Commodity Trading mit Treasury Integration. Karsten Kohl, BearingPoint Tobias Silbermann, SAP 11. April, 2013

Commodity Trading mit Treasury Integration Karsten Kohl, BearingPoint Tobias Silbermann, SAP 11. April, 2013

Content Commodity Trading Market BearingPoint s Service Portfolio and Expertise Challenges for Commodity Management Systems Commodity Management in SAP SAP Financial Excellence Forum 2

Where to find Commodities Trading High Tech Consumer Products Automotive Mills & Mining Oil & Gas Aerospace & Defense Pharma Agriculture Building Material Wholesale Distribution Chemical SAP Financial Excellence Forum 3

Our Service Portfolio in Commodity Trading Credit & Trade Finance Physical and Paper Contract Management Regulatory Reporting Treasury Risk Management Transportation Operations & Back Office Trade Accounting SAP Financial Excellence Forum 5

BearingPoint s Expertise in Commodity Trading "BearingPoint has been awarded by SAP Switzerland as Solution Partner of the year 2012, especially for its expertise in Commodity Management". BearingPoint has a record dating back to 2001 in cooperating with SAP in solutions for Commodity Management. Within this period BearingPoint has joined efforts with SAP in Delivering some of the first projects in Commodity Management Co-innovating in the design of the new standard solution Testing new functionalities Developing add-on functionalities Jointly, SAP and BearingPoint will provide a strong understanding in both processes and the SAP solution that will contribute to making your project successful. SAP Financial Excellence Forum 6

Commodity Management Related areas Commodity Trading Physical trades Paper trades Pricing Treasury and Cash Management Cash and liquidity management Foreign exchange Financing Working capital Credit Management Credit risk Credit risk exposure Trade finance (LC s, guarantees) Back office Invoicing Confirmation Stock valuation based on accounting rules Closing process Risk Management Exposure and position reporting P/L reporting Valuation: VaR; MtM, simulations Operations Scheduling Transportation Planning Production Planning As-Is analysis Legal and Compliance Contract management Regulations (e.g. EMIR for derivatives) Environment External Systems & sources SAP Financial Excellence Forum 8

Commodity Trading Management The requirements on a commodity trading system are highly complex. The synchronisation of front office physical and financial commodity trades with logistics, Treasury and Risk Management is essential to establish benefits for the business, to get advantages within the commodity traded market and to be able to track and trace the single positions. Business Values Integration of Commodity Trading within ERP system Transparency along the entire supply chain realtime and group-wide monitoring of risk, liquidity, positions Commodity Trading system serves as basis for being compliant Knowing the exposure of physical and paper positions in real time with a reduction of manual work End-to-end process Process Advantages SAP Financial Excellence Forum 9

Commodity Management in SAP An integrated solution is necessary to have the full transparency of each position as well as supporting the commodity trade lifecycle. The integration of commodity trading in SAP environment facilitates a seamless front-to-back office commodity management. Interfacing front office physical and financial commodity trades with SAP Logistics and SAP Treasury and Risk Management. Paper deals Commodity trading Physical deals Financial Risk for Commodities (TRM) Exposures Trading Contract (GTM) Portfolio Trading book Valuation Hedge accounting Purchase Contract (MM) Stock Valuation Inventory Invoice verification Delivery Pricing engine (CPE) Sale Contract (SD) Delivery Billing Trade Finance Credit Risk Finance and Controlling (FI/CO) Reporting (BI) SAP Financial Excellence Forum 11

The Commodity Exposure The Exposure allows the full transparency, track and trace of all paper and physical positions The exposure management is updated real-time and shows both positions: the paper as well the physical positions; manual captured positions are considered as well. The analytic reporting tool allows a more preciouses planning and steering of risks/open positions. Physical Trades (SAP) Sales (SAP SD) Purchases (SAP MM) Planned data (SAP APO) Treasury (SAP) Other sources (e.g. Excel) Paper Trades (SAP) Commodity (paper trades) - e.g. futures, forwards, swaps, options Foreign Exchange trades (FX) - e.g. spots, forwards, swaps, options Hypothetical Trades Operative Exposures (Raw Exposures) Automatic built or uploaded from various sources Aggregation of exposure positions (free definable) Exposure report Automatically updated by in case of price and/or volume changes Web based analytic reporting allows easily to track and trace single positions, to turn axes, drill-down, to aggregate per free-definable criteria s for example by type of commodity, type of trade, country, region, open position. SAP Financial Excellence Forum 12

Commodity Trading Management Reporting Comprehensive tools are available for different reporting purposes Ad hoc reporting point & click, unified databases, position, P&L, period, cash flow Reporting tools SAP Query, ABAP List, Other 3rdparty providers, Business Intelligence (BI) Result database Portfolio hierarchy e.g. by country, region, type of commodity, drilldown, historic results Management reports Positions, performance, ratios, compliance, risk exposure, profitability Data export Flat files, excel, automatic or manual SAP Financial Excellence Forum 13

Risk Management SAP Financial Excellence Forum 14

Commodity Products Available products as of EhP6 Commodity Futures contracts Traded on Exchanges Commodity Options Traded on Exchanges OTC Forwards OTC SWAPs OTC Options SAP Financial Excellence Forum 15

Commodity Products - Futures Commodity Futures Capture Deal Cash Settlement or physical settlement Matching with other Futures possible SAP Financial Excellence Forum 16

Commodity Product SWAPs A commodity SWAP can be with any counterparty in which: (1) a fixed-price contract for a commodity is exchanged for its floating-price contract or (2) one commodity is exchanged for another, with an execution date (due date) at a future point in time (or multiple due dates). Payer: A fixed price is paid and a floating price (index) is received (Future or OTC) Receiver: A floating price (index) is paid and a fixed price is received Basis: A basis SWAP involves swapping one floating rate index for another SAP Financial Excellence Forum 17

Commodity Master Data Commodity Master Data Create Commodity Master Data Commidity kind: Abstract or Commodity New features available (delivery location and Incoterms) SAP Financial Excellence Forum 18

Commodity Master Data Price Curves Commodity Master Data is represented as commodity price curves. The system supports two types of Curves: Future Style curves For Listed Instruments and Published commodity prices on exchanges (opening price or closing price) Forward Style curves For OTC Products Assign the Futures Class to the Commodity Curve SAP Financial Excellence Forum 19

Commodity Master Data Forward Price Curve Enter Commodity Forward Prices based on the price quotation style. SAP Financial Excellence Forum 20

Commodities Exposure Reporting Commodity Reporting A special report exists for the reporting and valuation of commodity exposures can combine physical and paper risk positions In addition the Exposure Management functionality can be used for commodities SAP Financial Excellence Forum 21

Raw Exposures set the price Subraw exposures can also split the commodity risk as well as the FX risk SAP Financial Excellence Forum 22

Valuation - Quantities in Analytical Reporting SAP Financial Excellence Forum 23

Logistics to Treasury Integration SAP Financial Excellence Forum 24

Contacts Karsten Kohl BearingPoint Pfingstweidstrasse 60 CH-8005 Zürich Switzerland M +41 71 79 714 3285 www.bearingpoint.com karsten.kohl@bearingpoint.com SAP Financial Excellence Forum 28