:- Configuration Document of SAP S/4HANA TRM (Treasury
& Risk Management) For End-to-End implementation
Project.
Created by: - Ajay Tiwari
Certified SAP S/4HANA FI-CFIN/TRM Consultant
Future CFA (Chartered Financial Analyst)
SAP Transaction Manager module tracks Treasury trades through their full life cycle – from
trade entry to payments to month-end processing to maturity of the trades. All accounting
entries related to the trades are triggered by the trades and are posted directly to the SAP
General Ledger.
Transaction Manager configuration is extensive when considering the several submodules
within Transaction Manager (e.g., Money Market, Foreign Exchange, Securities, Derivatives,
Commodities, and Trade Finance).
The Transaction Manager modules integrate well into other SAP modules, such as Cash
Management and Financial Accounting.
Transaction Manager configuration is consistent wherever possible across different trade
types. For example, there are basic differences between money market trades and
derivative trades. Derivative trades have underlying assets, but money market trades do
not. The configuration required for the different trade types is going to be different but is
largely going to be driven by the definition of the product and transaction type
configuration.
Source: - SAP
Customizing is entered in a development system and is captured in a transport. A transport
request in SAP simply refers to a method by which you can modify customizing, capture the
changes, and then move them to other systems, such as a quality assurance system, and
then to production.
The customizing changes should be tested both in the development system and the quality
assurance system before being moved to the production environment.
The exact landscape used may vary by customer but typically there is a development, QA,
and productive environment.
Financial Instruments in SAP:
The core component of the SAP Treasury solution is covering financial instruments. A wide
variety of financial instruments is available in SAP: These are divided into the following
groups:
1.Money Market transactions for short, mid, and long-term investments and borrowing.
2.Foreign Exchange transactions for all types of spot and forward transactions, including
swaps, plain vanilla options and many exotic options, through to knock-in and knock-out
structures and average rate options.
3.Loans cover both bilateral contracts, such as bank loans and syndicated contracts, issuing
programs and facilities.
4.Derivatives cover many types of OTC derivatives, such as caps and swaps as well as futures
and options dealt on the stock exchange.
5.Securities contain both bonds and stocks, with all types of rights and corporate actions.
Active, passive, and lending position can be managed.
6.Different types of Commodities. Matching of long/short future position and margin
management.
7.Trade Finance which includes instruments such as letters of credit and bank guarantees.
SAP Treasury: Analysers:
Transaction Manager covers the management of deals and requirements for the front,
middle, and back office, as well as accounting. SAP Treasury provides the following
Analysers. Market Risk Analyzer and Credit Risk Analysers.
1.Market Risk Analyzer (e.g., NPV, Sensitivity key figures, value at risk)
2.Portfolio Analyzer (calculates the yield on balances, including benchmarking)
3.Credit Risk Analyzer (manages limits and calculates utilization for the front office and risk
controlling)
4.Accounting Analyzer (calculation of accounting key figures)
The SAP Treasury and Risk Management solution includes the
following components:
1.Master Data (House Bank Accounts, Business Partner, Securities Account, Future Account,
Security Class)
2.Transaction Manager (Front, Middle, Back Office and Accounting)
3.Market Data Management (e.g., Currency Rates, Yield Curves)
4.Risk Management (Market Risk Analyzer, Credit Risk Analyzer, Portfolio Analyzer,
Accounting Analyzer)
5.Payment Program
6.Hedge and Exposure Management
The transaction management processes are split into the following areas:
1.In the front office department, you create transactions and exercise rights.
2.In the middle office, you validate the transactions, that is, you check the entered
transactions and carry out position management-related processes such as securities
account transfers. You manage the correspondence (e.g., dealing slip, confirmation, and
counter-confirmation) process.
3.Back Office/Accounting covers the accounting treatment of the relevant activities in the
subledger and the transfer of the posting information to the SAP General Ledger. At closing,
valuation and interest accrued is carried out for each subledger position to the SAP General
Ledger.
Configuration for types of trades across all Transaction Manager submodules
requires the following:
1.Define Accounting Codes
2.Assign Accounting Codes to Valuation Areas
3.Definition of Product Type
4.Definition of Transaction Types
5.Definition of Flow Types
6.Definition of Update Types and Assign Usages
7.Set Effects of Update Types on Position Components
8.Derived Business Transactions
9.Account Determination
In addition, the valuation class, position management procedure and account assignment
reference are required fields for trades across all Transaction Manager submodules.
Note: The above list is not an exhaustive list. There are other configuration nodes that are
relevant to all Transaction Manager trade types.
Business Partner Role Concept:There are two types of business partner master data. The first is the general settings, which
apply across all company codes. This includes the name, address, and contact information
for the business partner. Next, is the company code specific information, which is referred
to as standing instructions on SAP.
Within the Treasury and Risk Management, financial transactions are executed by means of
the business partner. Typical partners are bank branches or company subsidiaries. You
create a master data record for each business partner. The business partner master record
holds all relevant information for the business partner on SAP.
Financial Supply Chain Management Treasury and Risk Management
Basic Functions SAP Business Partner for Financial Services
There are two areas of the maintain business partner master record:
A) General role data is stored centrally for all roles. The data may vary according to the
role category and depending on the settings in customizing.
B) Company code specific data that only applies for the role in the respective company
code. Company code specific settings are part of the standing instructions.
The general settings apply across all company codes. This includes the basic name, address,
and contact information for the business partner.
The address settings are relevant for the communication (e.g. Correspondence, Payment).
Depending on the correspondence type, the following information is required:
1.E-Mail address
2.Fax number
3. SWIFT code
The payment transactions, which are the business partner's bank accounts, are part of the
business partner general settings.
Payment Transactions: Set up the relevant bank settings for this business partner, which you
can later use in the payment transactions standing instructions.
The company code-dependent settings are referred to as standing instructions on SAP.
The three types of information above for the business partner data are known as standing
instructions. They are:
Authorizations
Which are the financial transactions are allowed with business partner
Payment details
For transactions with business partner , what payments details should be used for a specific
type of transaction
Derived flows
For transactions with business partner A, if flow X occurs in a transaction with BP A, a tax /
commission of Y % shall be calculated on it and added to the financial transaction's cash
flows. For example, derived flows can also be done to account for withholding taxes
Overview of Traders and Portfolios
Traders are defined by company code. The trader name length is 12 characters long. In
this step, the trader’s name is defined.
After the traders are created, specific authorizations must be defined by company code,
product type, transaction type, and trader ID. Without authorizing a trader to enter specific
transactions, they will receive an authorization error when initiating the transactions. Trader
authorizations are defined using the Trader Authorization tile. This step must be performed
in each system, as it is not transportable.
There should be a one-to-one relationship between trader name and SAP user. A trader
name is tied to an SAP username. When trades are entered into SAP by the SAP username
user, SAP will fill the Trader field with the Trader entered in this configuration step.:-
The configuration node can be found under Financial Supply Chain Management →
_Treasury and Risk Management → _Transaction Manager → _General Settings →
_Organization → _Define Traders.
Portfolios are a criterion for grouping transactions for reporting (e.g., Credit Risk Analyzer,
Market Risk Analyzer, and standard TM reporting) and for the account determination. The
definition takes place per company code. The portfolio key can be up to 10 digits long.
You can create a portfolio and use it for trade reporting purposes. In this role, it groups the
financial transactions.
The portfolio field can have another role for securities positions. The position management
function of the Transaction Manager allows your accounting positions to be managed and
accounted for based on specific criteria in the financial transaction. It is possible to
distinguish securities positions by portfolio.
The portfolio is specified on the Administration tab of trades, and in most reports, the
portfolio field is a selection criteria and so can be used to filter on trades.
Similar to the trader field, portfolios are defined in customizing by company code.
Both the trader and portfolio fields are used consistently across the Transaction Manager
module
Portfolios are a criterion for grouping transactions for reporting (e.g., Credit Risk Analyzer,
Market Risk Analyzer, and standard TM reporting) and for the account determination. The
definition takes place per company code. The portfolio key can be up to 10 digits long.
Portfolios are defined in customizing under Treasury and Risk Management →
_Transaction Manager → _General Settings → _Organization → _Define Portfolio.
You can create a portfolio and use it for trade reporting purposes. In this role, it groups the
financial transactions.
Number Ranges: -
Follow customizing menu path Financial Supply Chain Management → _Treasury and Risk
Management → _Transaction Manager → _Money Market → _Transaction Management
→ _Transaction Types → _Define Number Ranges. There is a corresponding path for
Foreign Exchange, Securities, Derivatives, etc.
Product and Transaction Types for Money Market:-
In Transaction Manager configuration, an element that has "type" in the name is an element
that can be defined in configuration. An element that has "category" in the name is
something that is predefined by SAP and not changeable. The categories are used in the
definition of types, (product types, transaction types, and flow types). For example, the SAP
system provides product categories that are used to define product types.
Below are the different types of money market product categories delivered with SAP:
510 - Fixed term deposit
520 - Deposit at notice
530 - Commercial paper
540 - Cash flow transaction
550 - Interest rate instrument
560 - Facility
580 - Current account-style instrument
Based on the different product categories, different product types are defined. For example,
using the facility product category, bilateral or syndicated credit facilities can be defined.
Using the interest rate instrument product category, a loan type instrument can be created.
Based on if the loan would be made with an external or internal party, the product type(s)
would be named accordingly.
The cash flow structures are different for the different money market product categories.
For example, facilities, interest instruments, cash flow transaction and deposit at notice, all
have different cash flow structures.
the Transaction Manager module consists of the following submodules:
1.Money market
2. Foreign exchange
3. Derivatives
4.Securities
5.Commodities
6.Trade Finance
Transaction Manager configuration is consistent wherever possible across different trade
types and sub-modules. For example, there are basic differences between money market
trades and derivative trades. Derivative trades have underlying assets, but money market
trades do not. The configuration required for the different trade types is going to be
different. However, understanding the configuration for intercompany loans, which is in the
Money Market submodule, greatly expedites the understanding of processing other trade
types using Transaction Manager.
The building blocks to defining financial instruments are product type, transaction type, flow
types, condition types, and update types. Settings are made at each of these levels to
control the functionality of the financial instrument. How to make the settings for these
components is a key point of implementing the Treasury and Risk Management module.
At this point, each of the components is defined. Keep in mind, for each component, there
are key settings which drive the functionality and processing for the trade type. Each
submodule in Transaction Manager will be considered, with emphasis placed on the ways
the submodule is different from previous sub-modules covered.
Product types - The product type classifies a financial instrument in SAP Treasury and Risk
Management. Differentiation is necessary as the individual instruments are subject to
different processing rules and/or to create different levels for reporting. Examples of
product types are intercompany loans, FX spot trades, FX forward trade, etc.
Product types help to differentiate between different Money Market financial instruments.
Differentiation is necessary if the individual instruments are subject to different processing
rules or if you wish to create different levels for evaluation. By assigning different structure
characteristics, various forms of transactions can be predefined.
Only via the combination of the product type with a transaction type is the financial
transaction finally set.
In this step, you maintain the product types you require.
IMG Menu
Financial Supply Chain Management -> Treasury and Risk Management ->
Transaction Manager ->Money Market -> Transaction Management -> Product
Types -> Define Product Types
Transaction types - Transaction types are defined with respect to a product type and subdivide the product types by type of transaction. For example, the transaction types for a
product type representing a bond may be BUY and SEL.
Flow types - Flow types define the flows of a trade. For example, an FX forward contract
has a buy currency side (buy flow type) and a sell currency side (sell flow type).
IMG Menu
Financial Supply Chain Management -> Treasury and Risk Management
->
Transaction Manager ->Money Market -> Transaction Management -> Flow
Types -> Define flow Types
In this section, you define the flow types, which are necessary for your transactions.
Flows describe various payment flows arising from transaction conclusion, valuation and
accrual/deferral functions as well as transfer postings. They are classified through flow types
that you define in Customizing.
The sum of all transaction flows forms the basis for generation of the cash flow and describes
possible changes to the updated payment flows. They also form the basis for updating
transactions in FI and Cash management and for analysis in Market risk management. The
classification divides the flow types according to business criteria. The flow category allows
the system to interpret your settings, the calculation category determines the representation
in the cash flow.
Alongside the settings which determine whether the flows are to be updated in Cash
management and FI (i.e. they are cash forecast and posting relevant), this step allows you to
consider data for valuation, accruals/deferrals and display in the drilldown reporting tool.
Condition types - Condition types control
how flows calculated by the system are
handled, such as interest, dividends,
repayments, and charges.
IMG Menu
Financial Supply Chain Management -> Treasury and Risk Management ->
Transaction Manager -> Money Market -> Transaction Management -> Condition
Types -> Define Condition Types
In this step, you define the necessary condition types for your product types.
Assign the time and amount structure to the various financial transactions you wish to
represent in Treasury management via condition types. Interest, repayment or commission
are examples of condition types.
Condition types automatically generate flows, which are the basis for further processing in FI
and Cash management as well as for analysis in Market risk management.
To your condition types, you assign
1.
2.
3.
a classification
a condition category and
a flow type
The classification divides the condition types according to business criteria. Via the chosen
classification, you restrict the possible condition categories. Condition categories allow the
system to interpret and process your settings.
Update types - The update type identifies the flow in position management and controls
the flow to the operative and parallel valuation areas. Each update type has a direction
associated with it.
IMG Menu
Financial Supply Chain Management -> Treasury and Risk Management >
Transaction Manager ->Money Market -> Transaction Management ->
Update
Types -> Define Update Types
In this IMG activity, you define all the update types that are required to manage the positions
in the parallel valuation areas.
You can also assign update types to different “usages.” You can assign an update type to
several usages. An update type is assigned to a usage If it is an update type created by the
usage If it is an update type that is processed in the usage.
Example:
You assign all update types to the usage securities account management which is required
for managing positions or for which specific information may have to be defined for securities
account management.
SAM1104 Final repayment (scheduled)
SAM1105 Annuity
SAM1106 Instalment repayment
SAM1900 Nominal adjustment: Increase
SAM1901 Nominal adjustment: Reduction
SAM5000 Nominal interest
Step by step Configuration :-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Define Company Code Additional Data
Define Valuation Area
Define Accounting Codes
Assign Accounting Codes and Valuation Areas
Define and Assign Valuation Classes
SAP Business Partner for Financial Services
Define BP Roles & Categories
Define BP Role Groupings
Define Number Ranges for BP
Define Groupings and Assign Number Ranges
Define Product Types
Define Number Range
Define Transaction Types
Define Flow Types
Define Derived Flows for TDS on Fixed Deposit Interest
Define Flow Types for TDS on FD Interest Flows
17
18
19
20
21
22
23
24
25
26
27
28
Assign Flow Types to Transaction Type
Define Update Type
Assign Update Type to Flow Type
Assign Update Type for Valuation
Indicate Update Type Relevant to Posting
Define Condition Types
Assign Condition Types to Transaction Type
Assign General Valuation Class
Define Number Ranges for Security Classes
Define Position Management Procedure
Assign Position Management Procedure
Define Account Assignment References
29
Define Account Assignment References Determination (OTC Transactions)
30
Define Account Assignment References Determination (Securities/Listed
Derivatives)
31
32
33
34
Define Reference Interest Rate
Define Exchanges
Define Reasons for Reversal
Define Account Determination
34.1 Definition of Posting Specifications - Assignment of Treasury Document Types to Posting
Specs
34.2
Define Account Determination - Definition of Account Symbols
34.3
Define Account Determination - Assignment of Update Types to Posting Specs
34.4
Define Account Determination - Assignment of GL Accounts to Account
Symbol