Commodity Trading & Treasury Integration
Karsten Kohl / BearingPoint Switzerland AG
June 11/12, 2013
Content
Commodity Trading Market
BearingPoint‘s Service Portfolio and Expertise
Challenges for Commodity Management Systems
Commodity Management in SAP
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Where to find Commodities …
Trading
High Tech
Consumer
Products
Automotive
Mills &
Mining
Oil & Gas
Aerospace
& Defense
Pharma
Agriculture
Building
Material
Wholesale
Distribution
Chemical
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Content
Commodity Trading Market
BearingPoint‘s Service Portfolio and Expertise
Challenges for Commodity Management Systems
Commodity Management in SAP
© 2013 SAP AG or an SAP affiliate company. All rights reserved.
4
Our Service Portfolio
in Commodity Trading
Physical and
Paper Contract
Management
Credit & Trade
Finance
Regulatory
Reporting
Risk
Management
Transportation
Operations &
Back Office
© 2013 SAP AG or an SAP affiliate company. All rights reserved.
Treasury
Trade
Accounting
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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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6
Content
Commodity Trading Market
BearingPoint‘s Service Portfolio and Expertise
Challenges for Commodity Management Systems
Commodity Management in SAP
© 2013 SAP AG or an SAP affiliate company. All rights reserved.
7
Commodity Management
Related areas
Commodity
Trading
•
•
•
Physical trades
Paper trades
Pricing
Treasury and Cash
Management
•
Cash and liquidity
management
• Foreign exchange
• Financing
• Working capital
Back office
•
•
•
Invoicing
Confirmation
Stock valuation
based on
accounting rules
• Closing process
Credit Management
•
•
•
Credit risk
Credit risk exposure
Trade finance (LC’s,
guarantees)
© 2013 SAP AG or an SAP affiliate company. All rights reserved.
Operations
•
•
•
Scheduling
Transportation
Planning
Production
•
•
Risk Management
Planning
As-Is
analysis
•
Exposure and position
reporting
• P/L reporting
• Valuation: VaR; MtM,
simulations
Legal and
Compliance
•
•
Contract management
Regulations (e.g.
EMIR for derivatives)
• Environment
External
Systems
&
sources
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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
Process Advantages
 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
© 2013 SAP AG or an SAP affiliate company. All rights reserved.
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Content
Commodity Trading Market
BearingPoint‘s Service Portfolio and Expertise
Challenges for Commodity Management Systems
Commodity Management in SAP
© 2013 SAP AG or an SAP affiliate company. All rights reserved.
10
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
Financial Risk for
Commodities
Commodity
trading
Physical
deals
Exposures
Trading Contract
(GTM)
(TRM)
Portfolio
Trading book
Valuation
Hedge
accounting
Purchase Contract
Sale Contract (SD)
(MM)
•
•
•
•
Stock Valuation
Inventory
Invoice verification
Delivery
Pricing
engine
(CPE)
• Delivery
• Billing
Trade Finance
Credit Risk
Finance and Controlling (FI/CO)
Reporting (BI)
© 2013 SAP AG or an SAP affiliate company. All rights reserved.
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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
Operative
Exposures
Aggregation
(Raw Exposures)
(free definable)
Automatic built or
uploaded from various
sources
© 2013 SAP AG or an SAP affiliate company. All rights reserved.
Hypothetical
Trades
of
exposure positions
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.
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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
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Risk Management
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Commodity Products
Available products as of EhP6
• Commodity Futures contracts Traded on Exchanges
• Commodity Options Traded on Exchanges
• OTC Forwards
• OTC SWAPs
• OTC Options
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Commodity Products – Futures
Commodity Futures
• Capture Deal
• Cash Settlement or physical settlement
• Matching with other Futures possible
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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
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Commodity Master Data
Commodity Master Data
• Create Commodity Master Data
• Commidity kind: Abstract or Commodity
• New features available (delivery location and Incoterms)
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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
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Commodity Master Data – Forward Price Curve
Enter Commodity Forward Prices based on the price quotation style.
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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
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Raw Exposures – set the price
Subraw exposures can also split the commodity risk as well as the FX risk
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Valuation - Quantities in Analytical Reporting
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Logistics to Treasury Integration
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Logistics to Treasury Integration
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25
Logistics to Treasury Integration
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Logistics to Treasury Integration
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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.
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Karsten Kohl
BearingPoint
Pfingstweidstrasse 60
T +41 43 299 64 53
M +41 79 714 32 85
CH-8005 Zürich
Switzerland
www.bearingpoint.com
karsten.kohl@bearingpoint.com
© 2013 SAP AG or an SAP affiliate company. All rights reserved.