commodity trading & treasury integration

Karsten Kohl / BearingPoint Switzerland AGJune 11/12, 2013

Commodity Trading & Treasury Integration

© 2013 SAP AG or an SAP affiliate company. All rights reserved. 2

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Commodity Trading Market

BearingPoint‘s Service Portfolio and Expertise

Challenges for Commodity Management Systems

Commodity Management in SAP


Where to find Commodities …

Trading High Tech Consumer Products

Oil & GasMills & Mining

Building Material Chemical

Aerospace & Defense

Wholesale Distribution

Automotive

Pharma

Agriculture


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Credit & TradeFinance

Trade Accounting

Treasury

Risk Management

Physical and Paper Contract Management

Regulatory Reporting

Operations & Back Office

Transportation

Our Service Portfolio in Commodity Trading


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.


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Commodity ManagementRelated areas

Back office• Invoicing• Confirmation• Stock valuation based on accounting rules

• Closing process

Commodity Trading

• Physical trades• Paper trades• Pricing

Operations• Scheduling• Transportation• Planning

Production• Planning• As-Is analysis

Risk Management• Exposure and position reporting

• P/L reporting• Valuation: VaR; MtM, simulations

Credit Management• Credit risk• Credit risk exposure• Trade finance (LC’s, guarantees)

Treasury and Cash Management

• Cash and liquidity management

• Foreign exchange• Financing• Working capital

Legal and Compliance

• Contract management• Regulations (e.g. EMIR for derivatives)

• Environment

External Systems

& sources


Commodity Trading ManagementThe 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.

Integration of Commodity Trading within ERP system

Transparency along the entire supply chain real-time 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

Business Values Process Advantages


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Commodity Management in SAPAn 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.

Purchase Contract (MM)

• Stock Valuation• Inventory• Invoice verification• Delivery

Sale Contract (SD)• Delivery• Billing

Trade Finance Credit Risk

Trading Contract (GTM)

Pricing engine(CPE)

Commodity trading

Physicaldeals

Paperdeals

Portfolio Trading book Valuation Hedge accounting

Financial Risk for Commodities

(TRM)

Finance and Controlling (FI/CO)

Reporting (BI)

Exposures


Hypothetical Trades

Paper Trades (SAP) Commodity (paper trades)

- e.g. futures, forwards, swaps, options

Foreign Exchange trades (FX)

- e.g. spots, forwards, swaps, options

Automatic built or uploaded from various

sources

The Commodity ExposureThe 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.

Automatically updated by in case of price

and/or volume changes

Aggregation of exposure positions

(free definable)

Sales (SAP SD)Purchases (SAP MM)Planned data (SAP APO)

Physical Trades (SAP)

Treasury (SAP)Other sources (e.g. Excel)

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.

OperativeExposures

(Raw Exposures)

Exposurereport


Commodity Trading Management ReportingComprehensive tools are available for different reporting purposes

• Ad hoc reportingpoint & click, unified databases, position, P&L, period, cash flow

• Reporting toolsSAP Query, ABAP List, Other 3rd-party providers, Business Intelligence (BI)

• Result databasePortfolio hierarchy e.g. by country, region, type of commodity, drill-down, historic results

• Management reportsPositions, performance, ratios, compliance, risk exposure, profitability

• Data exportFlat files, excel, automatic or manual


Risk Management


Commodity Products

Available products as of EhP6

• Commodity Futures contracts Traded on Exchanges

• Commodity Options Traded on Exchanges

• OTC Forwards

• OTC SWAPs

• OTC Options


Commodity Products – Futures

Commodity Futures

• Capture Deal

• Cash Settlement or physical settlement

• Matching with other Futures possible


Commodity Product – SWAPs

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

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).


Commodity Master Data

Commodity Master Data

• Create Commodity Master Data

• Commidity kind: Abstract or Commodity

• New features available (delivery location and Incoterms)


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


Enter Commodity Forward Prices based on the price quotation style.

Commodity Master Data – Forward Price Curve


CommoditiesExposure 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


Subraw exposures can also split the commodity risk as well as the FX risk

Raw Exposures – set the price


Valuation - Quantities in Analytical Reporting


Logistics to Treasury Integration


5 Points to remember

1) An integrated solution gives you a real time view of your exposure to the market

2) Covers the whole commodity trading life cycle, including logistics, trading and accounting

3) Minimizing errors in the system by reducing manual work/intervention

4) Reducing your administrational effort

5) One system, less maintenance / interfaces.

© 2013 SAP AG or an SAP affiliate company. All rights reserved.

Karsten Kohl

BearingPointPfingstweidstrasse 60

CH-8005 ZürichSwitzerland

[email protected]

T +41 43 299 64 53M +41 79 714 32 85

www.bearingpoint.com

commodity trading & treasury integration

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