Financial Asset Management

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Financial Asset Management

  1. 1. Financial Asset Management Introduction to Analyzers and New Strategic Developments re pictu f or a slide ple itle sam the t in Christian Kupper, Julia Schäfer SAP Leipzig, June 10, 2008
  2. 2. Agenda 1. Introduction to Analyzers 1.1. Market Risk Analysis 1.2. Performance Calculation and Benchmarking 1.3. Limit Management 2. New Developments in Financial Asset Management © SAP 2008 / SAP International Forum for Insurance / Page 2
  3. 3. SAP Investment Management for Insurance Is Part of SAP for Insurance SAP NetWeaver Business Intelligence Planning and Consolidation Reporting projections SAP Investment SAP Investment Management for Insurance Controlling for Insurance transactions Master data Market risk analysis Payment Settlement Front office, Multi-GAAP valuation Performance analysis trading Regulatory reporting Benchmarking Market data Loans supply Securities Cash, currencies, derivatives Limit management General ledger Technical infrastructure: SAP NetWeaver © SAP 2008 / SAP International Forum for Insurance / Page 3
  4. 4. Different Areas of the Company Generally Have Different Risk Perspectives Company structure Asset classes Balance sheet classification Portfolio manager hierarchy © SAP 2008 / SAP International Forum for Insurance / Page 4
  5. 5. The Central Element of Analyzers Is the Portfolio Hierarchy Data is classified and shown from different perspectives: Example of a possible portfolio hierarchy with two levels Total Asset class Fixed income Stocks Real estate Country DE US CH DE US DE CH © SAP 2008 / SAP International Forum for Insurance / Page 5
  6. 6. The Analyzers Can Be Supplied by Different Systems Asset management FINANCIAL OBJECT Investment controlling Money market trading Predefined, product- Market risk analysis Securities type dependent Stress tests Loans characteristics Sensitivities Derivatives ISIN VaR Currencies Nominal Performance Rating measurement Business partner Benchmarking … Limit management External data User-defined analysis … Special funds single characteristics values Trader A Real estate Portfolio X Third-party systems … … © SAP 2008 / SAP International Forum for Insurance / Page 6
  7. 7. Risk Key Figures and Reporting in the Market Risk Analyzer Risk key figures Risk reporting NPV Portfolio hierarchies Sensitivities Current and historic data Duration Stress tests/market data shifts PVBP What-if analysis Convexity Reporting of fair value difference Value at risk (historic, Monte Carlo, VarCovar) VaR contribution Marginal VaR Mean excess loss Any parameterization with regard to holding period and confidence level of the VaR key figures TS 5 (+) Current TS TS 6 (long-) 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1M 2Y 4Y 6Y 8Y 10 Y © SAP 2008 / SAP International Forum for Insurance / Page 7
  8. 8. The Analyzer Information System Stores All Key Figures for the Long-Term and Ensures Auditing Acceptability © SAP 2008 / SAP International Forum for Insurance / Page 8
  9. 9. Yield Calculation Methods and Key Figures in the Portfolio Analyzer Yield calculation Portfolio key figures methods Treynor Ratio Time weighted rate of return Sharpe Ratio Money weighted rate of return Information Ratio Approximation methods Sortino Ratio Dietz Jensen’s Alpha Modified Dietz Any parameterization according to monthly, quarterly, and annual yields or “to-date” key figures © SAP 2008 / SAP International Forum for Insurance / Page 9
  10. 10. Benchmark Definition and Assignment Benchmark Basis benchmarks Composite benchmarks Index Weighted combinations of FX rate existing basis and other composite benchmarks Reference interest rate Portfolio (hierarchy node) Example of a possible assignment variant 60% NUS 60% Stocks 40% NDX US Stocks total 70% DAX 40% Stocks 30% MDAX GER © SAP 2008 / SAP International Forum for Insurance / Page 10
  11. 11. Portfolio Analyzer – Performance Calculation and Benchmarking © SAP 2008 / SAP International Forum for Insurance / Page 11
  12. 12. SAP Limit Management Fulfills Various Customer Requirements Limit management Limits with trading focus Downstream limit controlling Online limit check during entry Can be structured flexibly with of transactions portfolio hierarchies Warning if limit utilization Absolute and relative limits are reaches a critical point possible Workflow if limit is exceeded Limitation of NPV or risk key Entered as an absolute figures amount Batch – processing in the No risk key figures results database © SAP 2008 / SAP International Forum for Insurance / Page 12
  13. 13. Limit Management: Example of Different Limit Types Fixed-term deposit 2,000,000.-- Transaction Deutsche Bank Trader: Smith Anrechnung Attribution Attribution Net present value Nominal Limit types Company code/ CoCode/BP/ CoCode/BP/AC Company code business partner asset class Smith Limits 100,000,000.-- 10,000,000.-- 2,000,000.-- 1,000,000.-- No exceedance No exceedance No exceedance Limit exceedance Free limit: Free limit: Warning due to - 1,000,000.-- 98,000,000.-- 8,000,000.-- critical limit Logging Free limit: 0.-- Workflow © SAP 2008 / SAP International Forum for Insurance / Page 13
  14. 14. Limit Exposures © SAP 2008 / SAP International Forum for Insurance / Page 14
  15. 15. SAP Limit Management Considers Group Relationships in Limit Attribution © SAP 2008 / SAP International Forum for Insurance / Page 15
  16. 16. With the Portfolio Hierarchy, Even Complex Limits Can Be Mapped to Risk Key Figures Portfolio hierarchy 1 Portfolio hierarchy 2 Highest node: All assets Highest node: Fixed-interest securities Further levels: Asset class, country Further levels: Issuer class 1 1 All assets Fixed-interest securities FV, VaR, TWRR, book value, … FV, VaR, TWRR, book value, … 11 12 13 11 12 13 Fix-int. secur. Stocks Derivatives Government Municipal Industry FV, VaR, … FV, VaR, … FV, VaR, … FV, VaR, … FV, VaR, … FV, VaR, … DE CH DE CH DE CH Limit ! FVPH2, node11 ! ! formula: 0.2 ≤ ≤ 0.3 AND 50m ≤ FVPH2, node11 FVPH2, node1 Numerator Denom- Numerator Denom- Currency Upper limit Lower limit Upper Lower inator node inator node % % absol. limit absol. limit Limit definition: Fair value Fair value PH2 PH2 EUR 30% 20% -- 50m node 11 node 1 Limit description 1. The proportion of government bonds in the portfolio should be between 20% and 30%. 2. This proportion should never be less than 50m EUR. © SAP 2008 / SAP International Forum for Insurance / Page 16
  17. 17. Agenda 1. Introduction to Analyzers 1.1 Market Risk Analysis 1.2 Performance Calculation and Benchmarking 1.3 Limit Management 2. New Developments in Financial Asset Management © SAP 2008 / SAP International Forum for Insurance / Page 17
  18. 18. Preview: SAP Enhancement Package 4 for SAP ERP Insurance Financial Asset Management End-to-end hedge management process to eliminate market price risks of securities New financial instruments: forward securities transactions New correspondence monitor for end-to-end process support for the MT300 and MT500 series Business functions FIN_TRM_INS_HN: Hedge management for FAM FIN_TRM_LR_FI_AN_2: Hedge and exposure management for commodities, SWIFT, forward securities transactions © SAP 2008 / SAP International Forum for Insurance / Page 18
  19. 19. Hedge Management Process for FAM Fair value hedge Hedged item: Stock in local currency Hedge transaction: Forward stock transaction Effectiveness method: Dollar offset method Mapping of the life cycle of a hedging relationship of designation, dedesignation, effectiveness measurement, and documentation Accounting in accordance with IFRS © SAP 2008 / SAP International Forum for Insurance / Page 19
  20. 20. Forward Securities Transactions Definition: A forward securities transaction is a transaction for which the price is determined when the contract is concluded, but contract performance takes place at a later date. New product type: 740 forward securities transactions Mapping of the entire product life cycle, from entry of the transaction to early delivery and delivery on due date Delivery types: cash settlement or physical delivery Accounting in accordance with various accounting regulations © SAP 2008 / SAP International Forum for Insurance / Page 20
  21. 21. Settlement Process I New correspondence monitor for initiating and managing correspondence in relation to settlement Outbound correspondence types: Deliver free (MT542) Deliver against payment (MT543) Receive free (MT540) Receive against payment (MT541) Inbound correspondence types: Deliver free confirmation (MT546) Delivery against payment confirmation (MT547) Receive free confirmation (MT544) Receive against payment confirmation (MT545) Settlement status and processing advice (MT548) © SAP 2008 / SAP International Forum for Insurance / Page 21
  22. 22. Settlement Process II Flexible output channels: SWIFT Fax Master data management for determining settlement instructions Monitoring using status concept with correspondence object Supporting processes: Securities account reconciliation © SAP 2008 / SAP International Forum for Insurance / Page 22
  23. 23. Legal Disclaimer This presentation is not subject to your license agreement or any other agreement with SAP. SAP has no obligation to pursue any course of business outlined in this presentation or to develop or release any functionality mentioned in this presentation. This presentation and SAP's strategy and possible future developments are subject to change and may be changed by SAP at any time for any reason without notice. This document is provided without a warranty of any kind, either express or implied, including but not limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-infringement. SAP assumes no responsibility for errors or omissions in this document, except if such damages were caused by SAP intentionally or grossly negligent. © SAP 2007 / PageInternational Forum for Insurance / Page 23 2008 SAP 23
  24. 24. Thank you! Christian Kupper Regional Product Management Insurance SAP EMEA Hasso-Plattner-Ring 7 69190 Walldorf, Germany T +49 6227 7-41282 M +49 160 88 96 301 E christian.kupper@sap.com http://www.sap.com/insurance Julia Schäfer Solution Management Financial Asset Management IBU Insurance Dietmar-Hopp-Allee 16 69190 Walldorf, Germany T +49 6227 7-61068 F +49 6227 78-41017 E ju.schaefer@sap.com http://www.sap.com/insurance © SAP 2008 / SAP International Forum for Insurance / Page 24
  25. 25. SAP INTERNATIONAL FORUM FOR INSURANCE After the event, the presentations will be available at: www.sap.com/community/insurance2008 © SAP 2008 / SAP International Forum for Insurance / Page 25
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