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SAP AG
R
SAP AG
R/3 Treasury
R
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SAP AG
R
Overview of Treasury Functions
bank data
businesspartner
market data
CM
Financial Accounting
US$
DEM
MRMDownload
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 dealsand positions
• transfer to FinancialAccounting
• flexible reporting• datafeed interface
Logistics D
C D
C
100100
TM / LO
Forex
Money Market
Derivatives
SecuritiesLoans
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SAP AG
R
Market RiskManagement
TR-M
RM
Informationprocurement
Information system
SAP TREASURY
TreasuryManagement
CashManagement
TR-CMTR-TM
Liquidity/risk analysis
and simulation
Trading Back office
Controlandaudit
Transfer toFinancial
Accounting
Treasury Process
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SAP AG
R
Industries
1980
R/3 Launch
IS-IS/DARWIN projectfor Loans, Securities,Real Estate
today
R/2:Cash ManagementMoney Market, Forex,
Loans
R/3:Cash ManagementMoney Market, Forex, Derivatives, Securities, Loans,
Market Risk Management
Insurance companies
Mortgage banks
Corporates
19921993 1994
1996
Money Market, Forex, Derivativesproject
Market Risk Managementproject
Audit
Market release
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SAP AG
R
Countries
1980
R/3 Launch
IS-IS/DARWIN projectfor Loans, Securities,Real Estate
R/2:Cash ManagementMoney Market, Forex,
Loans
R/3:Cash ManagementMoney Market, Forex, Derivatives, Securities, Loans,
Market Risk Management
Germany, Austria, Switzerland
19921993 1994
1996
Money Market, Forex, Derivativesproject
Market Risk Managementproject
Audit
Market release
English-speaking countries
Other
today
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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
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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)
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R1) % of all companies surveyedSource: 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 possibleexchange rate fluctuations) 61
5 To hedge sales (e.g. against possible
exchange rate fluctuations) 52
6 To contribute to profit through activemanagement of open positions 30
1)Priority Target %
1)
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R
1 To ensure liquidity
using SAPCash Management
TR-CM
Liquidity Management
Priority Target %
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R
TR-CMCash Management: Functions
Comprehensive analysis of liquidity situation
Data transfer from operative systems: Financials,Logistics and Treasury ManagementElectronic banking functions
Cash position: daily bank account balances by valuedate, 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, ...
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R
Area-specificprocessing
Bankpostings
Subledger
accounts
Bankdata
Manualaccount
statement
SWIFT MT940
MultiCash
Lockbox
BACS
ETEBACCODA
FIDES
CSB43
ZENGINKYO
EU
EU
USA
UK
FBE
CH
E
JP
Czech. Rep.
SwedenCash position andliquidity forecast
Banks
Subledger
03/15
100
25
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
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R
Aim:
Monitoring bank account movements
comparing value dates
reconciling payment advice and
account or bank statement
cashed checks analysis
account interest
comparing bank conditions
Control Functions
Monitoring correct paymentsprocessing for planning
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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 60
B1 Outgoing checks 10- 10- 20-
Current bank account balances/balances per value
date (bank postings, payment advices)
Accounts managed in local/foreign currencyPlanning horizon 0-5 days Documentation and audit functions
Current liquidity position on bank accounts
per specific date
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R
Status before concentration after concentration
Bank 1 1200 5Bank 2 100 5Bank 3 400 1337Bank 4 -350 3
1350 1350
Cash Concentration
Clearing proposal in accordance with selection
criteria
Interactive manual adjustmentCredit transfers and correspondence
Concentrated bank accounts
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R
Liquidity Forecast
France (E4)
Payer ofcash discount (E2)
Payer of net amount (E3)France(E4)
(E2)Bankcollection(E1)
Payer of netamount (E3)
FI =Posting/Sales
FW =Bill of exchange
XA = Blockingreason 'A'
(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 items
Expected cash inflows/outflows over a planning
horizon of 1-24 weeks
Support for optimizing financial investment andborrowing
Monitoring liquidity situation
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R
Treasury Workstation
. . . . .R/2RF FD R/3FI CM
R/3CM FI
Analysis
CM
Liquidity
MRM
Market risks
TM
Financial transactions
Trading
Back office
FIFinancial Accounting
R/3Treasury
Workstation
FI-ALE FI-ALE
RFC TR-CM-ALE
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R
Company 2
Company code 2
External bank 2 External bank 2
External banks
External bank 2
Company 3
Company code 3
Central TreasuryCompany code 1
Company 4
Company code 4
Liquidity status
Company codes 2+3
Liquidity status
Company codes 1-4
internal financialtransactions
external financialtransactions
external financialtransactions
Corporate Group Evaluations
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R
Implementation Strategies
Support for efficient
liquidity management
Support for efficient
liquidity forecasting
Advantage:
RationalizationAdvantage:
Integration
TR-CM
FIMM
SD
extended forecast horizonvia link to the supply chain
automatic data transfer reduced transaction costs
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R
Automatic data transfer reduced transaction costs
Support for efficient liquidity
management
Advantage:
Rationalization
FI
TR-CM
Area-specificprocessing
Cashposition
Bankdata
Bankpostings
Sub-ledgers
Rationalization: Electronic Banking
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R
extended forecast horizonvia link to the supply chain
Support for efficient liquidity
forecasting
Advantage:
Integration
MM
SD
Integration
Goodsreceipt
Invoice
Payment
Accountstatement
Cash position
Payment afterarranged/forecast date
Value date based onbank statement
Order
Cash
Management
Delivery date andpayment conditions
updated paymenthistory
Liquidity forecast
TR-CM
Integration of Logistics
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R
Cash Position and Liquidity Forecast
Cash Position Liquidity Forecast
Bank accountsin currency:Account 1
:Account nTotal
Paymenttransactionsin transit:
- incoming- outgoing
Financialinvestmentsand
borrowings
Subledgers:- A/R- A/P
- Purchaseorders- Orders
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R
TRADINGCashmanagement
decision
Marketinformation
Cash Position and Liquidity Forecast
Cash Position Liquidity Forecast
Bank accountsin currency:Account 1
:Account nTotal
Paymenttransactionsin transit:
- incoming- outgoing
Financialinvestmentsand
borrowings
Subledgers:- A/R- A/P
- Purchaseorders- Orders
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R
Cash Management Decision
Financials
G/Laccounts
Customers/vendors
Treasury
TR-TM
MM/S
D
Orders
Logistics
FIFI
Cash Position Liquidity Forecast
Cashmanagement
decision
Marketinformation
TRADING
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R
Integration with other SAP modules
TR-TM
TR-CM
TR-TM TR-TM
FI
MM
SD
Financials
G/Laccounts
Customers/vendors
Treasury
TR-TM
MM/S
D
Orders
Logistics
FIFI
Cashmanagement
decision
Marketinformation
Cash Position Liquidity Forecast
TRADING
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R
Treasury and Market Risk Management
Priority Target % 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 possibleexchange rate fluctuations) 61
5 To hedge sales (e.g. against possibleexchange rate fluctuations) 52
6 To contribute to profit through activemanagement of open positions 30
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R
Market RiskManagementImplementation ofSAP TreasuryManagement
Treasury and Market Risk Management
TR-TMTR-MRM
Priority Target
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 possibleexchange rate fluctuations) 61
5 To hedge sales (e.g. against possibleexchange rate fluctuations) 52
6 To contribute to profit through activemanagement of open positions 30
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SAP AG
R
Treasury Management: Functions TR-TM
Complete financial transaction and positionmanagement
Support of trading and back office functions
Functions to track, check and release transactions
Data transfer to Financial Accounting
(including accrual/deferral and valuation)
Flexible settings to accommodate company-specific transaction and position managementprocesses
Financial transactions assigned to portfolios ormanaged in securities accounts
Flexible reporting and portfolio analysis
Datafeed interface
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SAP AG
R
Selection of Product Types
Product types
Moneymarket
Securities Loans Forex
Fixed-termdeposits
Deposits atnotice
CommercialPaper
Stocks Subscript. rights Investment
certificates
Bonds Convertiblebonds
Warrant bonds Warrants
Mortgageloans
Borrower'snote loans
Policy loans
Forexspotdeals Forward
exchangedeals 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
Derivativeinstruments
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SAP AG
R
TargetsInformationprocurement
Assessmentof possiblesolutions
InstrumentsMethodsMeasurements
Identificationof appropriatefinancial
transactionsSimulationof alternativeresults
Selection of analternative
TradingBack office
AccountingReporting
Controlling
Processing /Control
Internal:- liquidity status- risk position
External:- market data
Analysis and Trading Process
Earnings/risktargets
Decision
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SAP AG
R
Trading
Transaction and Position Management Process
PostingsPayment activitiesReversalsAccruals/deferralsValuation
Create order/contractExercise/expirationGive noticeRolloversExercise rights
User authorizationLimit management
Backoffice
Release
Accounting
Settlement/ControlInterest rate adjustmentNettingReferencesConfirmation lettersSecurities account transfers
Corporate actions
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SAP AG
R
Trading Support
Company-specific organizational structuresrepresented in the system, internal and externaltransactions
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 ororganizational units allow bank details and paymentdetails to be assigned to transactions automatically
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SAP AG
R
Trading Support
optional:
Order Contract
Business partnermanagement
Partner data
Marketdatabase
Market data
Standing Instructions
• Payment details• Correspondence• Derived flows
- Entry and editing functions - Valuation toolsstanding instructions NPV calculator
copying functions option price calculatorshortcuts and tree structures etc.fast entrycollective/fast processing
- Automatic checks - dealer slipworking days - limit managementtrader and business partner - change documents
authorization
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SAP AG
R
Basis for
updating Cash Management
updating FinancialAccounting via flexible
account determination
triggering payment
updating items
accrued/deferred interest
payment initiation
foreign currency valuation
yield calculation
Financial Transactions: Cash Flow
Amountinvested/borrowed
ACTUAL
PLANNEDCondition
Transaction
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)
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SAP AG
R
Financial Transaction Architecture
Product type
Transaction type
Business partner
Transfer flow
Valuation flow
Accrual/deferral flow
Flows describingstructure characteristics
Paymentinformation
Postinginformation
Calculationbases
General info History
Conditions
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SAP AG
R
Sequence Defined using Processing Categories
Order expiration Termination
Contract settlement Exercise/expiration
settlement Knock-in/knock-out
settlement Termination settlement
Contract
Exercise/expiration Knock-in/knock-out
Termination
optional:
Order
with/withoutorder
Contract
Trading
Example: Derivatives
with/withoutsettlement
Back office
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SAP AG
R
Contract
Contract
Exercise/expiration
Contract
Alternativewithout settlement
with/without
order
Example: Currency optionContract Contract
Alternativewith settlement
Trading Backoffice
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
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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
Le Description
TB
. . . . . .
OB Curr. option
. . . . . .
DB Foreign exch.
Balance xxx,xxx xxx,xxx xxx,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
Timedeposits
10/02 10/03 10/04 10/05 later
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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-dayprocessing
Netting of financial transactions (payment netting)
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SAP AG
R
Back Office Processing
Confirmation Confirmation
Correspondence
Back
office Accounting
Position
management
•Collective processing•Netting•References•Interest rate
adjustments•Securities acct
transfers•Corporate actions
•Confirmationmanagement(incoming/outgoing)
Payment details
Curr. Bank Acct
. . . . . . . . .
Processing
transactions
• Settlement/control• Payment details
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SAP AG
R
Correspondence
e.g. confirmation letter,SWIFT
Fax
e.g. dealing slip
External Internal
Confirmation Confirmation
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SAP AG
R
Transaction Settlement
Currency Payer/eePartnerbank ID
Pmntmeth.
Paymentactivity
Housebank
Acct IDPaymentdetails ID
Payment details
Account assignment reference
DB000001 Deutsche BankFixed-term deposit
G/L account: 113113
DEMUSD
DEM
COUNTERP.. . .
2
. . .
T
. . .
BANKBBANKB
. . .
X
. . .
GIROUSD
. . .
0101
02
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SAP AG
R
Business Partner - Payment DetailsFixed-term deposit in DEM at COUNTERPARTYForex purchase in USD
Our house bank: Bank B
Currency Payer/eePartnerbank ID
Pmntmeth.
Paymentactivity
Housebank
AcctID
Allocations Incoming Outgoing
Paymentdetails ID
0101
02
DEMUSD
DEM
COUNTERPARTY
. . .
2
. . .
T
. . .
BANKBBANKB
. . .
X
. . .
GIROUSD
. . .
Fixed-term dep.Deposit at notice
Money market
Forex
. . .
01
01
01
Foreign exchange
01
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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 viaaccount statement
Make payments using the extended payment program:
Generate and process payment requests
Payment netting, flexible settings for payment methods
Range of posting evaluations
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SAP AG
R
Accounting
Financial Accounting
Fixed-term deposit 1 month 3.5%
FI interface
Sept 1st 1100 - Fixed-term deposit 1,000,000Oct 1st 1120 + Final repayment 1,000,000
Oct 1st 1200 + Nominal interest 3,750
Selection of transactionsand flows relevant forposting
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SAP AG
R
Posting : Account Determination
Fixed-term deposit 1 month 3.5% Acct assignment ref. DB000001
Fxd-term dep. acct 113113
Deposit
Final
repayment
D
1,000,000
C
1,000,000
Interest earned 273100
Nominal
interest
D C
3,750
Bank clearing acct 113100
FT deposit
Nominal int.
Final
repayment
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 1,000,000
Oct 1st 1120 + Final repayment 1,000,000
Oct 1st 1200 + Nominal interest 3,750Balance sheet account acc. toaccount assignment reference
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SAP AG
R
Posting using Clearing Accounts
fixed-term depositvia activity at
fixed-term deposit level
post flows toclearing account
change toclearing accounts
change tobank account level
TR-TM
clearing entryvia account statement
TR-TM
TR-CM
TR-CM
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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
SAP
House bankDEUBA
fixed-termdeposit
Bank clearing account
100 m 100 m
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SAP AG
R
Posting using Payment Program
Paymentadvice
Banktransfer
Eurocheck
Check
Proposal data set
Print data set
Edit
proposal
Master
record
Payment
requests
Currentparameters
Paymentcontrol
Paymentsummary
Proposal run
Payment run
Print program
IDOC
Documents
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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
SAP
House bank
DEUBA
paymentorder
Payment requestclearing acct Bank clearing account
150 m 150 m
50 m
100 m
50 m
150 m
payment(trigger payment request run)
account statement from bank
Citi
payment
fixed-term deposit
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SAP AG
R
Cross-Application Reporting
Common reporting
structure
Data selection,definition oflayout
Individual
reporting
Journal Maturitylist
Revenuelist
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SAP AG
R
Drilldown reportingstructures
P A R T N E R
PRODUCT TYPE Borrowing/sale
1
PRODUCT TYPE
2
P A R T
N E R
CURRENCY
PRODUCT TYPE
CURRENCY
Company codeTraderProduct typePortfolioSecurities account
X
PartnerTransactionCurrencyAccount assignmentreference
X
X
Investm./purchaseX
P A R T
N E R
CURRENCY
Multidimensional Flexible Reporting
3
P A R T
N E R
PRODUCT TYPE
CURRENCY
Money marketForex
DerivativesSecurities
Loans
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SAP AG
R
Datafeed Architecture
SAP Bloomberg
Selectiverefresh
Request
Reques
t
Reply
Reply
RFC
R/3 Applications
FinanceIn-houseCash
Informationproviders
External
interfaceprogram
Datafeed
Server
Log
Datafeedserver
Marketdatabuffer
Translationtablez
OperativeSAP
tables
Treasury
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SAP AG
R
AnalysisAssessmentof possiblesolutions
Eliminaterisks
• Identify
suitablefinancialtransactions
•Simulatealternativeresults
Selection of an
alternative
Risk Management Process in R/3
TR-TM
SD
US$
DEM
Datafeed
TR-TMTR-CM
MM
TR-TM-MRM
TR-TM-MRM
TR-TM-MRM
Risk controllingTR-TM-MRM
•Trading•
Back office•Accounting•Reporting•Value at risk
Processing /Control
Informationprocurement
•Mark-to-market•
Sensitivities•Crashscenarios
TR-TM
• Internal:
- risk position•External:-market data
TR-
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SAP AG
R
Risk Management TR-TMTR-
MRM
Market risk management
Selection of instruments
Authorization concept at user, businesspartner and trader level
Limit management (money market, forex)
Hedging strategies
Macro hedge
Portfolio hedge
Micro hedge (release not yet specified)
TR-
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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
MRM
Extensive risk valuation and control
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SAP AG
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Market Risk Management: System Overview
Values(IRR, NPV, option
premium, exposure...)
Calculation
Reporting
(graphics, list,...)
Methods
Cash flowsMarket data
Scenariodatabase
Marketdatabase
Buffer
Portfolioformation
byselection
Fictitioustransactions
Actualposition
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SAP AG
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Integrated Market Risk Management
Actual/scenariomarket data
Actual transactions
Control panel
Integrates allincoming data andresulting data
relevant for risk
ExposureHedging rate
Cash Management
Mark-to-market
valuation
Key ratios/
values
Data inf low Results
Fictitious cashflow update
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Analysis and Simulation
Market data:
Prices
Interest rates
Volatilities
Key values NPV
IRR
Effective rate
Exposure
Hedging rate
Cash flows
Transactions: Forward transactions,
options, swaps, caps/floors
Key values
based on simulatedmarket data and
simulated financial
transactions
TR-
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Evaluation methods
Evaluation
methods
Earnings/expense-oriented
Risk-oriented
Internal rate of return (IRR)
Yield calculation (AIBD, Braess- Fangmeyer, Moosmüller, US -
Treasury)
Effective rate (cut-off rate) for FXexposures
Mark-to-market valuation
Changes in net present value
FX and interest rateexposures
Sensitivities (delta, gamma,duration, convexity)
Value at risk for portfolios
TRMRM
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Hedging strategy based on values from Cash
Management
No direct link between the hedging transactionand the hedged instrument
Delivery date/pmnt conditions Payment history Update
Cash forecast C/F USD
CashFwdBal.
Hedging strategy Exposure analysis Instrument selection
Macro Hedge
Foreign exchange
C/F USD
Cash
Bal.
05/21
100 80 20
Purch-: ForwardCurr.: USDKey date 05/25/95Rate 1.5500
Amount 80
05/21
100
100
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Traderauthorization
Business Partner and Trader Authorization
Business partnerauthorizationTrader and busin ess partner
Authorization AuthorizationTreasury
Money Market
Fixed-term deposit
51 A Fixed-term deposit100 investment200 borrowing
Deposit at notice
51 B Deposit at notice100 investment200 borrowing
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SAP AG
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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 utilization
Trader: Fuchs
Limit: 100 m
Utilization.: 10 m
Surplus/deficit 90 m
L1
Dres.900
Deuba1,000
L2
FTD400
FTD500
L3
700
L1
L1 : Partner
L2 : Partner / limit product group
L3 : Limit product group
O i f T F ti
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Overview of Treasury Functions
bank data
business
partner
market data
CM
Financial Accounting
US$
DEM
MRMDownload
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 dealsand positions
• transfer to Financial
Accounting• flexible reporting• datafeed interface
Logistics D C D C
TM / LO
ForexMoney Market
Derivatives
Securities Loans