Alert monitor

Instrument pricing

Risk analysis

Sensitivityanalysis

Re-porting

Standardreporting

Ad-hock reporting

Controlling

Limit reporting

Managementreporting


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Selection of Product Types

SAP AG 2009. All rights reserved. / Page 6

Money Market

Fixed-termdeposits (e.g.,overnightdeposits atnotice)

Commercialpaper

Repo

Floating rate

Any cash flows

Spot

Forward

Swap

Vanilla options

Barrier options(single anddouble)

Compoundoptions

Average rateoptions

Basked options

Exchange-tradedoptions

ForeignExchange

Securities(Investments)

Bonds ABS /MBS /CMO Index-linked

bonds Dual currency

bonds Drawable bonds Warrant Bonds Stocks Shareholdings

Subscriptionrights

Investmentcertificates

Repo/ ReverseRepo

Security lending

Cap

Floor

FRA

Swaps

Payer/Receiver,Fixed/Basis,Exotics (e.g.,roller coaster)

OTC options

Security,Swaption, IRG

Futures

Exchange tradedoptions

Total ReturnSwap

Interest &Equity

Derivatives

DebtManagement

Issued bonds

Fixed/ floating/zero interest,Bullet repayment/with repayment/ABS structures

Fixed rate loans

Floating rateloans

Annuity loans Commercial

Paper

Facilities(bilateral orsyndicated)

P o r t f o l i o A n a l y z e r

M a r k e t R i s k A n a l y z e r

R e p o r t i n g

T r a n s a c t i o n M a n a g e r

C r e d i t R i s k A n a l y z e r

Futures

Forwards

Traded Options

Swaps

OTC-Options

Commodities


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Exposure ManagementExample for Commodities

ExposureManagement

TransactionManager

HedgeManagement

Market RiskAnalyzer

Treasury and Risk ManagementSAP ERP

OperationsSD, MMor GTM

ExcelSpreadsheets

Other sourcesof Exposures

SAP ERP Financials

Commodity front office system - if needed


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Class informationretrieved automatically

Configurable entry screen andcustomizable default values per field

Drill-down to class details andbusiness partner details

Pre-defined businesscalendars and automaticdate checks

Integrated effective

interest rate calculator

Automatic calculationof derived flows

Automatic cash flow projection

Display of correspondingmarket rates and accordingwarnings

Integrated onlinelimit check

Automatic determinationof payment instructions

Automatic transfer to Back Office

Transaction Processing - Trading:Convenient Transaction Entry


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Transaction ProcessingBack Office Processing: Settlement

Settlement is an optional transaction processing step

The transaction is reviewed by a back office processor to satisfy the four-eyesprinciple (segregation of duties)

Optionally, information not entered by the trader can be supplemented by the backoffice processor

Only after the reviewer changes the status of a transaction to settled, it is clearedfor posting and payments.


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Create / sendcorrespondence

Automaticmatching

Real Straight Through Processing from deal capturing via new integratedCorrespondence Monitor to parallel accounting with a highly sophisticated authorization concept

behind.

Receive incomingcorrespondence

Error handling /manual matching

Release process use customer

defined channels,mediums andformats

Fax, email, printand swift filetransfers arepreconfigured

Predefined format(incoming andoutgoing) forMT300, MT320and free textMT399

Tracking ofincomingcorrespondenceuse customerdefined channels,mediums andformats

Fax, email, printand swift file

transfers arepreconfigured

Predefined format(incoming andoutgoing) forMT300, MT320free text MT399

Customizablematchingproposal

Automaticmatching whenmessage iscoming in orgoing out possible

Update status ofthe deal or triggera automaticsettlement of thedeal

Correspondencemonitor e.g.

Navigate in alldirections

Improved statustracking for themessages

Show all

correspondenceobjects assignedto one deal

Show matches

Manualassignment ofcorrespondenceto deals

Receive ACK andNACK messages

Dealcapturing

Transaction ManagerEfficiency with Correspondence Monitor (new with EhP4)


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Create messageand send

Create SWIFT fileenvelope

Send file to SWIFTalliance gateway

Creation of MTmessage automaticallyor manually in thecorrespondencemonitor

Save message on fileserver

PI picks up the datafrom the file server inpredefined timeintervals

SWIFT IntegrationPackage picks

up data

Data from fileadapter uploadedto TRM

Open SWIFT fileenvelope

Get file fromSWIFT alliance

gateway

Automatic matchingprocess is triggeredautomaticallywhenever a file

appears

SWIFT IntegrationPackage put

data on file adapter

Integration package forSWIFT

PI saves file on fileadapter




Transaction ManagerIncoming and Outgoing Messages Using SWIFT Integration Package


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Alternative deal capturing by connection to Market Places

Automation of download of FX transactions made on market placessuch 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

SAP Treasury andRisk Management

Market Place

Bank A

Bank B

Bank C

Transaction ManagerStraight-Through Processing for External Deals


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Automaticcreation ofcorrespondence

Valuation(parallel)

Automaticposting

Automaticaccrual/deferral

Transaction ManagerFully integrated


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Cash Management

Bank CommunicationManagement

Liquidity Forecast

Internal Banking

Risk Analyzers6

Treasury Management

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The SAP Treasury Solution Suite

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TransactionManager

Business-partner

Money MarketSecuritiesDerivativesForex

Commodities

REPORTING:Externallymaintainedtransactions

General LedgerIntegration

CashManagem.

Analyzers

Market RiskAnalyzer

PortfolioAnalyzer

Credit RiskAnalyzer

Market Data

FX Rates

Yield Curves

Indices

Volatilities

SAP Modules in Treasury Analyzers



CM

EDT

SAP

NON SAP -External

NPV, VaR,Exposure, Keyfigures

Results

Analysis/Reporting/Planning

Market data

Online data feed Simulated Shifts Scenarios

Pricing Engine

NPVVaR

Sensitivity

DatapoolTMCML

SAP Market Risk AnalyzerProcess



SAP MRA: Net Present Value Concept

Market data

Calculation Evaluations

Risk management

Saved market prices Real-time market prices Flexible scenarios Rule shifts

Mark-to-market Sensitivities

Duration Convexity Exposure

Crash/stress tests

CompanyPortfolioProfit centerProduct

Transaction data

Linear Debts Assets ....

Non-linear Options Caps ....

Price calculator(user exit)

NPV

Risk

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1 M 2 Y 4 Y 6 Y 8 Y 10 Y

Yield curve 5 (+) Current. yield curve Yield curve 6 (long-term)

Base portfolio

Bonds/New York

Base portfolio

Bonds/Frankfurt

LEVEL 1

Trading: Swaps

LEVEL 1

Trading: Bonds

LEVEL 2

Trading: Interest products



SAP MRA: Value at Risk

Historical marketparameters

Calculation Evaluations

Risk management

Market interest rates Exchange rates Stock prices Volatilities Correlations

Historical simulationMonte Carlo

Full valuation Delta method Delta/gamma method

Variance/covariance

Backtesting

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