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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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commodity trading treasury integration

Commodity Trading & Treasury Integration

Karsten Kohl / BearingPoint Switzerland AGJune 11/12, 2013

content
Content

Commodity Trading Market

BearingPoint‘s Service Portfolio and Expertise

Challenges for Commodity Management Systems

Commodity Management in SAP

where to find commodities
Where to find Commodities …

Consumer Products

Automotive

Trading

High Tech

Aerospace

& Defense

Pharma

Mills & Mining

Oil & Gas

Wholesale Distribution

Building Material

Chemical

Agriculture

content1
Content

Commodity Trading Market

BearingPoint‘s Service Portfolio and Expertise

Challenges for Commodity Management Systems

Commodity Management in SAP

slide5

Credit & TradeFinance

Our Service Portfolio in Commodity Trading

Physical and Paper Contract Management

Regulatory Reporting

Treasury

Transportation

Risk Management

Operations & Back Office

Trade Accounting

bearingpoint s expertise 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.
content2
Content

Commodity Trading Market

BearingPoint‘s Service Portfolio and Expertise

Challenges for Commodity Management Systems

Commodity Management in SAP

commodity management related areas
Commodity ManagementRelated areas
  • Commodity Trading
    • Physical trades
    • Paper trades
    • Pricing
  • Back office
    • Invoicing
    • Confirmation
    • Stock valuation based on accounting rules
    • Closing process
  • Operations
    • Scheduling
    • Transportation
    • Planning
  • Treasury and Cash Management
    • Cash and liquidity management
    • Foreign exchange
    • Financing
    • Working capital
  • Production
    • Planning
    • As-Is analysis
  • Risk Management
    • Exposure and position reporting
    • P/L reporting
    • Valuation: VaR; MtM, simulations

External Systems & sources

  • Credit Management
    • Credit risk
    • Credit risk exposure
    • Trade finance (LC’s, guarantees)
  • Legal and Compliance
    • Contract management
    • Regulations (e.g. EMIR for derivatives)
    • Environment
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.

Commodity Trading ManagementThe requirements on a commodity trading system are highly complex.

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
content3
Content

Commodity Trading Market

BearingPoint‘s Service Portfolio and Expertise

Challenges for Commodity Management Systems

Commodity Management in SAP

slide11

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.

Commodity Management in SAPAn integrated solution is necessary to have the full transparency of each position as well as supporting the commodity trade lifecycle.

Commodity trading

Paperdeals

Physicaldeals

Exposures

Financial Risk for Commodities (TRM)

Trading Contract (GTM)

Purchase Contract (MM)

Stock Valuation

Inventory

Invoice verification

Delivery

Sale Contract (SD)

Delivery

Billing

Portfolio

Trading book

Valuation

Hedge accounting

Pricingengine

(CPE)

Trade Finance Credit Risk

Finance and Controlling (FI/CO)

Reporting (BI)

slide12
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.

Hypothetical Trades

  • Paper Trades (SAP)
    • Commodity (paper trades)
      • e.g. futures, forwards, swaps, options
      • Foreign Exchange trades (FX)
      • - e.g. spots, forwards, swaps, options

Physical Trades (SAP)

Sales (SAP SD)

Purchases (SAP MM)

Planned data (SAP APO)

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.

Operative

Exposures

(Raw Exposures)

Aggregationof exposure positions(free definable)

Exposurereport

Automatic built or uploaded from various sources

Automatically updated by in case of price and/or volume changes

slide13
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
commodity products
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 Products – Futures
  • Commodity Futures
  • Capture Deal
  • Cash Settlement or physical settlement
  • Matching with other Futures possible
commodity product swaps
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

commodity master data
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 – 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

commodity master data forward price curve
Commodity Master Data – Forward Price Curve

Enter Commodity Forward Prices based on the price quotation style.

commodities exposure reporting
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
raw exposures set the price
Raw Exposures – set the price

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

5 points to remember
5 Points toremember
  • An integratedsolutiongivesyou a real time viewofyourexposuretothemarket
  • Covers thewholecommoditytradinglifecycle, includinglogistics, tradingandaccounting
  • Minimizingerrors in thesystembyreducingmanualwork/intervention
  • Reducingyouradministrationaleffort
  • Onesystem, lessmaintenance / interfaces.
slide29

Karsten Kohl

BearingPoint

Pfingstweidstrasse 60

CH-8005 Zürich

Switzerland

T+41 43 299 64 53

M+41 79 714 32 85

www.bearingpoint.com

karsten.kohl@bearingpoint.com