SAP Commodity Risk Management Overview

In the Financial Risk Management for Commodities area, you find all the functions that you need for commodity risk management in Treasury and Risk Management.

• Exposure Management - helps you to identify the risks from your commodity transactions.

• Trading, position management, and accounting for the hedging transactions with which to hedge risks from your commodity transactions.

• In Hedge Managament you can make assignments between risks in a hedge plan, exposure positions, and hedging transactions, and perform hedge accounting.

• Further, you can perform risk analyses and determine net present values for the exposure positions and the related hedging transactions.

  Business BackGround

  For hedge management and accounting it is important for a corporate treasury to capture Financial Exposures - identified and if needed aggregated risk values - from operational systems (e.g. Logistic - Log2TRM).
  These Exposures are often held in various system or even Excel. The Exposure Management delivers the possibility to upload (manual), group, match and store the raw exposures as well as the exposure positions which shall be used as hedge items in the Treasury system.
  Also, it is important to analyze the operational exposures for risks vis-à-vis market data changes in order to mark-to-market exposures and calculate Value at risk.

  Exposures & Risks From Different Perspectives

  Depending of a company’s operations, either the fixed or the floating price exposure position is considered as a risk that requires hedging - SAP Commodity Risk Management supports commodity price risk management in both cases

  Examples

* Beverage can producer: Purchases aluminum on a floating price base (to be fixed at a later time) o Sales price contains a floating price component based on the aluminum quotation o Risk are fixed prices on the purchase side or the value of aluminum stock 7 initiate hedging operations as soon as a purchase price is fixed.
* Beverage producer: Purchases cans on a floating price basis o Risk are floating prices of the cans as they can not pass through these changing prices to their customers 7 initiate hedging the floating price risks based on actual purchases or even hedge planned future purchases

Features of Exposure Management in EhP6

• Addresses Commodity Price and Foreign Exchange (FX) Risk
• Modeling of Fixed Priced Commodity Risks as well as Floating Priced Commodity Risks via new
• Exposure Approach Category.
• Deduct FX Risk for both, fixed priced and floating priced Raw Exposure Line items containing
• Commodity Risk and FX Risk.
• One Exposure Item can bear multiple risks resulting in different Sub Raw Exposures, depending on the nature and due date of the risks (foreign exchange, commodity price risks, different commodity price risk fixing dates).
• Fixing of Floating Priced Commodity Exposures in Exposure Management
• lt is possible to capture “raw exposures” from operational systems like SD/MM etc. into Treasury and
• Risk Management system including drill-down from Raw Exposure into Logistics (one system approach)
• Easy Navigation between Versions of Raw Exposures
• Navigation from SubRawExposure to Exposure Position

INNOVATIONS ON EHP08

Hedge Management Cockpit (TOENE) Exposure Display Mode, Renaming

Scope:

• Gain an overview of net exposures, resulting from the difference between net exposures and their corresponding hedging instruments
• The function Determine Net Exposures (transaction TOENE) is now called the Hedge Management Cockpit (SP05)
  

Key Benefits:

• Selection and display of exposures and hedging instruments according to settings
• Calculation of net exposures gives an overview of the unhedged portion of exposures

Innovation: TRM, Hedge Management, Target Quotas

Scope:

With Determine Net Open Exposures (FIN_TRM_LR_FI_AN_6), you can enter target quota tables for your hedging areas. You can define target quotas relevant for hedge quotas on the level of the analysis items. The target quotas themselves are entered on a higher level than the analysis items.

More informations here https://d.dam.sap.com/a/nOmy5/EhP8_WhatsNew_20170307_delta.pdf