C4 Treasury Risk Mgt

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Finanzielles Riskomanagement als zentrale Aufgabe des

Treasurers

SAP Financial Excellence Forum 201311. April 2013

Anja Klitscher

SAP (Schweiz) AG



© 2013 SAP AG. All rights reserved. 1

Managing Treasury TodayGlobal Treasury Survey 2010 – PWC Study 2010*

Today’s Perspective on Treasury Raised profile

Nearly 80% of participants believe that the financial crisis

has won them greater boardroom attention.

Value recognised

Nearly 70% of participants believe that the crisis has

highlighted the value they create within the business.

“

The valuable contribution of the treasury function is now better understood, as are the

disastrous consequences if it fails – now is the time to secure investment in treasury.

Back to basics

The proportion of participants rating cash management and

working capital management as highly important has more

than doubled (from 35% pre-crisis to more than 70% during

and after).

On top of exposures

Risk management tops the list of priorities for the future.




Benefits and Best Practices of Best RunRequires Connectivity and Coordination across Silos

In-House Banking

& Payment

Cash Mgmt

Risk Mgmt

Reduce IT Costs Integrated risk, cash and liquidity management

Natively integrated with general ledger

Single point of connectivity to multiple banks

Optimize Payments and Bank

Communications AR, AP and treasury activities streamlined

through automation and workflow

Integrated treasury systems and GL ensure

accurate reporting and compliance

Effective Financial Risk Management Timely insight into risks across portfolio

Robust risk management systems

Proper hedging strategies in place

Optimize Debt and Investments Low interest on borrowings

High interest on investments

Banks

Banks

Better Visibility of Cash

and Liquidity Complete visibility into global

liquidity

Low banking costs and higher

returns on cash

Compliant Reporting Timely insight into cash, liquidity and risks

Management and statutory reporting

Integrated cash, liquidity and treasury and financial risk management. One open platform to enable seamless

integration of treasury with your banks. Native integration with the general ledger, financial reporting and complianceprocesses.



Agenda1. Manage Cash and Liquidity

2. Manage Debt and Investment Strategies and Financial Risk

3. Control and Optimize Payments and Bank Communication

4. Why SAP?

5. Wrap-up




Manage Cash and LiquidityProcess Overview

Cash and liquidity management provides visibility into and control over sources anduses of cash, manages cash flows and forecasts, and manages cash to ensure the

enterprise has sufficient liquidity to fund its operating activities.

Gather Inputs Statistical Modeling Publish Forecast Finalize Forecast

Process steps

Reconcile databasefor cash forecast Forecast short-term liquidity Operational cashflow analysis Plan mid- and long-term liquidity

Capture data frommultiple systems – sales orders, SRM,

AR, AP, and bankledgers

Create and updateforecasts

Reconcile planmovements with actual

Analyze Bank status

Monitor incoming cashflows from receivables

Daily cash position,balances, transactionson bank accounts

Short-term forecastincluding sub-ledgers

Primary Plans: sales,production planning,balance sheet, incomestatement (e.g.,yearly)

Convert financial(primary) planning totreasury (secondary)planning

Determine plannedcash flows over nextperiod

Analyze operationalcash flows

321 4




Key Instruments of SAP Cash and Liquidity Management

Cash and Liquidity Management Decisions Are Based on

Bank

accounts

In-House

cash banks

Bank

clearing

accounts

Payments

in transit

Treasury

DealsMemo

records

Intra-day

bank

statements

…

Customer/Vendor-

open items

Blocked items

Down payment

requests ...

DisputesEarmarked

funds

Real estate

…

Purchase

requisitions

Purchase orders

Sales orders

…

LogisticsFinancialsIndustry

SolutionsFinancials

Non-

SAPNon-SAP

Non-

SAP

Cash Position Liquidity Forecast

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Reporting with SAP BusinessObjectsCash and Liquidity Reporting Enabled by SAP BusinessObjects

SAP BusinessObjects Dashboards

(formerly Xcelsius) can be

generated using the SAP Treasury

and Risk Management application

to provide visualization of cash

positions



Starter Kit for Liquidity PlanningOverview

• Jumpstart the implementation of a

liquidity planning solution

• Addresses the needs of treasury

and the CFO

• Pre-built components with best

practices for better results

• Implement as new installation, or

incorporate into existing SAP

BusinessObjects Planning and

Consolidation, version for SAP

NetWeaver deployment

• System independent: Flat files,

SAP ERP Financials, other ERP

systems






4. Why SAP?

5. Wrap-up



Optimize Debt and Investment StrategiesProcess Overview

■ Collect Cash Data oftoday

■ Create and updateforecasts

■ Take investment orborrowing decisionaccording to thecompanies Treasuryguidelines

■ Take care of limits,e.g., on counterparties

■ Determine bestoptions based on costof capital or best risk-adjusted investmentreturns

■ Execute financialtransaction

■ GenerateCorrespondence

■ Execute Payments

■ Execute postings,valuations andaccruals

■ Produce performanceanalysis compared todefined benchmark

■ Control Cash reporting

■ Monitor capitalstructure for bestoptions

■ Monitor investmentportfolio forperformance

■ Monitor counterpartiesfor risk exposure

SAP Treasury and Risk management, combined with other SAP Treasury applications,

provides visibility into anticipated cash balances so that treasury managers can optimizeinvestment returns. It also helps monitor and control investments and portfolio risks.

Process Steps

Cash

ManagementData

Investment or

BorrowingDecision

Deal Executionand accounting

321

PerformanceAnalysis

4



Credit Risk Analyzer

Utilization: Formulas, Credit

risk, 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 Indicators

xxxxxxxxxxxxxxxxxxxxxxxx

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 international

accounting standards

Spot

Forward

Swaps

Options

Futures

Foreign

Exchange Bonds

Bank loans

CommercialPaper

Facilities

Debt Mgmt Securities

Bonds Warrants Stocks Certificates

Repo Sec. lending

Derivatives

Cap Floor FRA Swaps

Options Futures

Money

Market Fixed-term

deposits Commercial

Paper

Repo

Commodities

Futures

Forwards

Traded Options

OTC Options

Swaps

Transaction Manager

Hedge ManagementExposure ManagementCentralized Database to gather group and

version data and transfer to Hedge Management Administration of hedge plans, exposures, hedge

items, and hedging relationships

Risk Analyzers

SAP Treasury and Risk Management

Reporting tools:SAP Query, ABAP List, Other

third-party providers, BI, SPA

BusinessObjects 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



Commodity Price Volatility Is Increasing

Source: Commerzbank /Wirtschaftswoche – Commodity radar screen for October 2010

Commodity Price Volatility isconstantly increasing for

commodities like oil, copper, lead,

zinc, wheat, etc.

Volatility is significantly higher than

for currencies or interest rates

This has a high impact on the profitof many companies

Calculating the material cost for end

products becomes difficult

Liquidity and cash planning

becomes challenging

Hedging with financial derivatives

can be a strategy to manage the

challenges



Commodity management – our solution platform

Materialsmanagement (MM)

Sales anddistribution (SD)

SAP Treasury and Risk Management application

Commodity

pricing andinvoicing(CPE)

GlobalTrade

manage-ment

(GTM) T r a d i n g

f r o n t o f f i c e

( p a r t n e r - e n a b l e d )

Commodity management specifics


Commodity

management

specifics

Quality

management

Production

planning

Supply chain

management

Transportation

management

Global trade

services

Accounting (financials and controlling: FI/CO)

More

SAP BusinessObjects portfolio




Financial Risk ManagementExposure Management as a Central Component for the Risk Process



Hedging Relationships and Categories forCash Flow, Fair Value and Net Investment Hedges

Hedging Item (Exposure) Hedging Instrument (Derivative)

Hedging Relationship

Effectiveness

test /valuation:

retrospective /

prospective

Hedge Accounting including FAS133 / IAS39

• Money Market Instruments

• Risk Objects

• FX-Exposure• Generation from FX Forwards

• manual entry

• FX Swap

• FX Forward

• FRA• IRS, CCS

• Commodity Future

• Commodity Forward

• NPV Method, Hypothetical Derivative Method, Benchmark Method, Regression Analysis



Report the Key Figures of Risk Managementvia Risk Cockpit



Optimize Debt and Investment StrategiesIntegration Aspects




.

SAP brings software and services together in a new offering that

gives you essential treasury functionality quickly and affordably

Preconfigured software to

eliminate the guesswork

Rapidly delivered in as

little as two months, using

SAP Consulting

An affordable priced

solution

Establishes a footprint in

treasury that can be

expanded

Analyzer Tools Transaction Mgr.Correspondence

& Reporting

Best Practices SAP Consulting

ERP

Integration

SAP

Treasury and

Risk

Managementrapid-

deployment

solution

Preconfigured Treasury Software and Services Enabling

Rapid Deployment Solutions

SAP Treasury and Risk Management

rapid-deployment solution

SAP Commodity Risk Managementrapid-deployment solution






4. Why SAP?

5. Wrap-up




Payment Solution Provided by SAP

SAP ERP

GL

Payroll

Treasury

In-house

cash

SAP

Integration

Package for

SWIFT

Aggregate

Payments

Approval

Workflow

Digital

SignaturesTransmitPayment

SAP Bank Communication Management

ReceiveStatusReport

Payment

Medium

Workbench

PaymentRun

Includes

SEPA

Package

from SAP*

Mobile Use Case




Features: Compliance

Increased compliance

• Multi-eye and individual release

procedures for payment approvals

• Personal digital signatures for outgoing

payments for internal audit

• Integration to the component

SAP BusinessObjects Global Trade

Services, in order to check incoming and

outgoing payments against sanctioned

party list screening and embargo lists




SEPA Package from SAP

SAP appreciates and supports the SEPA framework of the European Payment Council, improving straight-

through processing and allowing increased transparency into payment flows SAP’s Business Suite is already enabled to help customers benefit from the new regulatory

A dedicated SEPA package for the SAP Business Suite has been available since the end of 2007

SAP’s SEPA Package is available for all SAP customers with maintenance contract free of charge (R/3

Enterprise onwards)

Support of new payment formats and instruments in SAP ERP

XML enablement of the new standard European SEPA payment formats

SEPA Credit Transfer based on EPC Rulebook 4.0

SEPA Direct Debit based on EPC Rulebook V.3.3 (Core) and V.1.2 (B2B)

Management of SEPA direct debit mandates

Support of IBAN and BIC

SEPA Support of MT940 Bank Statements

References

TreasuryToday’s

Adam Smith Award Winners 2009 and 2010

for the Best SEPA Solution…

…using SEPA Package from SAP!




Payment Factory with SAP Bank Communication

Management and SAP In-House Cash

* www.swift.com/solutions/connectivity/connectivity_products/service_bureau/SB_directory.page

Corporate Client

Payments

Compliance

Subsidiary

Subsidiary

SAP

Bank

CommunicationManagement

SAP In-House

Cash

Accounts

Payable

Accounts

Receivable

Treasury

Manual Payments

SAP Integration Package for SWIFT

SAP Middleware

SAP ERPSubsidiary

SAP Business Package for EBICS

Financial

Services Network

FSN Connector




Business Benefits SAP In-House Cash

• Reduce physical cash transfers by internal netting• Reduce number of bank accounts

• Reduce administrative overhead

• Minimize netting process times

• Save bank fees for bank accounts and payment

transactions

• Avoid cost for external cross-border payments

• Reduce float and value date losses

• Gain more interest keeping cash within the group

• Reduce hedging deals concentrating exposure within

the group

• Reduce hedging cost using economies of scale

• Improve competitive position in external money

markets

Lowerinternalcost

Lowerexternalcost






4. Why SAP?

5. Wrap-up




Manage Global Financial Risk

Process steps

The treasury applications from SAP provide robust functionality that enable companies to identify and quantify

their exposure to foreign exchange, interest rate, commodity price, and counterparty risk, and take steps tomitigate them.

A sales order isentered in asystem, which is inforeign currency.This results inforeign currency

exposure.

“What-if ” scenarios

Capture and

Assess RiskExposure

Implement

Risk-

MitigationStrategies

Manage

Hedges

Financial

Reporting

Risk

Reporting

The TreasuryManager has toevaluate theexposure to decideif this exposurerequires hedging

Evaluate hedgingstrategies

If the exposure isrelevant forhedging, it has tobe allocated to aspecific hedge planfor tracking and

compliance

The Treasurer hasto hedge thisexposure in marketusing a derivative,which will offset themarket risk

The hedginginstrument(derivative) has tobe linked toexposure tocalculate the

effectiveness of thehedge

The effectivenesstest results show ifthe hedge willeffectively minimizethe risk over thegiven period of time

The Treasurer hasto maintaindocumentation,accounting entriesfor the hedge forcompliance

Possibility tocalculate variousrisk key figures likeNet Present Valueand Value at Riskon Exposurepositions as well asfinancial transaction

321 4 5




Why SAP for Treasury Management?

Lower risk

Hedge management integrated with

financial accounting, reporting, andinternal controls

SAP ERP Financials in use at thousandsof global companies

Lower TCO

Native/pre-built integration reducesimplementation and support cost

Transactional integration with SAP GeneralLedger ensures highest level of financialreporting accuracy

Comprehensive Solution

Comprehensive treasury suite acrosscash and risk management

Only vendor that provides cash pooling,integrated multi bank gateways, andallocation system for in-house banking

Proven Value

Customers realize improvements in risk

mitigation and reduced costs

High-value services to ensure delivery ofyour project




Customers Drive Value Comprehensive, Integrated

Treasury

“I have not found

another company

that processes

payments asefficiently as we do.

Certainly the tools

we use from SAP are

an important reason.”

Johan Bergqvist , Cash

Manager, TeliaSonera

Group

“

Treasury Applications from SAP

help speed Cash Flow and lower

operating expenses

Complete coverage of Treasury

Applications from SAP

Integrated support and

enhancements for all key

software from one single vendor,

SAP

Tight integration with other

treasury applications from SAPand with the SAP ERP

application

Overcome lack of control over

external banks that manage

payments

Improve efficiencies and reduce

risk of exposure by bringing

payments functionality in-house

“SAP Treasury and

Risk Management

has completely

fulfilled ourexpectations.”

Peter van Rood ,

Group Treasurer,

AkzoNobel N.V.

“ “By bringing intragroup

payments in-house with SAP

In-House Cash, we have

been able to reduce bank

fees, minimize costsassociated with foreign

exchange rates, and

significantly lower our risk as

an enterprise operating

globally..”

Gerd Klevenz, Head of

Treasury Operations, SAP AG

“




SAP Customers Are Driving Value Through

Financial Excellence Today

Manage Risk andCompliance

Treasury andFinancial RiskManagement

Invoiceto Pay

ReceivablesManagement

OptimizeFinancial

Performance

Accounting andFinancial Close

http://www.tsocorp.com/






4. Why SAP?

5. Wrap-up




6 Key Points to Take Home

Be compliant and gain efficiencies by using an integrated approach for Treasury

Management in a real Straight-Through-Processing

SAP Treasury Applications drives customer value in treasury, financial risk, cash and

bank communication management

SAP Treasury Applications are an integrated part of SAP ERP Financials

Using an integrated Treasury Solution supports the overall IT trend of harmonizing

the system landscape and the application variety

Treasury Management with SAP Applications is a solution portfolio

Implementing SAP’s treasury applications leverage your overall SAP investments

you have made

1

2

3

4

5

6




Thank you!



Contact information

Anja Klitscher [email protected]

Solution Principal Treasury & Risk Management

SAP (Schweiz) AG

Althardstrasse 80

8105 Regensdorf

mailto:[email protected]

mailto:[email protected]



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C4 Treasury Risk Mgt