Managing Foreign Currency Risk Management (1X1)

Objectives

After completing this lesson, you will be able to:

  • Describe the scope of Foreign Currency Risk Management (1X1)
  • Use the Foreign Currency Risk Management
  • Explain Hedge Management
  • Use Treasury Correspondence
  • Perform Risk Management
  • Use Treasury Accounting
  • Manage the Foreign Currency Risk Management – Group Ledger IFRS (1X9)
  • Configure the Foreign Currency Risk Management

Foreign Currency Risk Management Overview

Overview

This figure shows you how the system provides you with the full end-to-end process for managing foreign exchange risks arising from different exposures, such as forecasted transactions or firm commitments. In addition, you can review and hedge the balance sheet FX risk arising from the revaluation of monetary balance sheet items in foreign currency.

The Foreign Currency Risk Management app enables you to gain an overview of the foreign exchange risk that your company is exposed to, as well as the hedging instruments which you used to mitigate that risk.

The business benefits of this are as follows:

  • Review and hedge balance sheet FX risk arising from the revaluation of monetary balance sheet items in foreign currency.
  • Review and hedge net open exposure from different exposures, such as forecasted transactions or firm commitments within the Hedge Management cockpit.
  • Automate the management of foreign exchange instruments, including creation of financial transactions and mirror transactions for inter-company trades, confirmation of contract with counterparty, payments, and extensive accounting.
  • The delivered functionality to handle the financial transactions helps you to automate labor-intensive processes, such as confirmation of financial transactions and accounting postings, giving you more time to focus on value-added activities.
  • Make better operational and strategic decisions using the comprehensive reporting and analysis tools.
  • Improve internal operational compliance, such as the setting of counterparty limits.

Prerequisites Foreign Exchange Risk Management

In order to work with the Foreign Exchange Management app in SAP S/4HANA Cloud, several self-service configuration apps for making settings related to Treasury and Risk Management processes have been added to the Manage Your Solution app.

Furthermore, the Treasury Specialist - Back Office creates business partners in the issuer, depository bank, and counterparty roles to run the processes. In addition to that, you must decide on how you enter your market data, such as FX rates, interest rates, security prices, and factor values:

  • You can use the Import Market Data app to import market data from spreadsheets.
  • You can use the datafeed to incorporate current and historic market data into your financial transactions by means of the SAP Market Rates Management service. In this case, you must subscribe to the Market Data Service app, which is provided by the SAP Cloud Platform.

It is equally important to work on the trader and trader authorizations in the SAP S/4HANA Cloud system. The Treasury Specialist - Middle Office app defines the limits and settings with which to run the automated correspondence must be introduced.

All of the details around these prerequisites are described within the Foreign Exchange Risk Management area.

FX Spot/Forward

Overview

With spot transactions, internationally traded currencies are bought and sold for other currencies at the spot rate. Forward transactions, on the other hand, are traded on a certain date in the future with the relevant premiums and discounts for calculating the forward rate being specified.

Create FX Spot transaction

The procedure to create a FX Spot transaction in the system is straightforward:

  1. Launch the app Create FX Spot/Forward from your SAP Fiori Launchpad.
  2. Enter the company code, product type 60A for foreign exchange. With the transaction type, you can decide between a spot transaction (TType 101) or a forward transaction (TType 102).
  3. If you want to assign the transaction to a portfolio, enter a portfolio in the Limits area. Alternatively, you can enter a portfolio on the Administration tab in the Position Assignment area.
  4. To branch to the basic data screen for the transaction, choose Enter. On the Structure tab, enter the actual transaction data for the swap, forward, or fixing transaction.
    • Currency pair/Exchange rate
    • Call/Put indicator
    • Traded currency
    • Traded amount
    • Value date
  5. In the case of forward transactions, you enter the forward rate in the Rate field adjacent to the relevant currency pair. The system calculates the offsetting amount from the rate and the traded amount. You can change the amount calculated (within certain limits).
  6. Save the forex transaction that you have created.

You can also branch to the entry screens for the general transaction management functions. You can use the tabs to navigate between the different screens.

On the Administration tab, you can determine and call up administrative data for a financial transaction.

  • Here, the transaction can be assigned to a particular portfolio.
  • You use the General Valuation Class to classify transactions according to asset type.
  • You enter the Hedge Request ID field for all financial transaction created due to a hedge request.
  • Set accounting relevant fields like Profit Center, Cost Center or WBS Elements.

The cash flow contains all flows of a financial transaction, classified by flow types, in chronological order. As the cash flow of financial transactions forms the basis for all trading, management and evaluation activities within Treasury, the flows have particular significance. They are generated by financial mathematics from the general data on the transaction, its structural characteristics, and the conditions assigned to the transactions. The flows contain both the payment data and their calculation bases, as well as all data required for posting.

For the integrated single transaction check, the system calculates the relevant attributable amounts for the data entered and for all risk categories. It checks the maximum risk commitment period that was pre-defined, and the internal and external limits, or the critical limit utilization. Set the indicator Counterparty Risk Active (CP Risk Active), so that an attributable amount is calculated for the transaction.

Enter the following limit characteristics:

  • Limit Product Group (the limit product group you enter here overwrites the default limit product group)
  • Monitoring Unit (freely definable reporting characteristic)
  • Rating (the rating you enter here overwrites the rating for the business partner, but this is not the case for the integrated external business partner)

Enter the following evaluation parameters:

  • Default Risk Rule (the default risk rule you enter here overrides the one set in Customizing)
  • Recovery Rate

Enter the following netting information:

  • Netting ID or
  • Collateral ID
  • Transaction Start CPR: Start of validity of transaction for Counterparty Risk
  • Transaction End CPR: End of validity of transaction for Counterparty Risk

Process FX Spot/Forward transactions

The Process Spots/Forwards - Collective Processing app enables you to manage your own spot and forward transactions. Besides functions that allow you to select and display transactions, you can also go to the individual screens for processing the financial transactions. Collective processing enables you to generate a list of transactions according to selection criteria that you define.

Enter selection criteria according to the business transactions for the list that you want to create. The list of transactions is displayed with the help of the SAP List Viewer, which provides extensive options for structuring the list rows and columns, and for sorting and displaying totals.

You can perform one of the following functions for spot/forward transactions.

Change

The screen for changing the basic data appears. Make any of the necessary changes and save the spot/forward transaction. You can now overwrite the active entry fields or enter data in the empty fields.

If you make any changes to the values you entered manually in the Rate, Spot, or Swap fields, the system sets these as fixed values. If you make any later changes, the values determined by the system are changed, but not the values you entered manually.

Display

The display screen for the basic data appears. You can use the tabs to navigate between screens and display other transaction data.

Roll Over / Premature settlement

The same screen that you use for the fast entry of swaps appears, but you can enter data only on the left-hand side of the screen (first transaction). The following fields in this area automatically contain values: Currency ID, amounts, and forward rate of the transaction to be rolled over (prematurely settled). This forward rate is the spot basis for the rollover (premature settlement) and for the value date to be changed.

The second side (second transaction) shows you the details of the forward transaction to be rolled over, but with offsetting payment flows in the opposite direction. You can enter the liquidity costs of a rollover for the changed spot rate separately in the Liquidity field and use them for your own evaluation reports at transaction level.

Reverse

When you reverse a transaction, you reset the most recent change made to the transaction, which is identified by the system as an activity.

If postings are linked to the reversed activity, these are flagged for reversal.

The reversal function reverses the last active activity and reactivates the previous activity.

Documents that can not be reversed automatically (for example, if they have been cleared in FI) must be reversed manually. These flows are automatically assigned a reversal indicator.

Settle

Using the Settle Spot/Forward Transaction function, you can select a transaction to indicate that it has been processed in the back office.

At this stage, you check the entries and add any missing data. When you save the transaction, the system fixes the data (actual records) and flags the transaction flows for posting.

Terminate

You can terminate FX spot or forward transactions early before their maturity.

The FX spot or forward transactions must have the activity category Contract Settlement.

When you save the termination activity, the system creates a Termination OTC Transaction business transaction.

Hedge Management of Balance Sheet FX Risk

Process Overview

The Hedge Management of Balance Sheet FX Risk process supports you in managing the risks arising from the revaluation of monetary balance sheet items in foreign currency​.

Balance sheet FX risks arise from the revaluation of monetary balance sheet items in foreign currency​. The Hedge Management of Balance Sheet FX Risk process provides the following features:

  • You can use the Review Balance Sheet FX Risk app to analyze the balance sheet FX risk to which your company is exposed. This enables you to gain an overview of the balance sheet FX exposures and of the hedging instruments you used to mitigate that risk.
  • You can take snapshots of your balance sheet exposures and their hedges. The snapshot data is stored in database tables.

Using the Process Snapshots - Balance Sheet FX Risk app, you can display and check the generated snapshot. In the case that an exposure is missing in the system, but needs to be considered, you can manually create a snapshot item. When the snapshot data are correct, you can release the snapshot.

Generate balance sheet exposure hedge requests based on the released snapshot data.

Using the Process Hedge Requests - Balance Sheet FX Risk app, you can edit and release the created balance sheet exposure hedge requests. For released B/S hedge requests the system automatically creates a trade request.

Your trader uses the Process Trade Requests app to get information about the required hedging instruments.

Note

If you are using the Trading Platform Integration app, these trade requests are transferred to the trading platform and the closed trades (financial transactions) are imported automatically into your SAP S/4HANA Cloud application.

With the Define Settings - Balance Sheet FX Risk app, you can identify the data in your system that represents the balance sheet exposure and the financial transactions that are used as hedges.

The key figures and key figure groups that you define here are required for the calculation of exposures, hedges, and net exposures for each transaction currency or for the calculation of the absolute exposures, hedges, and net exposures for the company codes in the Review Balance Sheet FX Risk, Balance Sheet FX Risk and Balance Sheet FX Risk - In Transaction Currency apps.

You use the key figures to specify the balances and open items in foreign currencies from G/L accounts in financial accounting are relevant for the balance sheet FX exposure or which of the financial transactions of the Transaction Manager were made to hedge FX risk.

The apps calculate the balance sheet FX risks for the key figures defined here for each transaction currency and creates totals on the key figure group level, as well as for totals of all key figures for exposures per currency, and for totals of all key figures for hedges per currency.

The net exposure for each currency is derived from the difference between the total of exposures per currency and the total of the hedges per currency. The amounts are calculated in the transaction currency and are translated into the display currency. The current exchange rates are needed to accomplish this task.

Furthermore, these key figures are taken as the basis for calculating in the display currency the absolute exposure, the absolute hedges, and the absolute net exposure for the entire company code.

Maintain Key Figure Groups

You can use key figure groups to group together your key figures. In a key figure group, you specify whether the assigned key figures belong to exposures or to hedges.

In the Review Balance Sheet FX Risk app, the exposures or hedges of a key figure group are totaled at the level of the group in the detailed view for the company code.

Call the app Define Key Figures - Balance Sheet FX Risk.

Maintain Key Figures

Specify the data source from which the key figure is to be calculated (FI balances, FI open items, or financial transactions).

Select the key figure and choose Maintain Selection. Here, you specify how the key figure is calculated.

Example

The key figures Liabilities to Third-Parties and Receivables from Third-Parties both belong to the key figure group Third-Party Exposures. For the key figure group Third-Party Exposures, set the Exposure/Hedge indicator to Exposure.

For the key figure group Hedges for Third-Party Exposures, set the Exposure/Hedge indicator to Hedge.

Note

Key figure groups are used to structure how key figures are displayed in the Review Balance Sheet FX Risk app. In this app, the key figure groups of the exposures are displayed followed by the key figure groups for the hedges.

The key figure group is displayed in the app with its description, and not with the maximum 20 character name.

Review Balance Sheet FX Risk

Review your balance sheet FX risk using the Review Balance Sheet FX Risk app. In detail, you can do the following:

  • Quantify balance sheet FX exposure positions for all entities over all potential currencies​. Obtain detailed insights into the origin/structure of the exposure positions for each currency within the company codes.
  • Quantify balance sheet FX risk hedges. Obtain detailed insights into the structure of the hedging transactions for each currency within the company codes.
  • Gain an overview of the amount of absolute FX net exposures, FX exposures, and hedging transactions in your company codes. The aggregated net exposure positions are available in the transaction currency and are converted into the reporting currency.
  • Further drill-downs to single-line item level are possible in order to evaluate exposure and hedge positions in detail.​

The following data sources are available for defining your exposure and hedge key figures:

  • FI Balances

    Reads total values from G/L accounts (One Document) as of the report key date:

  • FI Open Items

    Reads open items from G/L accounts (One Document):

  • Financial Transactions

    Read nominals of financial transactions in the Transaction Manager of Treasury and Risk Management:

  • One Exposure

    Reads operational data from One Exposure, identified by their attributes, such as certainty level, planning level, planning group, liquidity item, and transaction date.

You can use this app for two purposes:

  • Gain an overview of the amount of absolute balance sheet net open exposures, absolute balance sheet exposures, and their hedges in your company codes.
  • Obtain detailed insights into origin/structure of the balance sheet exposures and hedges for each currency within those company codes.

The sources for the calculated key figures are the balances and open items in foreign currency on your G/L accounts in Financial Accounting (One Document) and the operational data from One Exposure (FX exposures) as well as financial transactions (hedges) managed in the Treasury and Risk Management.

Take Snapshot - Balance Sheet FX Risk

Take a snapshot of balance sheet exposures and the corresponding hedges on the key date using the Take Snapshot - Balance Sheet FX Risk job template available in the Schedule Treasury Middle Office Jobs app.

Select balance sheet exposures (B/S exposures) and their hedges according to the settings in the job template. If you have defined periods, the exposures and hedges are assigned to their relevant period by due date/value date.

Save the selected data under a specific snapshot ID in the database table by doing the following:

  • The selected B/S exposures and hedges are aggregated to a snapshot item if they have at least the same company code, key figure ID, and currency. Depending on your settings in the job template, additional criteria are relevant for the aggregation.
  • If you have selected specific dimensions in this job template, these dimensions are also relevant for the aggregation.
  • If you have defined periods in this job template, the relevant period of an exposure or hedge is also relevant for the aggregation.
  • Each snapshot item is saved with the amount in the transaction currency and also the amount in the reporting currency that you have specified in the job template.

To start processing the Balance Sheet FX Risk Snapshots use the Schedule Treasury Middle Office Jobs app.

Choose the job template, Take Snapshot - Balance Sheet FX Risk, and enter the job name. Furthermore, you need to define a Recurrence Pattern. You can refine your scheduling options, such as the recurrence of the job. In the Scheduling information dialog box that appears when you have clicked the link, you can set daily or weekly recurrence patterns and also set dates or time zones.

In the Parameters section, you set the status, key date definition, or currencies.

Note

Choose the status for the snapshot. You can choose between Created and Released. If you choose the status Created, you can check the snapshot later in the Process Snapshots - Balance Sheet FX Risk app. This app also offers you the possibility to add snapshot items manually before you release the snapshot.

The selected dimensions are also relevant for the aggregation of the snapshot data, either for the data of only a specific data source or for all selected data.

Result

If the job template has been executed successfully, the selected exposures and hedges are saved as snapshot items of the snapshot (under a specific snapshot ID) in database tables.

You can use the Process Snapshots - Balance Sheet FX Risk app to check and release the snapshot.

Based on the released snapshot, you can now run the Generate Balance Sheet Exposure Hedge Requests job template.

Process Snapshot - Balance Sheet FX Risk

Using the Process Snapshots - Balance Sheet FX Risk app, you can create additional snapshot items manually for snapshots in status Created. If all data of the snapshot is correct, you can release the snapshot. For released snapshots, the app offers you the possibility to jump to the related hedge request generated based on the snapshot. In addition, the Undo Release function is available.

Using the Process Snapshots - Balance Sheet FX Risk app you can check, update, release, or delete snapshots generated using the Take Snapshots - Balance Sheet FX Risk job template.

This app provides the following key features:

  • Display snapshots and snapshot items
  • If the data of the snapshot is incorrect or the snapshot was created by accident, you can also delete snapshots with status, Created
  • If all data of the snapshot is correct, you can release the snapshot
  • If you released a snapshot by accident, you can undo the release by choosing the Undo Release button
Note
This is possible only if you haven't created hedge requests based on the snapshot.

For snapshots with the status, Released, you can jump to the related hedge requests generated on the basis of the snapshot. The related hedge requests are displayed in the Process Hedge Requests - Balance Sheet FX Risk app.

The app Balance Sheet FX Risk Overview – Based on Snapshots provides an overview of hedge management of balance sheet FX risk based on snapshot data by displaying the total net open amount in the different transaction currencies and the contributing key figure types Net Exposure of Snapshot, Hedged Amount, and Open B/S Hedge Request of Snapshot.

The major key figures are therefore:

  • Net Exposure of Snapshot: The amount of net exposure from Balance Sheet Exposure Snapshot
  • Open B/S Hedge Request: The amount of B/S Hedge Requests, which are not fulfilled
  • Hedged Amount: The amount of B/S Hedge Requests, which are fulfilled
  • Net Open Amount = Net Exposure of Snapshot + Open B/S Hedge Request + Hedged Amount

Prerequisites:

  • You must define the relevant key figures for exposures and hedges using the Define Settings - Balance Sheet FX Risk app.
  • You need to have taken snapshots of balance sheet FX risk using the Take Snapshot - Balance Sheet FX Risk app.

Generate BS Exposure Hedge Request

For direct communication with your traders, you can create balance sheet exposure hedge requests for your net open balance sheet exposures based on released snapshot data to trigger the conclusion of the required hedges.

The balance sheet exposure hedge requests are created by executing the Generate Balance Sheet Exposure Hedge Request job template available in the Schedule Treasury Middle Office Jobs app.

The balance sheet exposure hedge request has a B/S hedge request ID and a hedge request status.

A balance sheet exposure hedge request always has a status. The following statuses are available:

Error

A hedge request with this status results from the generation of hedge request due to a requirement for the creation of hedge request not having been fulfilled, such as the minimum amount. The hedge request is shown in the Process Hedge Requests - Balance Sheet FX Risk app, but no further processing is possible.

Created

A hedge request gets the status, Created, if the target status for the generated hedge requests was Created.

You can check the data of the hedge request and change the values if needed. If the data of the hedge request is correct, you can release the hedge request.

You can also delete a hedge request if the hedge request is not needed.

Released

The system automatically creates a trade request for a released B/S hedge request.

You can undo the release of a hedge request.

Canceled

If the trade request is rejected by the trading platform, the B/S hedge request gets the status Canceled.

In Process

If the related trade request has the status, In Process, the B/S hedge request also gets the status, In Progress.

Completed

If the related trade request has been completed, the B/S hedge request also gets the status Completed.

Using the Generate Balance Sheet Exposure Hedge Requests job template from the Schedule Treasury Middle Office Jobs app enables you to generate balance sheet exposure hedge requests for your net open balance sheet exposures based on released snapshot data to trigger the conclusion of the required hedges.

Features

  • You can generates hedge request for your net open balance sheet exposures.

    The net open balance sheet exposures are calculated by comparing the total amounts of the selected snapshot items for hedges and the selected snapshot items for balance sheet exposures on the level of the analysis item. Where the analysis item is defined by the company code, the risk currency of the exposures and hedges, as well as the period (only if you have defined periods for the snapshot).

  • In the report, you can specify a minimum amount for a balance sheet exposure hedge request (B/S Hedge Request) and the relevant rounding rules.
  • For the released balance sheet, you can automate the creation of exposure hedge requests automatically as well as trade requests (with trade request category B/S Hedge).
    • If you are using the Trading Platform Integration app, these trade requests are transferred to the trading platform and the concluded trades (financial transactions) are automatically imported into your SAP S/4HANA Cloud application.
    • If you do not use the Trading Platform Integration app, the trader uses the Process Trade Requests app to get information on the required hedging instruments.
Note

In the Integration with External Trading Platforms integration scenario, these trade requests are handled in the same way as the trade requests created for the hedge requests of the Hedge Management Cockpit.

Result

If the job template has been executed successfully, the created hedge requests are stored in the database table for the balance sheet exposure hedge request with the chosen target status. This is outlined as follows:

  • If the hedge requests are created in the Created status, you can use the Process Hedge Requests - Balance Sheet FX Risk app to check, edit, and release the generated hedge requests.
  • If the hedge request are created in the Released status, you can use the Process Hedge Requests - Balance Sheet FX Risk app to display the hedge requests.

After the hedge request has been released, a trade request is created automatically for each balance sheet exposure hedge request. Use the Process Trade Request app for further processing of the trade requests.

Process Hedge Requests - Balance Sheet FX Risk

Working with the Process Hedge Requests - Balance Sheet FX Risk app, you can display, edit, release, or delete balance sheet exposure hedge requests.

The key features of the app are as follows:

  • Display the balance sheet exposure hedge requests
  • You can edit balance sheet exposure hedge requests with status Created
  • You can release balance sheet exposure hedge requests with status Created
  • You can delete balance sheet exposure hedge requests with status Created
  • You can undo the release of balance sheet exposure hedge requests with status Released
  • For released hedge requests, you can jump to the related trade requests
  • You can jump to the underlying snapshot

Open the Process Hedge Request - Balance Sheet FX Risk app to get a list of hedge requests and set your required filters. If you do not restrict the search, you get a list of all available hedge requests.

From the overview you can clearly distinguish between the different status of the hedge requests based on their color coding. You can further see the instrument category, amount, company code, or the trading activity.

To process or display a hedge request, select it with the Details button.

If you want to display the details of a hedge request, choose the Details arrow on the right side of the screen.

On the screen that appears, you see all available information for the selected hedge request. The general information, the account assignments, and the action history of the hedge request are shown:

Note
For released hedge requests, the trade request ID of the related trade request is shown. The status of the hedge request and the Open Amount and Declined Amount fields provide information about the fulfillment status of the hedge requests.
  • If the data of the hedge request is incorrect or incomplete, you can change the field values of the hedge request with status Created.
  • If a hedge request was created by accident or is not needed, you can delete hedge requests with status Created.
  • You can jump to the underlying snapshot by clicking the snapshot ID.
  • If all data of the hedge request is correct, you can release the hedge request using the Release button at the top of the list.

    With the release of a hedge request, the system automatically creates a trade request.

    If you released a hedge request by accident, you can undo the release using the Undo Release button.

    Note
    This is possible only if the related trade request has not been fulfilled so far.
  • If a hedge request is already released, you can jump to the related trade request by clicking the trade request ID displayed.

Process Trade Request

Use the Process Trade Requests apps to process your trade requests.

If you implemented the Integration with External Trading Platforms integration scenario, the trading platform integration application can retrieve the trade requests. The app supports the end-to-end business process with which trade requests created in your SAP S/4HANA Cloud are sent to an external trading platform and with which, trades are then concluded on the external trading platform and automatically transferred through the trading platform integration application to your Treasury and Risk Management system.

If you do not use the trading platform integration application, the trader can use the app to find the trade requests created from B/S hedge request and cash trade request. After the required hedging transactions have been concluded, you can set the status of the trade requests manually to Completed.

Note
Trade requests of category Hedge are only generated automatically after the release of hedge requests if you have selected the Activate Trading Platform Integration checkbox when setting up your hedging area.

Using the Process Trade Requests app, you can display, change, fulfill, and check all trade requests that were automatically created after the release of hedge requests, B/S hedge requests, cash trade requests, or manually.

With a trade request you trigger the conclusion of a financial transaction (trade) on an external trading platform. For the Hedge Management of Balance Sheet FX Risk a trade request with the trade request category B/S Hedge was created as an balance sheet exposure hedge request. The balance sheet exposure hedge request is created in status Released and the corresponding trade request is automatically generated.

The requested trade of these kind of trade request can have one of the following instrument category:

  • FX Forward
  • FX Option
  • FX Non-Deliverable Forward
  • FX Collar

Trade requests created in your SAP S/4HANA Cloud are sent to an external trading platform, the trades are concluded on the external trading platform, and then they are transferred automatically to the trading platform integration application before being sent back to your SAP S/4HANA Cloud system.

The Trade Request is created with the request category: Balance Sheet Exposure.

Hedge Area

Overview

The hedging area is an entity that represents a section of your hedging policy. You define in the hedging area on the level of granularity you want to monitor your foreign exchange risk. You also specify which exposures and hedging instruments are relevant for the hedging area.

The hedging area is the basic master data of hedge management reporting. It controls the execution of the Hedge Management Cockpit app.

In the hedging area, you define the following:

  • Which level of granularity you want to monitor your foreign exchange risk.

  • Incoming and outgoing exposures are aggregated according to the differentiation criteria and reporting time pattern. The exposure aggregation level decides whether they are saved as net or gross exposure items.

  • Which exposures and hedging instruments are selected by defining the relevant company codes, hedging classifications, risk currencies, and the filters for exposures and hedges.

  • Define and enter the target quota tables relevant for the hedging area.

The hedging area is versioned. Every version of a hedging area has a different valid from date.

Note

You can only change the latest version of a hedging area if there is no snapshot for this latest version. If changes to the latest version are no longer possible, but changes to the hedging area are needed, you have to create a new version of the hedging area.

Hedge Area Creation

The hedging area in the SAP S/4HANA Cloud system is based on several different attributes. These attributes are maintained throughout the tab based layout of the hedging area. The Main Data tab of the hedging area allows you to maintain the risk category, the exposure aggregation level, and the risk-free currency setup.

The Exposure Aggregation Level

  • Controls which exposure items are created for an analysis item and saved on the database

  • Is a basic setting for the possible designation levels, because designation is done for exposure items

  • Is a basic setting relevant for the target quota definition

  • Controls the possible exposure display modes in the Hedge Management Cockpit (transaction TOENE), when you choose to see the data based on exposure items

You can choose between the following settings:

  • Only Net
  • Only Gross
  • Net and Gross

Risk-Free Currency

  • Single Risk-Free Currency

    You can choose a single risk-free currency for the whole hedging area.

  • Local Currency

    Choose the company code's local currency as its risk-free currency. In this case, you can have different risk-free currencies in the hedging area.

    If you choose this option, the company code is a mandatory differentiation criterion.

  • Currency Defined by the Source

    The target currency is derived from the currency pair of the exposure item.

    This option activates cross-currency hedging.

    If the source is Exposure Management, the risk-free currency is the target currency.

    If the source is Cash Management, the risk-free currency is the company code currency.

    If the hedging area is relevant for hedge accounting, you must choose either the Local Currency option or the Currency Defined by the Source option.

Integration

  • Hedge Accounting

    If you want to use the automated designation process for exposure items for the hedging area, you have to mark the Hedge Accounting checkbox. You can then choose the product type for the exposure subitems, created during the automated designation process. In addition, the Hedge Accounting I and Hedge Accounting II tabs accept your input.

  • Activate Trading Platform Integration

    Set this indicator to activate the integration with the trading platform integration application.

    When you set the indicator, hedge requests with the FX Hedge Request hedge request category are transferred to the trade request after their status has been set to Released.

    The trading platform integration application can then receive the trade requests and process them further before they are sent to an external trading platform.

    When you do not set the indicator, hedge requests with the hedge request category FX Hedge Request can only be processed using the Process Hedge Requests app.

Differentiation Criteria

Define the level of granularity with which you want to monitor your net open exposures by selecting the corresponding differentiation criteria on the left-hand side. The currency is always a differentiation criterion. Unless you choose one of the following differentiation criteria, the exposures and hedges are aggregated on the level of the currency.

When you choose a differentiation criterion here, make sure that it is also an additional differentiation criterion for the exposure positions in exposure management and that the field is also filled in the financial transaction data of the hedging instruments.

In this way, nominal values of all exposures/hedges that have the same differentiation criteria and are in the same time bucket are aggregated to one single amount. The net open exposure is the difference between the aggregated exposures and the aggregated hedges.

In the Hedge Management Cockpit, the differentiation criteria - in combination with the reporting time pattern - determine the amounts calculated. The differentiation criteria define the exposure items and groups of hedges relevant for a row in the result list. The reporting time pattern defines whether the rows are aggregated together in one amount or sorted by their due dates, and whether different amounts are calculated for each time bucket.

Target Quota

If you want to enter target quotas, you need to specify which differentiation criteria are relevant for target quotas on the right-hand side.

Hedging Classifications

You can choose the hedging classifications that are relevant for a hedging area.

Due Date Shift

For hedging areas with the analysis item definition By Time Periods, reporting time pattern Calendar-Related, and period length Monthly, you can define a due date shift.

The due date shift allows you to report your hedging instruments in the Hedge Management Cockpit in the following month after the due date of the hedging instrument. This means that these hedging instruments are used to hedge the exposure items of the following month.

For hedging classifications relevant to hedge accounting, the automated designation process considers the due date shift and searches for exposure items in the following month. The end date of the hedged item and the value date of the hypothetical derivative are also affected by the due date shift.

Treasury Correspondence

Treasury Correspondence

You can create correspondence documents (confirmation/deal slip) to be sent to your business partners/internal recipient via mail or print the correspondence both automatically and manually.

Furthermore you use the Treasury Correspondence Integration with SWIFT Network integration scenario, to exchange information with your counterparties.

Depending on the configuration and Master Data setup either of the three options to create a Correspondence Object is determined and used.

The integration with the SWIFT network requires an additional activation of the scope item 3QM - Treasury Correspondence Integration with SWIFT Network.

Correspondence Master Data

When working with Correspondence in the SAP S/4HANA Cloud system there is a set of Master Data that is set through the Fiori Launchpad by the Business User.

This information is also generic throughout the three different options.

Within the app Assign BIC to Business Partner, you assign a bank identifier code (BIC) to your business partner. The BIC identifies the counterparty and is needed for sending and receiving SWIFT messages.

A business partner group and communication profile needs to be assigned to each business partner acting as a recipient or sender so that the business attributes and technical attributes can be derived. However, if no assignment is found for a business partner, the system tries to find the assignment based on wildcard entries.

You make an assignment between Business Partner / Company Code / Recipient Type for possible Contract Category / Product Category / Product Type / Activity Category with Profile / Business Partner Group.

There are two apps available in the SAP S/4HANA Cloud system. One for external participants and one for internal.

To make the profile and business partner group assignments, you first need to define business partner groups and assign the relevant attributes to them using the following configuration apps:

  • Define Business Partner Group
  • Assign Attributes for Business Partner Group

For each format, business partner, and recipient type you assign correspondence classes for the inbound process.

To enable the SWIFT inbound process you need to assign the correspondence classes for the MT300 and MT320 formats dependent on business partner and recipient type (Counterparty).

Manual creation of Correspondence

The app Process Correspondence - Monitor provides an overview of all the correspondence objects available. You can edit these and also create new correspondence objects. You can use the app to conduct the entire trade process without the need for re-keying or manual intervention. Straight through-processing exists throughout the entire trade lifecycle.

You can send the correspondence manually from the correspondence monitor. In addition, you can use the Send Correspondence app. With the app Send Correspondence, you can execute correspondence on the basis of the planned records and assigned entities for the transactions selected. According to the settings, correspondence is sendt via mail or sent to theprinters.

You use this app to send correspondence manually to business partner that you create without assigning to the BP group.

From the app Process Correspondence - Monitor you can view all available correspondence objects. From the overview list you see e.g. the status, recipient, channel, the format, or the underlying transaction.

You can search and filter the list to find the information required. It is also possible to attach documents, add notes or to download the list.

In addition you can:

  • Create correspondence objects manually
  • Change correspondence objects
  • Display correspondence object
  • Display the correspondence file created from the correspondence object
  • Cancel
  • Assign
  • Send

Correspondence Objects from the application.

If you want to create a manual correspondence object, you need to set the corresponding parameters.

The system needs information on the following to create a Correspondence Object in status Initiated:

  • The Correspondence Category
  • Company code
  • Correspondence direction
  • Transaction data
  • Business Partner Group

In order to understand all of the Correspondence Object details there is the option to check on the log entries for the individual objects.

With the app Send Correspondence, you can execute correspondence on the basis of the planned records and assigned entities for the transactions selected. According to the settings, correspondence is sent via mail or sent to the printers.

By default, correspondence are sent automatically when a financial transaction is saved, if a business partner is assigned to a predefined BP group. You use this app to send correspondence manually to business partner that you create without assigning to the BP group.

Automatic creation of Correspondence

To automatically create a Correspondence Object and to send it automatically there are certain prerequisites in the SAP S/4HANA Cloud system that must be fulfilled.

Check the interactive graphic to learn more about the prerequisites:

Prerequisites for Automatic creation of Correspondence Objects

In the self-service configuration in the Manage your Solution app there are two main tasks that need to be performed:

Define Business Partner Group

With this app, you can define business partner groups with which to control the correspondence process under Assign Attributes for Business Partner Groups.

The default business group BPG_DEFAULT is delivered.

Assign Attributes for Business Partner Group

Set attributes to control the outgoing and incoming correspondence process per business partner group, correspondence class, and recipient/sender type.

In addition there are settings to Assign Profiles and Business Partner Groups so that the system is able to find the assignment based on wildcard entries, if no assignment is found for a business partner.

Define business partner groups used to control the correspondence process with the self-service configuration app Assign Attributes for Business Partner Group.

You make the required settings for the business partner group, which defines the business settings for correspondence. These settings are used to differentiate business attributes, such as counterconfirmation requirement and matching requirement, from technical attributes.

Set attributes to control the outgoing and incoming correspondence process per business partner group, correspondence class, and recipient/sender type.

You assign the following business attributes to a combination of the business partner group, correspondence class, and recipient/sender type:

  • Indicator Automatic Correspondence
  • Indicator if Correspondence Object is status-relevant
  • Indicator if Counterconfirmation is required
  • Indicator for Automatic Completion
  • Indicator to Get Values from Counterconfirmation

By using the app Schedule Treasury Back Office Jobs, the user could schedule the treasury back office jobs including fixing interest rate, calculate NPV, send correspondence and import market data. Back Office could also update the cash flow for Security Transaction.

There are several job templates available for this app. With the Send Correspondence template, you can send correspondence manually on the basis of the planned records and assigned entities for the transactions selected. According to the settings, correspondence is sent via mail or sent to the printers.

In addition, the app supports scheduling options to define the start date and the recurrence pattern for the job.

Treasury and Risk Management correspondence is integrated in the Output Management. The settings are preconfigured for Treasury and Risk Management correspondence. When you use the predefined PDF forms, you use the Output Parameter Determination app only to assign the relevant print queue.

Within the Output Management, the administrator can define your own PDF templates on the basis of the delivered PDF templates.

  • Output Parameter Determination
  • Maintain Form Templates

    Download templates and upload again after modification

  • Maintain Email Template

    Download templates and upload again after modification

  • Maintain Print Queues

    Maintain more print queues instead of the standard Default

Financial instrument processes include the following: release and settlement of financial transactions, payment and posting of cash flows, sending correspondence for financial transactions, and fixing of interest rates. To support your processes and to ensure that the individual process steps are executed in time, you can use the following apps that inform you in time when one of the activities has not been executed as expected.

Support your processes for your outgoing and incoming correspondence. You can define a specific number of hours after which you receive an alert if a counterconfirmation, an outgoing or an incoming correspondence are still pending.

Several filters for alerts are available, for example:

  • Transaction
  • Company Code
  • Counterparty
  • Counterinformation Open Since (hours)

Integration with SWIFT Network

This process allows you to exchange Treasury correspondence with your counterparties using MT300 and MT320 SWIFT messages for your FX and money market transactions. The process requires the Treasury Correspondence Integration via SWIFT Network integration scenario.

This integration scenario is a part of the Exchange Treasury Correspondence via SWIFT process which allows you to send and receive Treasury Correspondence using MT300 and MT320 SWIFT messages for your FX and money market transactions. The integration is enabled using SAP Multi-Bank Connectivity for communication with the SWIFT infrastructure.

The integration scenario is a prerequisite to use exchange Treasury correspondence via SWIFT process. To enable this integration scenario you need to set up the SAP Multi-Bank Connectivity for the Corporation Using SWIFT via SAP Multi-Bank Connectivity use case.

This process allows you to exchange Treasury correspondence with your counterparties using MT300 and MT320 SWIFT messages for your FX and money market transactions.

On a high level the Treasury Correspondence process with the SWIFT Network comprises the following steps:

  1. Create a financial transaction (FX transaction, FX option, or money market transaction).
  2. The correspondence object is created automatically.
  3. Send the correspondence object using Schedule Treasury Back Office Jobs app, Send Correspondence app, or Process Correspondence - Monitor app.
  4. The SAP S/4HANA Cloud system automatically creates the MT300/MT320 file including SWIFT parameter according to the assigned format mapping. The file name is Format + CO Key.
  5. The SAP S/4HANA Cloud system sends the MT300/MT320 file to SAP Multi-Bank Connectivity.
  6. The correspondence object gets the Acknowledgment Awaited status.
  7. SAP Multi-Bank Connectivity generates the SWIFT message by adding a SWIFT envelope around the received files for MT300 / MT320.
  8. SAP Multi-Bank Connectivity sends the SWIFT message to the SWIFT infrastructure.
  9. SAP Multi-Bank Connectivity gets a response from the SWIFT infrastructure and passes the response to SAP S/4HANA Cloud system.
  10. If an error occurred and the counterparty did not receive the SWIFT message, the non-acknowledge (NACK) response is sent from SAP Multi-Bank Connectivity automatically to SAP Cloud system. The system matches the response to the correspondence object and updates status to Error. Analyze the error and correct the financial transaction data or the correspondence object. Send the correspondence object again.
  11. When the counterparty received the SWIFT message, the acknowledge (ACK) response is sent from SAP Multi-Bank Connectivity automatically to SAP Cloud system. The system matches the response to the correspondence object and updates status to Delivery.

If the SAP Multi-Bank Connectivity gets a SWIFT message from one of your counterparties, it automatically sends the message to the SAP S/4HANA Cloud system.

The SAP S/4HANA Cloud system automatically analyzes the incoming MBC file and creates an incoming correspondence object.

If the correspondence objects are matched correctly, the status of the outgoing and incoming correspondence objects needs to be changed to Matched or Completed depending on the system setting.

Map Treasury Correspondence Format Data

Format Mappings Overview

Treasury correspondence formats are used for collecting incoming or generating outgoing treasury deal data using a predefined format. Using these formats, you can exchange information about treasury deals with your financial institution.

You define mappings for the treasury correspondence objects to define the rules for mapping or transforming data to enable communication with your financial institution in the required data format.

You use the Map Treasury Correspondence Format Data configuration step to create new outgoing or incoming format mappings or copy from existing ones, display the details of your existing format mapping, as well as import, export, edit, check, delete, and release these mappings.

Predefined Format Mappings

SAP delivers predefined treasury correspondence format mappings for some of the types of SWIFT messages that you exchange with the bank. The following treasury correspondence format mappings are available:

  • MT 300 - Foreign Exchange Confirmation
  • MT 320 - Fixed Loan/Deposit Confirmation

If you need to adjust or amend the predefined formats use the configuration in the self-service configuration of the SAP S/4HANA Cloud System. In the Manage Your Solution app under Configure Your Solution > Finance > Treasury and Risk Management > General Settings > Correspondence you will find the configuration tasks related to Format Mappings.

You can define the rules for mapping or transforming data to enable communication with your financial institution in the required data format. You can create new format mappings or copy from existing ones, display the details of your existing format mapping, as well as import, export, edit, check, delete, and release these mappings.

You can use this step for outbound or inbound processes as follows:

  • For outbound processes, you can define how data in the outgoing treasury correspondence objects are transformed to generate the final file that you send to the bank.
  • For inbound processes, you can determine how the system interprets data received from your financial institution and how to map that to the incoming treasury correspondence objects stored in the system.

Manage Treasury Correspondence Format Mappings

You can use the functions below to manage your treasury correspondence format mappings.

  • Importing and Exporting Format Mappings
  • Creating Format Mappings
  • Copying Format Mappings
  • Checking, Saving, Canceling and Releasing Format Mappings
  • Deleting Format Mappings

All these functions are relevant both for outgoing and incoming format mappings. Before performing these functions, choose either the Outgoing or Incoming button on the home screen of the app to be able to select the relevant format mapping. You can use filtering options on the top of the screen to display only format mappings that fulfill the filtering criteria.

From the self-service configuration app Map Treasury Correspondence Format Data, you can import and export treasury correspondence format mappings from the home screen of the app.

Import

To import a treasury correspondence format mapping, search or filter for your treasury correspondence format mapping, select it in the hierarchy, then click the Import button. Select the format mapping file from your computer. The imported format mapping will open in the format mapping details screen.

You can import a format mapping to another format mapping if it fulfills the following conditions:

  • It has the same type
  • It has the same parent or it is without a parent (both the source and target)
  • It has the same output type (XML or flat file)

Export

To export a treasury correspondence format mapping, search or filter for the treasury correspondence format mapping you wish to export, select it in the hierarchy, then click the Export button. The treasury correspondence format mapping is downloaded to your computer as an XML file.

Create Format Mapping

You can create new treasury correspondence format mappings from the home screen of the app.

To create a treasury correspondence format mapping, click the Create button, enter the format mapping name, a description, and, for outgoing format mappings, also select whether the type of the generated file using the mapping should be an XML or flat file (for incoming mappings, only flat file is available). The format mapping name must start with the / character, which indicates that it is a customer-defined format mapping.

You can only create a new treasury correspondence format mapping on the top level of the hierarchy, that is, you cannot create it as a child node.

The new format mapping is initially created with status Maintenance. After all the required fields are maintained you can release the format mapping.

Copy Format Mapping

To copy a treasury correspondence format mapping, search or filter for your treasury correspondence format mapping, select it in the hierarchy, then click the Copy button. Enter a new treasury correspondence format mapping name as required and select whether you want to create it as a child of the selected treasury correspondence format mapping (recommended). The format mapping name must start with the / character, which indicates that it is a customer-defined format mapping.

Note
You cannot copy treasury correspondence format mappings with the Maintenance status.

You can use the following functions to prepare your treasury correspondence format mappings for active use.

Check

When in editing mode, you click the Check button to check your format mapping for any problems. You will be notified of any problems in a list of individual error or warning messages.

Save

When in editing mode, you click the Save button to save the changes you made to your format mapping. The format mapping is saved in maintenance version.

Cancel

When in editing mode, you click the Cancel button to discard all your unsaved changes.

Release

When in editing mode, you click the Release button to ready your treasury correspondence format mapping for use in the current system and for release to the production system. When you click Release, a check is performed to see if there are any problems. You will be notified of any problems in a list of individual error messages. You must fix the errors before you can release the format mapping. If no error is found, the format mapping is saved, activated, and ready for release. The format mapping is added to a transport to be transferred to the production tenant.

Note

When releasing a format mapping, warning messages are not displayed and the format mapping can be released despite warnings. To check warning messages, use the Check button.

Treasury correspondence files are created based on the released version of the format mapping, not the maintenance version.

To ensure that the format mapping can be released to the productive environment, you must have created a new project for your changes or assigned the changes to an existing project before you edited the treasury correspondence format mapping.

After you have released the format mapping, you must also use the standard Proceed to Deploy Phase function to ensure that all the changes assigned to the project are transported to the production tenant.

You can delete a treasury correspondence format mapping from the home screen of the app.

To delete a treasury correspondence format mapping, search or filter for your treasury correspondence format mapping, select it in the hierarchy, then click the Delete button. The treasury correspondence format mapping is deleted and is not visible in the hierarchy anymore.

Note
  • You can only delete customer treasury correspondence format mappings, you cannot delete a treasury correspondence format mapping delivered by SAP.
  • If you want to back up the format mapping, you can export it before deletion. If required later, you can import it again.
  • To ensure that the deletion of the format mapping can be released to the productive environment, you must have created a new project for your changes or assigned the changes to an existing project before you deleted the treasury correspondence format mapping.
  • After you have deleted a format mapping, you must also use the standard Proceed to Deploy Phase function to ensure that all the changes assigned to the project are transported to the production tenant.

Edit Treasury Correspondence Format Mappings

Depending on the type of the format mapping, that is, whether you want to maintain incoming or outgoing treasury correspondence format mappings, different editing options are available.

This configuration step is available in the self-service configuration of the SAP S/4HANA Cloud System. In the Manage Your Solution app under Configure Your Solution > Finance > Treasury and Risk Management > General Settings > Correspondence.

Note

You cannot edit format mappings delivered by SAP. To make changes, you must copy the mapping to your customer namespace first and apply your changes there.

You can create, edit or copy outgoing treasury correspondence format mappings from the self-service configuration app Manage your Solution.

When you open an outgoing format mapping, there are several options available to create or change a format mapping. Using specific node types, node properties, or filtering options you can define the format mapping exactly the way you want it. Learn more on these options below.

Each outgoing treasury correspondence format mapping begins with the Format Mapping Properties node. Here you define the general properties and behavior of the outgoing treasury correspondence format mapping . When you select this node on the format mapping details screen, you see the following sections:

  • Format Mapping Attributes

    Under the Format Mapping Attributes section, you can maintain the description, format tags and Format Parameters Structure.

  • File Data

    Under the File Data section, you make entries related to the placement and formatting of the data as it is processed to the file. Depending on the output file type, you can maintain data for XML and/or Flat Files.

  • Levels

    In the Levels section, you specify the number of levels in the format mapping and the repetition factor for individual levels.

  • Sort / Key Fields

    In the Sort/Key Fields section, you assign treasury correspondence data fields to the levels in the file and indicate how the fields should be sorted. You make the following settings for the Sequence, Sort Field, or Key Fields.

  • Variables

    In the Variables section, you create variables to store the results of simple mathematical operations. You can reference the variables you create in calculation nodes or other nodes where they can be assigned.

  • Post-Processing

    In the Post-Processing section, you can specify any post-processing functions you want to be executed after the file is generated.

The format mapping consists of several different node types. Some icons represent nodes in both flat file formats and XML formats.

Click on the legend icon to see the full list of available node types and a description on how they are used within the app.

When you are in editing mode, you can manage the nodes in the format tree using the icons available above the tree or selecting an action from the context menu of the node (available by right-clicking the node).

You can:

  • Create New
  • Cut
  • Copy
  • Paste
  • Activate/Deactivate
  • Delete
  • Convert

nodes as per your requirement.

When you are in editing mode, the properties of existing nodes can be edited. Depending on the type of format and the type of node, different properties can be edited or specified. Select a different node in the tree to view and edit the properties of that node.

  • Attributes

    Under the Attributes section, you can maintain a description, default field separation, or field delimiters

  • Source

    In the Source section, you make settings related to the source of the data in the node. Depending on the node and file type, you may need to maintain a mapping procedure with constants or aggregations.

  • Condition

    Depending on the node type, you may need to maintain the following entries in the Condition section. Here you can define conditions that control whether a certain treasury correspondence format mapping hierarchy node is processed during file generation.

    You can define conditions for any node type. If you have a node with subnodes and a condition defined for the top node is not fulfilled, its subnodes are skipped too.

  • Calculations

    Calculation nodes allow you to perform simple mathematical calculations. The results of calculations are stored in variables and variables can be used as sources of nodes

Additional fields (53J, 56J, 57J, 82J, 87J) are available to the format mappings for incoming and outgoing MT300 and MT320 SWIFT messages to enable option J reporting.

In option J, party identification must be specified as a list of pairs (Code)(Value) and one or more of the following codes and formats must be used (Error code(s): T78). The codes must be placed between slashes ('/').

  • ABIC 4!a2!a2!c[3!c] Identifier Code
  • ACCT 34x Account number
  • ADD1 34x First line of the address
  • ADD2 34x Second line of the address
  • CITY 34x City, possibly followed by state and country
  • CLRC 2!a[32x] Clearing code
  • LEIC 18!c2!n Legal Entity Identifier. Must be filled with 20 characters in total. Only used in MT300 and MT320 in fields 82J and 87J.
  • NAME 34x Party's name
  • TXID 34x Tax identification code. Only used in MT300 and MT320 in fields 82J and 87J.

If you use the delivered format mappings (TRM_MT300 and TRM_MT320) for incoming and outgoing MT300 and MT320 SWIFT messages, you get the updated format mappings and do not need to make any changes. If you defined your own format mappings, you must update them according to the new SWIFT standard using Map Treasury Correspondence Format Data configuration step under Manage Your Solution -> Configure Your Solution -> Finance -> Treasury and Risk Management ->Correspondence.

Depending on the node type, you may need to maintain the following entries in the Condition section. Here you can define conditions that control whether a certain treasury correspondence format mapping hierarchy node is processed during file generation.

You can define conditions for any node type. If you have a node with subnodes and a condition defined for the top node is not fulfilled, its subnodes are skipped too.

You can use the filter option to hide nodes in the format tree.

The following options are available:

  • Display Deactivated Nodes

    Select the checkbox to show deactivated nodes in the format tree. Leave it blank to hide deactivated nodes.

  • Display Redefined Nodes

    Select the checkbox to show redefined nodes in the format tree. Redefined nodes are inherited nodes that you have edited or changed. Leave it blank to hide redefined nodes.

  • Display New Nodes

    Select the checkbox to show new nodes that you have added to the format tree. Leave it blank to hide new nodes.

  • Display Inherited Nodes

    Select the checkbox to display inherited nodes. Inherited nodes are those nodes that have been inherited from the parent format. Leave it blank to hide inherited nodes.

You can use version management functions for format mappings to store different versions of format mappings, generate new versions, or restore older versions.

To access the different versions of a format mapping, a dropdown list is available next to the name of the format mapping on the top of the screen. You can manage versions for format mappings as described below.

Creating Versions

A new version of a format mapping can be created in one of the following ways:

  • When you create a new format mapping or copy from an existing one, a maintenance version of the format mapping is created (Maintenance status).
  • When you start editing an existing format mapping, a draft maintenance version of the format mapping is created (Maintenance (draft) status).
  • This is a user-specific version that can be edited only by the user who created this version and its data is not visible to other users. When you save the format mapping, the version changes to Maintenance. This means that the version can be edited by other users.
  • When you edit a released version of a format mapping, the Released version of the format mapping will be available in addition to the new draft maintenance version. Once you have saved the maintenance version, you can restore the released version any time.
  • You can create a backup version while editing a format mapping using the Generate Backup button. In this case, a backup version is created from the draft maintenance version that is being edited, which contains unsaved changes too.
  • The system automatically creates a backup version in the following cases:
    • When you restore a version
    • When you release a version that has been released before with a different transport
    • When you import a new format mapping XML file
Note
If a format mapping has the Maintenance (draft) status and there is no activity from the owner of this version for a specified time, another user can delete this draft maintenance version and create a new draft maintenance version. In this case, the old draft maintenance version of the original user is lost.

Editing Versions

You can edit the Maintenance version of a format mapping using the Edit icon. To edit the Maintenance (Draft) version, simply click on the row of the version.

To edit other versions, you must first restore them to maintenance version.

Displaying Versions

You can open a version of a format mapping for display to check its data. To do that, click on the row of the relevant version. Note that the Maintenance (Draft) version of a format mapping can only be opened in editing mode.

Restoring Versions

You can restore backup versions or released or active working versions of format mappings back to maintenance version. To do that, use the Restore to Maintenance Version icon.

Deleting Versions

You can delete any backup versions of format mappings. You cannot delete working versions. To delete a version, select the Delete icon.

Editing Incoming Format Mappings

You can edit incoming treasury correspondence format mappings from the self-service configuration app Manage your Solution.

When you open an incoming format mapping, you can see the hierarchy of nodes on the left-hand side of the screen. To expand all the nodes in the hierarchy, you can use the Expand All icon.

The icons next to the nodes show the type of the node and node highlights (blue or no highlight) indicate where the content of the node is coming from. For explanation about the icons and highlights, use the Legend icon.

Each incoming treasury correspondence format mapping begins with the Format Mapping Properties node. Here you define the general properties and behavior of the incoming treasury correspondence format mapping. When you select this node on the format mapping details screen, you see the following sections:

  • Attributes
  • Global Constants
  • Enumerations

A format mapping tree can contain different types of nodes. For Incoming Format Mappings the following are available:

  • Record Group

    Used to group records. Record groups can include records, other record groups, or action nodes.

  • Record

    Represents a block of information in the input data.

  • Field Group

    Used to group fields. Field groups can include fields, other field groups, or action nodes.

  • Field

    In general, it represents a field inside a record in the input data. For each field, you specify how the input field value is to be mapped and processed and determine how the values are transferred to the fields in the target structure.

  • Action Node

    Represents one or more actions that are performed each time the node is reached while the input file is being processed. Actions do not correspond to any data in the input file. For example, if your file consists of multiple table rows, you use an action node to indicate where to append a new row.

When you are in editing mode, you can manage the nodes in the format tree using the icons available above the tree or selecting an action from the context menu of the node (available by right-clicking the node).

You can:

  • Create New
  • Cut
  • Copy
  • Paste
  • Activate/Deactivate
  • Delete
  • Revert to Original

By creating subfields under a parent field, you can split the values of a parent field and map them into different fields in the output structure.

Since subnodes retrieve their content from their parent node, by creating subnodes, the content of the parent node is automatically broken up based on your specifications for the subnodes.

For example, you have a field that contains the date in the following format: YYYYMMDD.

For this field, you can create 3 subnodes:

  • Year: you specify data type Number and fixed length 4
  • Month: you specify data type Number and fixed length 2
  • Day: you specify data type Number and fixed length 2

In this case, when the system reads the date field from the input file, it creates 3 separate fields in the output structure, for the year (YYYY), month (MM), and day (DD) respectively.

When you are in editing mode, the properties of existing nodes can be edited. Depending on the type of node, different properties can be edited or specified. Select a different node in the tree to view and edit the properties of that node.

You can edit the following properties of a node:

  • Attributes (all node types)
  • Input Specification (only for fields)
  • Output Specification (only for fields)
  • Actions (only for action nodes)
  • Condition (all node types)

For example, for Field node types, under the Output Specification and Condition sections, the System Variables option is available when creating new items for output value adjustment or condition.

You can use Filter icon to show or hide nodes in the format tree.

The following options are available:

  • Display Deactivated Nodes

    Select the checkbox to show deactivated nodes in the format tree. Leave it blank to hide deactivated nodes.

  • Display Redefined Nodes

    Select the checkbox to show redefined nodes in the format tree. Redefined nodes are inherited nodes that you have edited or changed. Leave it blank to hide redefined nodes.

  • Display New Nodes

    Select the checkbox to show new nodes that you have added to the format tree. Leave it blank to hide new nodes.

  • Display Inherited Nodes

    Select the checkbox to display inherited nodes. Inherited nodes are those nodes that have been inherited from the parent format. Leave it blank to hide inherited nodes.

  • Display User-Defined Output Nodes

    The filtering option Display User-Defined Output Nodes allows you to display or hide nodes that are independent of the input file.

You can use version management functions for format mappings to store different versions of format mappings, generate new versions, or restore older versions.

To access the different versions of a format mapping, a dropdown list is available next to the name of the format mapping on the top of the screen. You can manage versions for format mappings as described below.

Creating Versions

A new version of a format mapping can be created in one of the following ways:

  • When you create a new format mapping or copy from an existing one, a maintenance version of the format mapping is created (Maintenance status).
  • When you start editing an existing format mapping, a draft maintenance version of the format mapping is created (Maintenance (draft) status).
  • This is a user-specific version that can be edited only by the user who created this version and its data is not visible to other users. When you save the format mapping, the version changes to Maintenance. This means that the version can be edited by other users.
  • When you edit a released version of a format mapping, the Released version of the format mapping will be available in addition to the new draft maintenance version. Once you have saved the maintenance version, you can restore the released version any time.
  • You can create a backup version while editing a format mapping using the Generate Backup button. In this case, a backup version is created from the draft maintenance version that is being edited, which contains unsaved changes too.
  • The system automatically creates a backup version in the following cases:
    • When you restore a version
    • When you release a version that has been released before with a different transport
    • When you import a new format mapping XML file
Note

If a format mapping has the Maintenance (draft) status and there is no activity from the owner of this version for a specified time, another user can delete this draft maintenance version and create a new draft maintenance version. In this case, the old draft maintenance version of the original user is lost.

Editing Versions

You can edit the Maintenance version of a format mapping using the Edit icon. To edit the Maintenance (Draft) version, simply click on the row of the version.

To edit other versions, you must first restore them to maintenance version.

Displaying Versions

You can open a version of a format mapping for display to check its data. To do that, click on the row of the relevant version. Note that the Maintenance (Draft) version of a format mapping can only be opened in editing mode.

Restoring Versions

You can restore backup versions or released or active working versions of format mappings back to maintenance version. To do that, use the Restore to Maintenance Version icon.

Deleting Versions

You can delete any backup versions of format mappings. You cannot delete working versions. To delete a version, select the Delete icon.

Assign Treasury Correspondence Format Mappings

You assign treasury correspondence format mappings to outgoing treasury correspondence objects in the Assign Format Mappings for Outbound Process configuration step and to incoming treasury correspondence objects in the Assign Format Mappings for Inbound Process configuration step.

This is performed in the self-service configuration app Manage your Solution under Finance > Treasury and Risk Management > Correspondence > Assign Format Mappings for Outbound Process or Assign Format Mappings for Inbound Process.

The configuration step Format Mappings for Outbound Process is relevant for sending correspondences to your counterparties via SWIFT messages. You need to assign format mappings for the SWIFT formats MT300 (for FX transactions and FX options) and MT320 (for MM transactions) as a function of business partner group and country.

The format mapping is needed to transfer the data from the correspondence object to an MBC file

The configuration step Format Mappings for Inbound Process is relevant for the receipt of correspondences from your counterparties via SWIFT messages. You need to assign format mappings as a function of message type, sender ID, and the SWIFT formats MT300 (for FX transactions and FX options) and MT320 (for MM transactions).

The format mapping is needed to transfer the data from the MBC file to a correspondence object.

Market Risk Analysis

Overview

To get an objective impression of the financial and risk situation of a company, you have to be able to view all financial assets and liabilities in terms of their current market value. The Market Risk Analysis offers apps with which you can calculate online the mark-to-market values. Using the released CDS query views of the virtual data model for market risk key figures, you can also calculate the value at risk your company is exposed.

Market Risk Key Figure Sets

If you want to calculate market risk key figures based on a specific scenario and/or based on a market data shift, you must first define the scenarios and market data shifts.

Further, you need to create the Risk Factor set to be used in the Market Risk Key Figure Set if you choose to calculate the Value at Risk. Finally, you should consider the effects of changing or deleting a Market Risk Key Figure Set.

Create, change, display, delete, or copy market data shifts with the Manage Market Data Shift app.

You use market data shifts (also known as external rules) to change current market prices as well as scenario market prices. For this, a market data shift can include risk factor shifts that are distinguished from one another within the system by a rule index.

A market data shift relates to one or more factors that affect the price. In this way, you can use market data shifts to make a fictitious change to values of the following factors:

  • Exchange rate
  • Yield curve
  • Volatility
  • Basis spreads
  • Credit spreads

For each of these factors, you can define an absolute risk factor shift or a percentage-based risk factor shift.

Market data shifts are used as characteristics in the NPV evaluation. They are used to represent in simple form the effects of price changes on the NPV. The NPV evaluation displays all fictitious NPVs for each risk factor shift as well as the current NPV. Further key figures can be calculated from the NPV evaluation.

A scenario is a market data record that can contain current market data, exchange rates, exchange rate volatilities, yield curves, interest rate volatilities, and so on. You create scenarios that represent probable or possible market situations (for example, a high interest rate scenario with an inverted yield curve).

You can create, change, or delete market risk key figure sets with the Manage Market Risk Key Figure Sets application. In a market risk key figure set, you define the parameters – evaluation currency, evaluation type, scenario, shift rule – that are relevant for the calculation of market risk key figures using the Schedule Treasury Middle Office Jobs app. You also determine whether and how (value-at-risk type, risk factor set) the value at risk is calculated.

Calculate Value at Risk Indicator

If you want to calculate the value-at-risk key figures (VaR and MEL) in addition to the NPV key figures, you must mark the Calculate Value at Risk indicator.

If you set this indicator, you cannot choose a market data scenario or a market data shift. If you set this indicator, you must specify the value-at-risk type (which defines the value-at-risk calculation method) and the risk factor set (which defines the relevant risk factors).

Value at Risk Type

The VaR type specifies the valuation parameters for value-at-risk calculation in Risk Management. The following VaR types are available:

SV1 VaR – Historical Simulation

If you choose this VaR type, the mean excess loss key figure is calculated in addition to the value at risk.

SV2 VaR – Monte Carlo Simulation

If you choose this VaR type, the mean excess loss key figure is calculated in addition to the value at risk.

SV3 VaR – Variance/Covariance

Real-Time Update indicator

Set this indicator if you want changes made to objects covered by the market risk key figure set (such as when a financial transaction, a security position, or an exposure position are changed or new ones are created) to trigger an automatic adjustment run of the Calculate Market Risk Key Figures report.

Note
The adjustment run uses the same parameters (derived from the market risk key figure set) as the basic run. Even if you have changed the market risk key figure set in the meantime, the adjustment run uses the same parameters as the basic run. This ensures that all financial objects are processed according to the same parameters on a key date.

If you selected the VaR calculation, you must choose a Risk Factor Set. The risk factor set defines which kinds of risk need to be considered (FX risk and/or interest rate risk) and the specific risk factors relevant for the calculation of the value at risk. You also define the risk factor set in this app.

To create a new Risk Factor set, choose the New Entries button. Create the entry considering the following:

FX Risk

If you choose the FX risk, FX spot rates are used as risk factors. In this case, you must also specify the Risk Currencies in the risk factor set.

Interest Rate Risk

If you choose the IR risk, the grid points of the yield curves are used as risk factors. A grid point is identified by the yield curve type, the currency, and the reference interest rate. The yield curves used for discounting as well as the yield curves for the forward calculation are considered. The yield curves for discounting are taken from the evaluation type, while the yield curves for forward calculation are taken from the specific reference interest rates.

Dependent on your settings in the Scenario and Shift Rule columns, the market risk key figures are calculated as described in the table.

Note
If you also calculate the value at risk within a market risk key figure set, you cannot use scenarios or shift rules.

You should consider the following when working on Market Risk Key Figure Sets:

Change a Market Risk Key Figure Set

Even if market risk key figure values based on this market risk key figure set exist, it is nevertheless possible to change the market risk key figure set. Note that such a change in the calculation parameters can lead to a break within the historical time series of the calculated values, with the result that these values are no longer consistently comparable.

Delete a Market Risk Key Figure Set

If market risk key figure values based on these market risk key figures exist, it is not possible to delete the market risk key figure set.

Net Present Value

You use the Calculate Market Risk Key Figures app to calculate and display online market risk key figures, such as NPV and sensitivity key figures for the selected financial transactions.

You can calculate market risk key figures using key figures defined for the available key figure categories or formula-based key figures based on the key figure categories, and then display them together.

By specifying the evaluation date and horizon date, you define for which date the financial transactions and market data are selected.

You use the key figure analysis to calculate certain market risk key figures online for a small portfolio of transactions. The advantage of the Calculate Market Risk Key Figures app is that you can display NPV key figures and sensitivity key figures together, and relate them to formula-based key figures.

Value at Risk

The value at risk (VaR) represents the potential loss in value of a position (expressed as a net present value) that could – with a certain probability – be realized before the position is hedged or liquidated. The VaR evaluation is thus an extension of NPV analysis and has the benefit of enabling a standardized approach to risk quantification. The difference between the two types of evaluation is that VaR takes into account the uncertainty of future market developments.

An NPV approach is used throughout the VaR evaluation, allowing the VaR to be consolidated across all sub-areas of the enterprise. You can freely aggregate the risk from products, currencies, and organizational units, and bring the results together to establish the total risk. Value-at-risk analysis is therefore of key significance for an enterprise’s global risk controlling activities.

Within the framework of risk management, VaR represents a target figure for controlling. The value at risk therefore forms the basis of the internal risk controlling models proposed by the Basle Committee on Banking Supervision.

In principle, the value at risk is determined by the value of the position entered into and the volatility of market prices. The value at risk is also influenced by the average retention period of the position, that is, the time it takes for the position to be hedged or liquidated. The following calculation methods are available for the value at risk.

Basics on Financial Objects

Financial Objects - Definition

In Treasury and Risk Management, financial data is analyzed based on the financial objects created automatically for each object you want to analyze. Additional information that is required for risk analysis is also entered into the financial object.

Financial objects are created for the following:

Treasury and Risk Management

  • Money market transactions
  • Foreign exchange transactions
  • Over-the-counter (OTC) derivatives
  • Security transactions
  • Security class positions in securities accounts
  • Trade finance transactions
  • Exposure positions

Cash Management

Bank accounts

Financial Object Integration

The structure of financial objects mainly consists of three parts:

General part: General data (such as the product type) for the financial object

  • Company Code
  • Transaction
  • Product Type
  • Source System

Analysis: Data that is relevant for Market Risk Analysis

  • Transaction Start
  • Transaction End
  • Contract Type
  • Security Class ID
  • Securities Account

Default Risk Limit: Data about the Default Risk and Limit System

  • Credit Risk (CR) Active
  • Limit Product Group
  • Monitoring Unit
  • Default Risk Rule

If you are creating a new financial transaction, you can set the values for the Counterparty Risk - for example, here with a Fixed-Term Deposit on the tab Default Risk Limit.

Set the indicator Counterparty Risk Active (CP Risk Active), so that an attributable amount is calculated for the transaction.

Enter the following limit characteristics:

  • Limit Product Group (the limit product group you enter here overwrites the default limit product group)
  • Monitoring Unit (freely definable reporting characteristic)
  • Rating (the rating you enter here overwrites the rating for the business partner, but this is not the case for the integrated external business partner).

Enter the following evaluation parameters:

  • Default Risk Rule (the default risk rule you enter here overrides the one set in Customizing)
  • Recovery Rate

In the next end-of-day processing run, the system calculates an attributable amount for the transaction to which you assigned this financial object.

The financial objects are created automatically by the system when you create financial transactions, exposure positions, and bank accounts. The field values are derived according to predefined derivation rules and customer-defined substitution rules. When you create a financial transaction, you can change the derived financial object data manually. Financial objects are created immediately following the creation of financial data. 

Financial objects are created for the following reasons:

  • Treasury and Risk Management
  • Cash Management

When you create financial transactions, the system offers dialog entry screens in which you can change the financial object data manually. If you do not enter the data manually, they are derived automatically by the system. For exposure positions and bank accounts, the financial objects are always derived automatically by the system. When you save the transaction, the system checks the information in the various parts of the financial object.

Financial Object - Derivation Process

During the derivation process, the predefined derivation rules are executed first. The predefined derivation rules do not overwrite any field values. Therefore, a field value that is entered manually, for example, is not overwritten by the predefined rules. In the second step, the substitution rules are executed. When the system executes the substitution rules for the market risk data, the system first executes the rules for the specific business contexts and then the rules for the general context. The substitution rules can overwrite the fields that have already been filled manually - either by predefined derivation rules or by an earlier executed substitution rule - if the Overwrite indicator was set in the definition of the substitution rule. Note this when you define your substitution rules.

With the Financial Objects Substitution Rules - Default Risk Data app, you can display, change, and create substitution rules for some fields of the financial objects that are relevant for default risk limit management. The rules are executed during the automatic derivation process of financial objects, whereby you can replace the field values that have already been filled, for example, from the predefined derivation rules.

Using the Financial Objects Substitution Rules - Default Risk Data, your business configurations expert can define substitution rules for the values of the following fields of the financial object data that are relevant for default risk limit management:

  • Business Partner as Limit Characteristic
  • Default Risk Rule
  • Transaction End Date for CL Counterparty/Issuer Risk
  • Transaction Start Date for Counterparty/Issuer Risk
  • Limit Product Group
  • Counterparty/Issuer Risk Active indicator

The fields available for defining preconditions are different for each business context. This enables you to substitute values of the target fields dependent on attributes specific to the business context.

You can define substitution rules to fill the following fields:

  • CR Active
  • Business Partner as Limit Characteristic
  • Limit Product Group
  • Default Risk Rule
  • Start Date
  • End Date

If you changed or created new substitution rules, business user can start the Update Financial Objects app to update the data of all existing financial objects.

The Financial Objects Substitution Rules - Market Risk Data app facilitates the display, change, and creation of substitution rules for some fields of the financial objects that are relevant for market risk analysis. The rules are executed during the automatic derivation process of financial objects, whereby you can replace the field values that have already been filled, for example, from the predefined derivation rules.

You manage substitution rules by business context. A context represents the circumstances in which the substitutions are defined and applied. It determines the fields that are available in the rule definition. There are several applicable business contexts defined by SAP. It is important to note that those can not be changed. Examples of these are as follows:

  • Bank Accounts: Market Risk Data
  • Derivatives: Market Risk Data
  • Exposure Positions: Market Risk Data
  • General: Market Risk Data

When the system executes the substitution rules for the market risk data, the system first executes the rules for the specific business contexts and then the rules for the General: Market Risk Data context.

The fields available for defining preconditions are different for each business context. This enables you to substitute values of the target fields dependent on attributes specific to the business context.

The same fields are also available as source fields for the substitution.

Note
You are responsible for ensuring that the data used in the substitution rule is used in accordance with the applicable legal or business requirements. The results, which substitution rules were applied, and the values of the target fields are visible in the apps for users with treasury business roles and must therefore not contain any sensitive data.

Update Financial Objects

With this app, you can update the data of your existing financial objects. The report starts the derivation process of financial object data for the selected financial objects and updates the values, if needed.

You use this report in the following cases:

  • If your business configuration expert created new substitution rules for specific fields of the financial object using the Financial Objects Substitution Rules - Market Risk Data and Financial Objects Substitution Rules - Default Risk Data configuration apps
  • If your business configuration expert changed the settings in the Assign Product Categories and Default Risk Rules and Assign Product Categories and Limit Product Groups configuration steps
  • If an error occurred during the automatic integration process of financial objects and the data could not be derived

You execute the report for a specific financial object type, whereby you can also restrict the number of financial objects according to financial object type-specific selection criteria.

You can execute the report as a test run or as an update run.

Treasury Accounting Terms

Account Assignment References

Account assignment references are assigned to each treasury position.

You use the account assignment reference to determine the G/L account in which the position is managed.

You make the assignments of the G/L accounts dependent on the account assignment reference for the relevant account symbols (position and interest revenue) for posting the positions, dividend payments, interest payments, accruals and deferrals, incoming payments, and repayments in the general ledger.

For example, you can define different account determination settings for an update type, depending on the valuation area. You could, for example, assign posting specifications to an update type in valuation area 002 that differ from the posting specifications for the same update type in valuation area 003. Alternatively, you could use the same posting specifications, but assign different G/L accounts to a account symbol for each valuation area.

In order to derive the correct account assignment reference, the following requirements are set in the system:

  • You have defined the chart of accounts and all the required accounts in Financial Accounting.
  • You have defined all account assignment references in the step Define Account Assignment References.
  • In the Define Account Symbols configuration step, you have defined abstract account symbols.
  • You have defined your update types.
  • The system posts flows in the parallel valuation areas only if an update type is set as relevant for posting in the Indicate Update Types as Relevant to Posting configuration step, and if posting specifications have been defined, for the corresponding update types in this configuration step.

Determination Process

The determination process of account assignment references starts when an over-the-counter (OTC) transaction or security purchase is created.​

During the determination process of account assignment references, the system runs through the following sequence:

  1. The system searches for a suitable substitution rule. If it finds a suitable substitution rule, it uses it to determine the account assignment reference.
  2. If the system can not find a suitable substitution rule, it searches for a suitable determination rule. If it finds a suitable determination rule, it uses it to determine the account assignment reference.
  3. If the system can not find a suitable determination rule either, it derives the account assignment reference using predefined rules in the content.

The single items and dependent Fiori apps will be analyzed in more detail below.

The Account Assignment Reference - OTC Transactions (Substitution Rules) app helps you to display, change, and create substitution rules to determine the account assignment references of OTC transactions. Account assignment references are assigned to each treasury position. ​You use the account assignment reference to determine the G/L account in which a treasury position is managed.

The substitution rules are executed during the automatic process for determining account assignment references when an OTC transaction is created.​

Rules for the determination of account assignment references can be defined by you and are predefined in the content:

  • You can define rules in the Account Assignment References - OTC Transactions (Substitution Rules) and Account Assignment References - Securities (Substitution Rules) configuration apps
  • If you have the Define Determination Rules - Account Assignment References in use, the settings are still relevant for the determination process of account assignment references.
  • The predefined content also contains derivation rules that are also still relevant for the determination of account assignment references.

During the determination of account assignment references, the system runs through the previously described sequence.

The table exemplifies the different fields for available defining preconditions by business context. This enables you to substitute values of target fields dependent on attributes specific to the business context. The target field is the Account Assignment Reference of Position Management.

Using the Account Assignment Reference - Securities (Substitution Rules) app, you can display, change, and create substitution rules to determine the account assignment references of securities. Account assignment references are assigned to each treasury position. ​You use the account assignment reference to determine the G/L account in which a treasury position is managed.

The substitution rules are executed during the automatic process for determining account assignment references when a securities transaction is created.​

You manage substitution rules by business context. A context represents the circumstances in which the substitutions are defined and applied. It determines the fields that are available for the definition of rules.

At runtime, business users create financial transactions. This triggers the automatic determination of the account assignment references for the corresponding treasury positions, and the rules that you have defined are applied automatically. In case of a substitution the system derives, replaces, or clears values for the relevant fields defined in the substitution rules. The substitutions take place at the time of data entry with no system messages.

View the previous example to learn about how the target field (account assignment reference) is derived.

Using the Define Determination Rules - Account Assignment References app, you can define rules for the automatic determination of account assignment references for parallel valuation areas. You define the rules for each product group and subledger position that enables you to make postings to a position. Business rules for OTC Transactions and Securities are available.

Note

The Account Assignment References - OTC Transactions (Substitution Rules) and Account Assignment References - Securities (Substitution Rules) apps replace this app. The Define Determination Rules - Account Assignment References app is deprecated and will soon be deleted from the launchpad. We recommend that you switch to the successor apps.

Note

The Define Determination Rules - Account Assignment References app is deprecated and will soon be removed from the launchpad. However, if you have the Define Determination Rules - Account Assignment References app already in use, the settings are still relevant for the determination process of account assignment references.

Various account assignment references are predefined in the Define Account Assignment References configuration step under the following: Manage Your SolutionConfigure Your SolutionFinanceTreasury and Risk ManagementTreasury Accounting.

As outlined above, the predefined account assignment references are used if otherwise no suitable rule can be found and applied in the SAP S/4HANA Cloud system.

Differentiation Terms

Differentiation terms are used to determine how the positions are created. Some differentiation terms are defined by the system for each product group, and others can be selected additionally. The differentiation SEC. ACCOUNT is defined and assigned for all company codes and valuation areas that do not have a specific differentiation assignment. For Securities, the following is predefined:

  • Valuation area
  • Special valuation class
  • Accounting code
  • Security class ID number
  • Securities account

In addition to that, you can define and assign your own differentiation in the Define and Assign Differentiation configuration activity. This enables you to use account assignments of other areas, such as Cost Center, Profit Center, WBS Element, and Functional Area, to differentiate treasury positions in Treasury and Risk Management. When the flows are posted to Financial Accounting, the account assignment values for a treasury position are also transferred to Financial Accounting.

Account Assignment Transfer

Account Assignment Transfer

With this feature, you can transfer the units/nominals of a treasury position to another position with different account assignments (such as cost center, WBS element, functional area, profit center). In this internal transfer, the position component values are transferred proportionally according to the transfer category of the target position management procedure.

If you have activated Public Sector Management and use the fund and grant account assignments as differentiation criteria for your treasury positions, the account assignment transfer can also be used to transfer a treasury position from one fund to another or from one grant to another.

Simulate Period-End Closing

Simulate Period-End Closing Overview

The simulated period-end closing uses the framework of the operative period-end closing functions. Therefore, the simulated valuation includes, for example, all relevant valuation results that are also generated by the real valuation during period-end closing.

Click on the single elements of the simulated period-end closing below to learn more.

Simulated Period-End Closing

Simulate Period-End Closing Process

In order to run the simulated period-end closing, the following prerequisites must be met:

  • Make sure that the market data (such as exchange rates and interest rates) are up-to-date because the simulated period-end closing operations require current market data.
  • Net Present Values (NPV) values need to be stored in advance of the valuation of treasury positions and of the classification. You can enter the NPVs manually (using the Enter Net Present Values app), or start the calculation of the NPVs using Calculate Net Present Values - With CVA and DVA.
  • You must execute the simulated valuation before or together with the simulated classification.
Note
The system does not check the availability of current market data for the key date.

In the Simulate Period-End Closing app, key figures are used to verify how balance and P&L figures have been developing since last period end.

The simulated key figures cover all relevant Period-End Close figures, which are usually generated within the period end closing process. The idea for the simulation key figures is to call the wrapped functionality, which is used in the operative transactions, and reuse the calculated results for reporting without generating any persistent flows in and postings from the subledger.

Therefore, the simulated key figures are using the same framework as the operative procedure to assure coherence between reporting and subledger values. Based on the most recent book value from the last period end closing without reset the customer can see at a glance the balance effects, the P&L revenue and expenses as well as potential interest payables/receivables as of today.

You can use the following procedure to work on the simulated period-end closing:

  1. Select the treasury positions for which you want to perform the simulated valuation. To do this, you must choose the relevant product groups. In addition, you can use the fields available under General Selections to restrict the selection of the treasury positions. The General Selections area of the interface provides selection criteria - Company Code, Valuation Area, Product Type, and Valuation Class - as relevant for all product groups, as well as selection criteria relevant for specific product groups.
  2. In the Simulation Parameter area, you control how the report is run.
    • If you want to recalculate outdated simulated valuation results of the selected treasury positions, set the Recalculate Outdated Sim. Val. indicator. The recalculation can be executed for outdated treasury positions for a specific date or period, or for all outdated treasury positions. Enter the date range for recalculation according to your needs.
    • If you want to carry out simulated period-end closing, you must enter the simulation date as the key date.
  3. Choose which function you want to execute:
    • Valuation
    • Accrual/Deferral
    • Classification

The result of the simulated period-end closing is composed of the following:

  • For the selected treasury positions, the selected period-end closing operations are executed on the entered simulation date according to the settings of the position management procedure and the relevant configurations for the period-end closing operations based on the current market data.
  • A message log is shown for the simulated period-end closing run.
  • The results are shown in the results list. Each row represents a treasury position and shows the simulation results, such as the new book value in position currency and in valuation currency and also all other new position component values. You can mark a row and choose Display. In the following Details box, you see the information for the selected treasury position, the new book value of the treasury position in position currency and in valuation currency and all other position component values (empty fields are not displayed).
  • The results are stored in database tables.

Delete Simulated Period-End Closing

The Delete Results of Simulated Period-End Closing app deletes the results of simulated period-end closing for a specific date from the database tables.

Simulated Period-End Close results which are invalidated automatically by a real Period-End Close run can be deleted from the database tables in this way.

The result of this action is that simulated valuation results for the selected treasury positions and the position value date entered are deleted from the database table. A message log is shown for the deletion run of simulated valuation results.

Period-End Closing Foreign Currency Risk Management

Book Values for Manual Valuation

Use the app, Enter Book Values for Manual Valuation, to enter the new book values for treasury positions for a specific key date.

After you have entered the new book values, you can start the valuation of the treasury positions using the Run Valuation app executed with the valuation category, Manual Valuation With Reset or Manual Valuation Without Reset.

This valuation categories allows you to write-up or write-down a position to the book values entered in position currency and valuation currency in the Enter Book Values for Manual Valuation app, independent of the valuation rules defined.

The following valuation steps support manual valuation:

  • Security valuation
  • Foreign currency valuation
  • One-step price valuation
  • Index valuation

Foreign Currency Risk Management – Group Ledger IFRS

Foreign Exchange Risk Management — Parallel Ledger Overview

You can use an additional valuation area besides your operational valuation area according to International Financial Reporting Standards (IFRS9) phase I (Classification and Measurement) when activating parallel valuation for Foreign Currency Risk Management.

IFRS 9 Components

The accounting standard IFRS 9 was published in July 2014 and addresses accounting for financial instruments.

The solution focuses on covering one part of IFRS 9: the requirements of IFRS 9 phase II Impairment.

The main objective of IFRS 9 impairment is to provide companies with additional information about expected credit losses of financial instruments. The basic idea is to shift from the incurred loss model to the recognition of expected losses

Parallel Ledger Valuation Area

Pick the Fiori tile Fix, Post or Reverse Business Transactions on the Launchpad.

In order to generate the postings for the parallel valuation area, in the General Selections block, select the Valuation Area field and choose your second valuation area.

Select the business transactions needed and execute the report.

This step needs to be performed at the Period-End-Closing (usually executed at month end) in parallel valuation area 002 (for example, IFRS)

You use the valuation function to value the positions of financial instruments based on historical cost or fair value for a given key date in valuation area 002 for IFRS, and transfer results to corresponding ledger for IFRS in Financial Accounting (FI).

Take the Run Valuation Fiori app and set your parameters, taking valuation area 002 into account.

After executing the report it displays all positions to be valued according to the selection criteria.

On the Display Positions to be Valued screen, choose Execute Valuation. You will be presented with the posting log or the message log to see the details.

Postings in Parallel Valuation Area

In this step, you fix and post derived business transactions (usually it is realized profit and loss when the deal is mature), in valuation area 002 for IFRS, for example.

Pick the Post Derived Business Transactions Fiori tile. Give the company code and the valuation area in your selection screen plus additional criteria according to your needs.

Press the Fix button and the new screen Posting Log: Posted Business Transactions displays, where you can see the posting information for valuation area 002.

Given the posting log, you will see the details for each accounting principle with the status.

Foreign Currency Risk Management Configuration

Self-Service Configuration User Interface

Select the Manage Your Solution app in order to get to the Configuration screen.

The task Configure Your Solution enables you to maintain certain processes.

Self-Service Configuration Tasks

Here, you can assign general valuation classes to FX transactions.

On the Assign General Valuation Class -- MM Transactions UI, you can assign a general valuation class per company code, product type, and transaction type that is used as a default value when you create a financial transaction.

A general valuation class must be assigned to every financial transaction from which the special valuation classes of different valuation areas can be derived.

A general valuation class must be assigned to every financial transaction from which the special valuation classes of different valuation areas can be derived.

The one valuation area and two valuation area scenarios are possible.

On the Define Portfolio screen, you define portfolios per company code. You use the portfolios as an organizational element to group various financial transactions for reporting purposes.

Here, you define leading currencies, following currencies, and spot days for various currency pairs. This is relevant for determining the rate notation when you enter FX transactions and FX options.

On this screen, you define business partner groups used to control the correspondence process in the Assign Attributes for Business Partner Groups app.

Here, you set attributes to control the outgoing and incoming correspondence process per business partner group, correspondence class, and recipient/sender type.

On the Define Reference Interest Rates screen, you define reference interest rates with attributes such as payment frequency, currency, interest calculation method, yield curve type for forward calculation, working day shift, and maturity at month end.

Performing this configuration step, you can create your own bank guarantee types to be used for the Trade Finance process.

In this task, you change settings for evaluation types that are required for the calculation of the net present values of financial transactions/treasury positions. The settings in the evaluation types are required for the calculation of the net present value of financial transactions/treasury positions. You can change settings for yield curve types for the preconfigured evaluation types that are required for the calculation of the net present values of financial transactions/treasury positions. When you start the Calculate Net Present Values - With CVA and DVA, Calculate Market Risk Key Figures, Analyze NPV, and Sensitivity Key Figures - Single Analysis apps on the SAP Fiori Launchpad you can choose an evaluation type.

The following preconfigured evaluation types are available:

  • Y001 Evaluation Type for Risk-Free

  • Y002 Evaluation Type w. Credit Spr.

  • Y003 Evaluation Type w. BasCrd Sp.

You can make settings for the following:

Assign yield curve types on the Market Data Categories tab, which you have defined in the Define Yield Curve Types configuration step under General Settings. When the calculation of the net present values is done including CVA/DVA using the difference method, CVA/DVA is calculated as the difference between NPV and risk-free NPV. How these key figures are calculated depends on the settings here in the evaluation type: The risk-free NPV is calculated using the risk-free yield curve types without credit spreads. The (risk-based) NPV is calculated using the yield curve types, and can include credit spreads.

Different ways of depicting credit risk are available: Enter yield curve types containing a credit risk component in the Yield Curve Types area, and risk-free yield curves in the Risk-Free Yield Curve Types area. Do not use credit spreads. Enter the same risk-free yield curves both for Yield Curve Types and Risk-Free Yield Curve Types. Use either parallel shift credit spreads or credit spread curves. SAP recommends entering the same risk-free yield curve types both for Yield Curve Types and Risk-Free Yield Curve Types, and using credit spread curves by entering derivation IDs for them.

Caution
To avoid credit risk effects being counted twice, do not use different yield curve types and credit spreads in parallel.

On the Evaluation Control tab, enter the maximum age of price for securities. On the Evaluation Control 2 tab, enter settings for the FX valuation.

To change an evaluation type, do the following:

  1. In the structure on the left-hand side, choose an evaluation type and double-click on General Information.
  2. Make the required changes.
  3. Save your entries.

In the Define and Assign Valuation Classes task, you can display and define general valuation classes (GVCs). On an abstract level, the general valuation classes allow the trader in the front office to group the positions. In addition, you assign for each valuation area the valuation area dependent special valuation classes to the general valuation classes.

In the Assign General Valuation Class to Groups configuration step you can define groups and assign general valuation classes to the groups. The groups are assigned per company code, product type and/or transaction type.

If the trader uses the F4 help for assigning general valuation classes to a financial transaction, only the general valuation classes of the group the financial transaction belongs to are displayed.

In the Assign General Valuation Class to Group task, you can display and change the assignment of general valuation classes to predefined groups. The groups are allocated per company code, product type and/or transaction type. When you use the input help for assigning general valuation classes, only the general valuation classes of the group, relevant for the specific kind of financial transaction, are displayed. The configuration step is preconfigured. You can adapt the settings to your needs, by changing the assignment of the general valuation classes to the groups.

In addition, you can enter a default value for the general valuation classes depending on the product/transaction type in the Treasury Accounting configuration item using the Assign General Valuation Class - MM Transactions, Assign General Valuation Class - FX Transactions, Assign General Valuation Class - OTC Derivatives, and Assign General Valuation Class - Securities Product Types configuration steps. This value is automatically used but can still be changed when you enter a transaction.

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