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cleanFiles/bookmap_SAP_Commodity_Management_Solution_for_Oil__en-US_learning-sap-com_lsc-prod.zip (MMCP-DROPZONE) - 2025-03-17T13:06:31.000Z

Providing Financial Transactions Solution Overview

<div id="content"><div class="parentsection"><div class="section"><div class="kalturaVideoLessonWrapper"><div aria-label="" class="kalturaVideoLessonContainer" data-testid="video" id="1_cnu9ud9z"></div></div></div></div><div class="parentsection"><div class="section"><div tabindex="0"><h3>Lesson Summary</h3></div><div class="formalblock"><p tabindex="0">In this video you've learned:</p></div><ul style="list-style-type:disc"><li tabindex="0"><strong>Treasury and Risk Management Lifecycle:</strong>Traders execute trades, risk managers manage positions, and analytics are calculated using Market Risk Analyzer.</li><li tabindex="0"><strong>Transaction Management:</strong> Trades can be captured manually or through interfaces with brokers or exchanges, using standard SAP tools.</li><li tabindex="0"><strong>Position Management and Analytics:</strong> Position reports, mark-to-market reports, and P&amp;L analysis are integral to managing financial and physical exposures.</li><li tabindex="0"><strong>Integration with Accounting:</strong>Trades and cashflows are integrated with accounting processes, though hedge accounting for commodities is not yet supported.</li><li tabindex="0"><strong>Trade Creation and Management:</strong> Use central transaction codes for creating, editing, and reversing trades, with options for authorization and release management.</li></ul></div></div></div>

Financial Transactions Solution Overview

SAP Commodity Management Solution for Oil & Gas and Metals & Mining

SAPIndustry_Day5_Part2.mp4

Similar to the, you know, life cycle what we saw before, this is like a more technical view of how treasury and risk management encompasses the commodity risk solution. Basically, there are, there are no as such, you know, special requirements to, you know, make use of commodity solution, risk solution within treasury and risk management. everything what you would have seen by in treasury and risk management is almost the same life cycle so a trader executes a trade you know then basically the risk manager or the risk team manages the position and then you know moves on to analytics if in a typical treasury environment like if this was not a corporate this was not a commodity treasury but you know a corporate treasury for like example your investments and liabilities uh this would be like front office back mid office and back office uh so the roles and authorizations are similarly but just at the now since it's risk management uh that terminologies are different um so analytics is basically calculated by MRA, market risk analyzer of treasury and risk management, and that provides your inputs to commodity risk management. So transaction management is a place where all the trading happened. Basically, we have standard boppies for each instruments, what we discussed till now and the trades can be captured manually or you can create your own interfaces with your clearing brokers or exchanges to import these trades. Position management, again, is a similar architecture used within treasury and risk management, which is for other, you know, used for other instruments as well. So these are some technical terms here. Oops, sorry. The way basically the sublidges are handled in treasury and risk management. And all these then is moved into commodity management, risk management analytics. So then you get your version data, MTM results like we saw yesterday, the two commodity risk management tables on the financial side. And then all this is then moved into accounting, like cash management and payments. So wherever, whichever flows are applicable, these are all integrated with accounting and subsequent processes. So this is like a more detailed view of the whole architecture, right? You basically know this gets a little bit more technical in terms of the nomenclature is used within treasury and risk management solution. So you as a trader or owner create a transaction, you determine what category it is. For example, if this is your open transaction or a closed transaction, what company go to use, valuation area is, this is now a different valuation area compared to your material master or physical side. This valuation area in Treasury is reference to an accounting principle. So if you have more than one accounting principle, more valuation areas can be. configured. And then posting days based on, you know, what delivery periods you have, status of the trade, basically, whether it is an open, you know, fixed or reversed, fixed as if it was a commodity swap, then, you know, a floating swap, you can fix your prices for all those floating dates. And then basically all the cash flows of a trade. Moving on to transaction management, it determines what type of product it is or instrument, like securities, foreign exchange, commodity derivatives, and, you know, all those instruments. Then you move into analytics. You have position reports, market reports, v&L analysis, you know, and delta factors for your option positions. And the term union just means that this position report consists of both your physical exposures and financial trades. So that's what the union in this analytics means. Typically, all these, you know, these are some more functionalities of typical treasury. I would not go into these details because most of these are might not. be applicable for commodity derivatives. Some of them are like variation margin. And I think in this block here, and postings, of course. But all these are in reference to different instruments. So I would not go into that detail. And again, coming back to this side here, margin management, and quantity ledger is what is most important for commodity trades. And, of course, integration with accounting. At this version of the S4, we do not support hedge accounting of commodity derivatives. But that is something in the pipeline. But yeah, at this version, hedge accounting is not really supported for commodity derivatives. it is supported for different instruments like your FX positions or interest rate swaps so those kind of instruments are supported for hedge accounting but not commodity derivatives any questions all right um this is some more insight on how the whole end-to-end flow looks like um so uh you have you could have a third party front office like for example you could there could be a third party tool sitting on top of which becomes a liaison between capturing your trades from your brook clearing brokers or exchange or you know they could or they interface to capture basically your settlement prices so you connect your third party or you can create your own interface within SAP as well based on Fury so those interfaces are connected to the transaction manager or Treasury and Risk Management via BAPIS. And you capture deals. These are all type of the high-level product categories available within Treasury and risk management. So commodities is what we are focusing on. And then basically all these are then pushed into your valuation areas. Basically, so even within commodity, if you have multiple. accounting principles that your organization follow. So you can have multiple valuation areas, for example, IFRS or US GAAP. But typically what we have seen so far, at least in terms of commodities, we don't manage it through multiple valuation areas because since another being important factor also, it's not, hedge accounting is not supported in. SAP as of now for commodity so we just keep it simple and then in terms it then finally it just pushed on to financial account so all your monthly and evaluations closing out of your trades and capturing the cash settlements is all transferred to financial accounting this slide is again the same thing what we discussed and I would just like to highlight here some more points is every trade in treasury goes can be configured for authorization and concept and release management so if if your project or customer requires you to do that like every trade goes through authorization you can do that as well but what we have seen since the volume of these instruments are so much usually we don't use the release management on commodity trades. These are some samples of how trades are captured. So what you see here is basically a security ID or people who are not aware of our background in treasury and risk. A security ID is basically a profile of your commodity, of which delivery period you're trading into. So in this case, if you see this is an hour. are Bob gasoline, CME future, and the settlement is basically November 30th, 2019. So this is a December contract, December 2019 contract, and that's how SAP knows that, you know, what delivery period is associated. So based on this, I think we will have more screens against the trade creation process. But a typical process involves automatic posting in terms of month and valuations or market. So, you know, this screen shows postings and then reversal of that posting, basically. And if your organization also goes through multiple valuation areas, we can do that as well. So it posts everything according to your month-end accounting principles that has been configured. And if this was a closed transaction, like if you have realized the gain and loss finally at the maturity, then you can even generate a payment request. and clear it against your customer or a vendor accordingly with your broker. And this is just an example of correspondence that could be created and can be sent to your broker or can also receive a counter-confirmation. This now screens, as I was saying, talks about how the financial trade is being created. These are the FDR and this code create is the one, transaction code which you would use everywhere in treasury and risk management solution so no matter what instrument it is doesn't matter you would always use this so as i was saying any type of instrument that is available within treasury and risk always to create a certain trade it always goes through fDR and this code create in previous versions of treasury and risk management there were certain different decodes for different instruments, but that is all now gone. This is now the central transaction which would be used everywhere. Similarly, FDR underscore edit is a central transaction to edit a trade. Like, for example, if you want to change something or reverse a trade, or if it was an option trade, if you want to exercise an option trade. So all these are all managed by these. two transaction codes and I mean of course there are certain different transaction codes for master data and everything but when it comes to trade creation lifecycle these are the two transaction codes which would be used to create the trades manually so as I was saying you know this is we will go into the next screen which would have a detailed view of how this looks so uh every time you create uh go via ftr underscore create it will bring up the screen and with multiple tabs so depending on the usage or the type of instrument and what kind of flows it supports this so this basically uh gives you information of what data needs to be captured and you know what data some of the data which are mandatory some of them are not so all these information will be captured on a based on an instrument level um so yeah let me go to the next uh and again like any other any other uh module in SAP most of these fields can be managed through field selection so that if some of the fields you don't want them mandatory or don't want them visible to your customers or traders or users, those can be hidden in via field settings as well. In that sense, you know, whenever you're going to FDR underscore create, it will bring up some initial screens which shows, hey, what's the company code, what's the product type, blah, blah, because those are the typical components of trade creation, which I will talk. through in a while but this is the more generic screen like this is a future let me actually I think the slides were interchanged okay so the typical FTR underscore create first initial screen would ask for these values like a company code this office company code sorry it's hidden by the screen then the product type the transaction type business partner and the security ID so that's what the first screen would look like and you would give that information and the 70d is basically the product type configured in Treasury and risk management system and transaction types since this is an open position because you're going to create a new trade so that's why you select open if there was an open trade already created and you want to close it now, then this transaction type would change to close transaction. So that is the difference. So coming back to the screen. Right. So now here in this screen, first step, you notice there is a counterparty. It could be a clearing broker. There is a flow type. Now, flow type is basically it says whether this is a purchase or a sell or long or short to be. And so in this case, it's a purchase, and then there is a future account. So a future account is basically a simple explanation is like a dematerialized account in case of your stocks or bonds, where you actually hold your stocks, and that could be then cleared, you know, against your position upon maturity. But for commodity, the future account can be in reference to anything, right? For example, a typical mapping is basically map between, you know, a future account can be managed as your business areas or business units or trading groups. It could be anything because what happens is the volume of the trades are so much. And since you are the futures, the future trades are exchange cleared or your clearing broker clears for them, these are not realistic. realistically, the real future accounts are not usually used because everything is being cleared based on your margin management process through your clearing broker. So these kinds of attributes or parameters can be used to map different position attributes, like as I was saying, your trading groups or, you know, even your book structure attributes for that matter. but you know again you're open to design the way you seem right for your customer but this is just an example how you can use future accounts position value date is nothing but the trade date the date on which you execute the trade or you know create the trade payment date again payment date differs since at the creation of this trade there is actually no payment done because a few will only be settled upon the expiry if it was a financially settled future. Although if you have any kind of fees associated with it, you may choose to post during the inception of the trade. If not, you know, those fees can also be accrued over the period of the trade. So a payment date again can be different since it does not matter if there were no fees. I am there's nothing to post really on on the state so it just the way it is and so remember every every futures has to go through are always traded in terms of lots so that's why you see number of units is nothing but lots so this is 10 lots and the contract size in this case in our bob is 40,000 gallons so the math here is 10 multiplied by 42,000 multiplied by the price per unit. Now price per unit is not price for gallon, but price per lot. And that's how you get this value. I mean, and in case if a commodity is also for an exchange relevant, so then you would see the value in local currency. And if you open up this button here, it would also show you if there was exchange rate maintained and it would show you the local currency amount as well. Some more fields on the transaction like contact person. You can capture this information, contact person from your clearing broker and whatnot. So if you want that, external references, again, what reference? If you have a different reference number, you want to capture which the broker sends you. That is also available trader, the person who is executing this trade, exchange, basically which exchange this commodity belongs to this is some additional information not really impacting commodity trades but these good this kind of fields can be hidden easily this is for different instruments and you can free to you are free to use for your reporting for some other purpose but the functionality behind this is not really for commodity trades and some of you know some of the risk teams also require the date and time at which a particular trade was executed so you can you know fill this as well some more free fields like this is the standard portfolio field in treasury and risk again these fields can be utilized any way you want to so these are these three fields are free text so you can fill anything they have certain character limit so you can fill the way you want to and these will be available in your report it's a general valuation class is just the way of categorizing a trade like you know uh here it says short-term investments but you could configure it to say commodity futures or options whatever you would like authorization groups so you have you can provide some authorizations also based on like for example trader groups and whatnot so only a certain amount of traders can allow to trade a certain amount of trades for a company code so you can configure that and you know these can be part of your standard process as well so it's a typical treasury and risk functionality as I was saying there can be multiple charges also you can this is a sample charge added so this charge is $20 now typically for a commodity futures the charges are calculated based on per lot like let's say point