Commodity Trading & Treasury Integration

Commodity Trading & Treasury Integration Karsten Kohl / BearingPoint Switzerland AGJune 11/12, 2013

Content Commodity Trading Market BearingPoint‘s Service Portfolio and Expertise Challenges for Commodity Management Systems Commodity Management in SAP

Where to find Commodities … Consumer Products Automotive Trading High Tech Aerospace & Defense Pharma Mills & Mining Oil & Gas Wholesale Distribution Building Material Chemical Agriculture

Credit & TradeFinance Our Service Portfolio in Commodity Trading Physical and Paper Contract Management Regulatory Reporting Treasury Transportation Risk Management Operations & Back Office Trade Accounting

BearingPoint‘s Expertise in Commodity Trading • "BearingPoint has been awarded by SAP Switzerland as Solution Partner of the year 2012, especially for its expertise in Commodity Management". • BearingPoint has a record dating back to 2001 in cooperating with SAP in solutions for Commodity Management. Within this period BearingPoint has joined efforts with SAP in • Delivering some of the first projects in Commodity Management • Co-innovating in the design of the new standard solution • Testing new functionalities • Developing add-on functionalities • Jointly, SAP and BearingPoint will provide a strong understanding in both processes and the SAP solution that will contribute to making your project successful.

Commodity ManagementRelated areas • Commodity Trading • Physical trades • Paper trades • Pricing • Back office • Invoicing • Confirmation • Stock valuation based on accounting rules • Closing process • Operations • Scheduling • Transportation • Planning • Treasury and Cash Management • Cash and liquidity management • Foreign exchange • Financing • Working capital • Production • Planning • As-Is analysis • Risk Management • Exposure and position reporting • P/L reporting • Valuation: VaR; MtM, simulations External Systems & sources • Credit Management • Credit risk • Credit risk exposure • Trade finance (LC’s, guarantees) • Legal and Compliance • Contract management • Regulations (e.g. EMIR for derivatives) • Environment

The synchronisation of front office physical and financial commodity trades with logistics, Treasury and Risk Management is essential to establish benefits for the business, to get advantages within the commodity traded market and to be able to track and trace the single positions. Commodity Trading ManagementThe requirements on a commodity trading system are highly complex. Business Values Process Advantages • Integration of Commodity Trading within ERP system • Transparency along the entire supply chain real-time and group-wide monitoring of risk, liquidity, positions • Commodity Trading system serves as basis for being compliant • Knowing the exposure of physical and paper positions in real time with a reduction of manual work • End-to-end process

The integration of commodity trading in SAP environment facilitates a seamless front-to-back office commodity management. Interfacing front office physical and financial commodity trades with SAP Logistics and SAP Treasury and Risk Management. Commodity Management in SAPAn integrated solution is necessary to have the full transparency of each position as well as supporting the commodity trade lifecycle. Commodity trading Paperdeals Physicaldeals Exposures Financial Risk for Commodities (TRM) Trading Contract (GTM) Purchase Contract (MM) Stock Valuation Inventory Invoice verification Delivery Sale Contract (SD) Delivery Billing Portfolio Trading book Valuation Hedge accounting Pricingengine (CPE) Trade Finance Credit Risk Finance and Controlling (FI/CO) Reporting (BI)

The Commodity ExposureThe Exposure allows the full transparency, track and trace of all paper and physical positions. • The exposure management is updated real-time and shows both positions: the paper as well the physical positions; manual captured positions are considered as well. The analytic reporting tool allows a more preciouses‘ planning and steering of risks/open positions. Hypothetical Trades • Paper Trades (SAP) • Commodity (paper trades) • e.g. futures, forwards, swaps, options • Foreign Exchange trades (FX) • - e.g. spots, forwards, swaps, options Physical Trades (SAP) Sales (SAP SD) Purchases (SAP MM) Planned data (SAP APO) Treasury(SAP) Other sources(e.g. Excel) Web based analytic reporting allows easily to track and trace single positions, to turn axes, drill-down, to aggregate per free-definable criteria’s for example by type of commodity, type of trade, country, region, open position. Operative Exposures (Raw Exposures) Aggregationof exposure positions(free definable) Exposurereport Automatic built or uploaded from various sources Automatically updated by in case of price and/or volume changes

Commodity Trading Management ReportingComprehensive tools are available for different reporting purposes • Ad hoc reportingpoint & click, unified databases, position, P&L, period, cash flow • Reporting toolsSAP Query, ABAP List, Other 3rd-party providers, Business Intelligence (BI) • Result databasePortfolio hierarchy e.g. by country, region, type of commodity, drill-down, historic results • Management reportsPositions, performance, ratios, compliance, risk exposure, profitability • Data exportFlat files, excel, automatic or manual

Risk Management

Commodity Products • Available products as of EhP6 • Commodity Futures contracts Traded on Exchanges • Commodity Options Traded on Exchanges • OTC Forwards • OTC SWAPs • OTC Options

Commodity Products – Futures • Commodity Futures • Capture Deal • Cash Settlement or physical settlement • Matching with other Futures possible

Commodity Product – SWAPs A commodity SWAP can be with any counterparty in which: (1) a fixed-price contract for a commodity is exchanged for its floating-price contract or (2) one commodity is exchanged for another, with an execution date (due date) at a future point in time (or multiple due dates). Payer: A fixed price is paid and a floating price (index) is received (Future or OTC) Receiver: A floating price (index) is paid and a fixed price is received Basis: A basis SWAP involves swapping one floating rate index for another

Commodity Master Data • Commodity Master Data • Create Commodity Master Data • Commidity kind: Abstract or Commodity • New features available (delivery location and Incoterms)

Commodity Master Data – Price Curves Commodity Master Data is represented as commodity price curves. The system supports two types of Curves: •Future Style curves – For Listed Instruments and Published commodity prices on exchanges (opening price or closing price) •Forward Style curves – For OTC Products Assign the Futures Class to the Commodity Curve

Commodity Master Data – Forward Price Curve Enter Commodity Forward Prices based on the price quotation style.

CommoditiesExposure Reporting • Commodity Reporting • A special report exists for the reporting and valuation of commodity exposures – can combine physical and paper risk positions • In addition the Exposure Management functionality can be used for commodities

Raw Exposures – set the price Subraw exposures can also split the commodity risk as well as the FX risk

Valuation - Quantities in Analytical Reporting

Logistics to Treasury Integration

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

Karsten Kohl BearingPoint Pfingstweidstrasse 60 CH-8005 Zürich Switzerland T+41 43 299 64 53 M+41 79 714 32 85 www.bearingpoint.com karsten.kohl@bearingpoint.com

Commodity Trading & Treasury Integration