Exposure management 2 0 in SAP rudolf brysa

1 Basic Principles 2 Raw Exposures 2.1 Raw Exposure Maintenance FTREX1 2.2 Overview of Raw Exposures FTREX2 2.3 Maintain a Commodity Split FTREX7 3 Raw Exposure Customizing 3.1 Global Se

Rudolf Bryša, Thomas Fritzsche, Markus Heß, Sönke Jarré, Reinhold Lövenich, AndreasMartin, Klaus G Müller

Exposure Management 2.0 in SAP® Treasury and Risk

Management

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The Authors of this E-Bite

Rudolf Bryša, Thomas Fritzsche, Markus Heß, Sönke Jarré, Reinhold Lövenich, AndreasMartin, and Klaus G Müller work at SAP They have many years’ experience of workingwith SAP Treasury and Risk Management in various capacities Learn more about the

authors at https://www.sap-press.com/sap-treasury-and-risk-management_3166/authors/.

What You’ll Learn

Learn the basics of exposure management, before diving in to raw exposures,

customization, and exposure positions Discover how data from SAP ERP MM and SD can

be integrated into SAP Treasury Exposure Management 2.0

1 Basic Principles

2 Raw Exposures

2.1 Raw Exposure Maintenance (FTREX1)

2.2 Overview of Raw Exposures (FTREX2)

2.3 Maintain a Commodity Split (FTREX7)

3 Raw Exposure Customizing

3.1 Global Settings

3.2 Exposure Activity Type

3.3 Free Attributes

4 Releasing Raw Exposures

4.1 Manual Release and Automatic Release

4.2 Connection to SAP Business Workflow

4.3 Derivation Strategy for Exposure Fields

4.4 Product Type

4.5 Exposure Position Type

5 Exposure Position

5.1 Position Values for Exposure Positions

5.2 Exposure Position Flows

5.3 Commodity Exposure Report

6 Integration of Logistics into Treasury

6.1 Logistics Outbound Processing

6.2 Treasury Inbound Processing

This E-Bite is an excerpt from SAP Treasury and Risk Management by Klaus G Müller,

Andreas Martin, Reinhold Lövenich, Sönke Jarré, Rudolf Bryša, Thomas Fritzsche andMarkus Heß

1 Basic Principles

In order to hedge risks from your operative transaction, you often close derivative financialtransactions

Usually, however, the data that describes this operative underlying transaction is not

stored in SAP Treasury and Risk Management, but in Sales and Distribution (SD) or

Materials Management (MM) in SAP ERP, or possibly in other SAP or third-party systems.Recently forecasted revenue figures are frequently stored in a spreadsheet

All the data associated with the operative underlying transaction becomes the basis foryour hedging In SAP Treasury and Risk Management, this data is mapped and managedusing exposure management In other words, exposure management links your operativetransaction to your treasury activities and is therefore a feeder channel into SAP Treasuryand Risk Management

Version of Exposure Management

This E-Bite refers to Exposure Management 2.0, which is the new and recommendedversion of exposure management For this reason, the sections below do not make anyreference to Exposure Management 1.0

Notes Regarding Path Details

For the sake of simplicity, many of the paths specified in this E-Bite have been

shortened:

To access the starting point for the Customizing paths listed below, call T REASURY

AND R ISK M ANAGEMENT • T RANSACTION M ANAGER • G ENERAL S ETTINGS • E XPOSURE M ANAGEMENT 2.0.

To access Customizing for the commodity solution, choose T REASURY AND R ISK

M ANAGEMENT • F INANCIAL R ISK M ANAGEMENT FOR C OMMODITIES • E XPOSURE M ANAGEMENT.

All the Customizing paths mentioned in the following sections relate back to these rootnodes In the case of transactions, we will use shortened path details and the followingroot node: T REASURY AND R ISK M ANAGEMENT • T RANSACTION M ANAGER • E XPOSURE M ANAGEMENT 2.0 and

T REASURY AND R ISK M ANAGEMENT • F INANCIAL R ISK M ANAGEMENT FOR C OMMODITIES • E XPOSURE M ANAGEMENT.

Exposure management supports two different types of risks, namely foreign currency risks

and commodity price risks Of course, other types of risks exist (for example, interest rate

risk and liquidity risk), but these risks are often managed by other SAP modules, such asSAP Liquidity Planner or the money market function in transaction management That iswhy these risks are currently not supported by exposure management.

When you analyze the underlying transactions in your business, you must first decidewhich ones concern risks that you need to hedge When doing so, check whether an

operative business transaction represents a foreign currency risk or a commodity pricerisk, then use exposure management to map this process in your system

The next question you need to answer is in relation to hedging If you do not hedge each

risk separately (micro hedge), you will most likely want to determine your total risk position and then hedge this total risk (macro hedge) instead Depending on the risk strategy

deployed by your company, you can configure the system in different ways and createdifferent risk positions

The key terms defined below are used throughout this E-Bite

Exposure

In SAP Treasury and Risk Management, you generally use hedging activities to

hedge many different financial risks associated with your operative transaction

The more individual your operative underlying transaction is, the more individual

the financial risks and your risk hedge strategy will be In an effort to use one

standardized term for all these risks, we use the term exposure to describe such a

financial risk

Raw exposure

In exposure management, only the basic data relating to your operative business

transactions is stored in a raw format known in the system as a raw exposure A

raw exposure is a simple mapping of an operative business transaction

Sub raw exposure

All information relating to financial risks is stored in sub raw exposures Here, a

distinction is made between foreign currency risks and commodity price risks Subraw exposures form part of a raw exposure A raw exposure can contain several

sub raw exposures

Exposure position

Raw exposures, as a total, represent the financial risk associated with your

operative transaction The total risk position is known as an exposure position,

which comprises several sub raw exposures

Differentiation and exposure transactions

Differentiation enables you to define how risks are divided Here, the sub raw

exposures are initially converted into a temporary intermediate format They thenbecome exposure transactions and are used to create exposure positions.

Exposure position flow

Exposure transactions are used to create exposure position flows, which, in turn,

create the exposure position An exposure position generally contains several

exposure position flows

Exposure position value

The exposure position value is the total value of the exposure position flows for

one exposure position on a particular key date

Figure 1 shows an example of how the most important entities in exposure managementare used This is a schematic representation of how a raw exposure that contains the subraw exposures of the commodity price exposure and foreign currency exposure is mapped

in the system and how the system releases it to generate exposure positions

Figure 1 Overview of Exposure Management

2 Raw Exposures

In exposure management, the data is initially stored in the form of raw exposures Alltransactions for raw exposures are available under R AW E XPOSURES.

2.1 Raw Exposure Maintenance (FTREX1)

Call the Raw Exposure Maintenance transaction (FTREX1) and specify that you are

dealing with a collective transaction that can be used to create, display, change, and

release raw exposures Then, create a raw exposure

To do this, choose C REATE The system asks you to specify an exposure activity type This

defines what type of exposure you are creating Further information on possible settingshere is available in Section 3.2 Once you select a suitable exposure activity type, you seethe view shown in Figure 2 However, this view may differ depending on which exposuremanagement business function is used and the Customizing settings for the field selectionand free attributes

Figure 2 Raw Exposure Maintenance (Transaction FTREX1)

In general, however, this view always contains a header and three tab pages: H EADER D ATA,

L INE TEM D ATA, and U SER D ATA

2.1.1 Header

The header contains the R AW E XPOSURE ID Since the system does not assign the raw

exposure ID until you save the raw exposure, the system initially displays the text

\INTERN\ in this field when you call the transaction for the first time You also see the

E XPOSURE A CTIVITY T YPE you selected, as well as the V ERSION of the raw exposure.

Exposure Versions

Note that Version 0 is always the current version The system does not generate a newversion until you release the raw exposure This new version is then assigned the

number 0, while the released version is assigned a sequential number

2.1.2 Header Data Tab Page

The first thing you do on the H EADER D ATA tab page is specify the origin of the raw exposure.You use the E XT D OC N O., L OGICAL SYSTEM, and E XPOSURE O RIGIN fields for this purpose You can

enter any text of your choice in these fields You maintain the values for the E XPOSURE O RIGIN

in the Customizing activity D EFINE E XPOSURE O RIGINS If you have integrated Logistics into

Treasury, these fields are already pre-assigned by the system A button is then available

to enable you to navigate back to the document that created the raw exposure

In the G ENERAL A TTRIBUTES screen area, you can specify a company code and country The

entry in the C OMPANY C ODE field is used for further processing (for example, in hedge

management), while the C OUNTRY field is a characteristic you can use afterward for reportingand grouping purposes

The F REE A TTRIBUTES screen area is filled with characteristics relating to a raw exposure

Once again, you can enter any text here Your Customizing settings determine which

fields are shown here Therefore, use these fields to store predominant attributes that arenot provided in the standard SAP system We show you the Customizing for these freeattributes in Section 3.3

In the C ONTROL A TTRIBUTES screen area, specify the valid-from date for the raw exposure The

R ELEASE S TATUS of the raw exposure is also shown here provides further detailed information

on how to release a raw exposure, as well as information on the various release stepssupported by the system

2.1.3 Line Item Data Tab Page

The L INE TEM D ATA tab page is divided into two areas (see Figure 3) In the upper area,

enter the actual raw exposure information for each line item in tabular form, and in thelower area, enter the sub raw exposures These line items are called RAW EXPOSURE POSITIONS

If you choose C REATE N EW L INE TEM to create a new line item, the system displays a new rowwith the following RAW EXPOSURE POSITION ID: 1 In the Customizing settings, define which fieldscan be displayed and edited for each line item The use of free attributes enables you tosave individual values for each line item For more information, see Section 3.3

Figure 3 Raw Exposure Line Items and Sub Raw Exposures

In the E XT TEM N O field, enter the position number for the original business transaction.

Here, use the original text from the source document The system only checks that theexternal position number is unique for each raw exposure Use the P ER (period), P LAN Y R

(planning year), and E XP D UE D ATE (raw exposure date) fields to define the period in which

your raw exposure is due You use these difference pieces of information to create riskpositions for each period, for example

In the case of commodity price risks, enter the quantitative size of your raw exposure inthe Q TY, UoM (unit of measure), and C OMMODITY (commodity ID) fields.

In the E XP A MOUNT (exposure amount), E XP C CY (exposure currency), and T ARGET CCY (targetcurrency) fields, enter information on the value of the raw exposure The exposure

currency corresponds to the transaction currency, while the target currency corresponds

to your risk-free currency, which is usually the local currency for your enterprise If you donot enter any information here, the system will revert to the currency of the company

code

You use the P ROFIT C TR and M ATERIAL fields to group your raw exposures further Generally,

however, these fields are not required entry fields

Finally, enter the P YMT D T (payment date) and D LY D ATE (delivery date) Since we are usuallydealing with bilateral transactions that involve the exchange of goods for money, enter thedates on which the money and goods will be exchanged in these fields This information isthe basis for calculating discounts when calculating the time value for the risk position.You use an exposure activity type whose exposure approach category is F LOATING P RICES or

F IXED AND F LOATING P RICES to enter further information on floating commodity prices for the line

items The F LOATING P RICES button is shown here If you choose this button, the system

displays the dialog box shown in Figure 4 You enter price fixing dates here You also

specify a weighting, as a percentage, to determine which portion of the raw exposure lineitem you are referring to If there are several entries here with different price data, thesystem recognizes that this data will produce different commodity price risks

Consequently, the original raw exposure line item is split according to the weighting This

results in sub raw exposures that correspond to the different price fixing dates If you want

to manually fix individual entries, choose F IX If you want to be able to edit the entries

again, choose U NFIX

Figure 4 Raw Exposure Price Maintenance

After you enter the line item, the system generates corresponding sub raw exposures (see

Figure 3), which are based on your Customizing settings You can select a raw exposureline item and choose D ISPLAY S UB R AW E XPOSURES or double-click a line item to refresh thedisplay screen for the sub raw exposures of the line item you have selected Each lineitem can have several sub raw exposures If, for example, in Customizing for the

exposure activity type, you have defined that the foreign currency risk and the commodityprice risk are relevant, the system generates a sub raw exposure for both risks

2.1.4 User Data Tab Page

The U SER D ATA tab page shows you when the raw exposure was created, who created it,who was the last person to change it, and when it was changed (see Figure 5)

Figure 5 Raw Exposure: User Data

You can choose S AVE to save your entries Once the raw exposure has been successfully

saved, the system displays the number of the new raw exposure in the status line next tothe success message

2.2 Overview of Raw Exposures (FTREX2)

After you enter your first raw exposure, you can use the Overview of Raw Exposurestransaction (FTREX2) to display existing raw exposures in the system As you can see in

Figure 6, numerous different characteristics are available for selection on the selectionscreen

Figure 6 Raw Exposure Selection Screen (FTREX2)

Restricting Your Selection

Even though there is a great deal of flexibility in terms of making your selection, pleasenote: the more flexible your selection is, the more careful you should be when makingyour selection If you have saved a large number of raw exposures in your system andyou start a selection for which a database index has not been defined, your system

may experience some performance problems If possible, restrict your selection to asmall number of selective characteristics

Make your selection for the raw exposure that you created in the last paragraph As youcan see in Figure 7, the system displays an overview of all raw exposures that correspond

to your selection

Figure 7 Overview of Raw Exposures

Select a raw exposure and choose E DIT R AW E XPOSURE to navigate to Transaction

FTREX1, which you learned about in Section 2.1 Then, choose R AW E XPOSURE D ETAILS tonavigate to the display screen for the raw exposure, and choose D ELETE to delete the

raw exposure To start the release process, choose I NITIATE R ELEASE If you want to view therelease log without actually performing the release, choose S IMULATE R ELEASE This enablesyou to check, in advance, whether all release steps have been performed correctly Forfurther details on releasing a raw exposure, see Section 4

You can also use the Raw Exposure Display Screen transaction (FTREX2) as a form ofcollective processing whereby you use all these processing functions and navigate to therelevant detail transactions

2.3 Maintain a Commodity Split (FTREX7)

In many cases, a commodity comprises several other commodities that bear the actualprice risk This is the case with alloys, for example, which are not traded on the stock

exchange in their existing composition In this case, the price risk associated with the alloyresults from the metals used to manufacture the alloy You use the Maintain CommoditySplit transaction (FTREX7) to map such a scenario in the system In the system, the

commodity used as the starting point is known as the M ASTER C OMMODITY, while the individual

components that comprise this master commodity are known as C OMPONENT C OMMODITIES Onthe start screen for the transaction, you see the commodities for which a commodity splithas been defined You can choose N EW E NTRY to define new commodity splits.

As you can see in Figure 8, you define component commodities and their respective

percentages for each master commodity

Commodity Split and Integration of Logistics into Treasury

The commodity split is particularly interesting if you enter the raw exposures directly inthe SAP Treasury and Risk Management module In this case, the commodity's

composition is known only in SAP Treasury and Risk Management

If, however, you are using the Logistics module integrated into Treasury, it is assumedthat the individual components of a commodity are already defined in Logistics In thiscase, exposure management assumes that the raw exposures have already been

transferred to SAP Treasury and Risk Management in their "split" state The system nolonger performs the commodity split for these raw exposures This applies to all rawexposures that do not have the exposure approach category W ITHOUT P RICES A more

precise explanation of the approach category is provided in Section 3.1

Figure 8 Commodity Split Maintenance

Define a commodity split and then use the master commodity to create a raw exposure inthe Raw Exposure Maintenance transaction (FTREX1) Make sure to use an exposureactivity type that has the exposure approach category W ITHOUT P RICES and for which a

setting has been made in relation to the commodity price risk

If you now enter the raw exposure line items, you see that the system takes the

commodity split into account when deriving sub raw exposures In the sub raw exposures,the master commodity in the line item is replaced with the component commodities Youcan see this in Figure 9

Figure 9 Commodity Split when Creating a Raw Exposure

3 Raw Exposure Customizing

Let’s now take a look at the most important Customizing settings for exposure

management However, this explanation does not claim to be complete, as the

Customizing required for special functions is provided directly in the relevant sections

3.1 Global Settings

In real life, your underlying transaction often involves a chain of business transactions thathave varying degrees of liability Exposure management uses the following activity

categories to differentiate between these varying degrees of liability: F ORECASTED T RANSACTION,

F IRM C OMMITMENT, and A SSET/ L IABILITY T RANSACTION This is also useful because you can usuallyalso adopt different hedge strategies for such different exposures In Customizing, under

D EFINE G LOBAL S ETTING, you can define how the activity categories merge into one another.

This now poses the question of how a forecasted transaction results in a firm commitment

if, for example, real revenue is generated from forecasted revenue If you choose theoption A UTOMATIC P OSITION M ATCHING A LLOWED, the system automatically takes care of this

matching process for you If, for example, you create a F IRM C OMMITMENT, the system

interprets this as the realization of a forecasted transaction Specifically, when creating anexposure of the type F IRM C OMMITMENT, the system tries to reduce an exposure of the type

Management

3.2 Exposure Activity Type

The exposure activity type specifies a number of key settings that determine how rawexposures behave and how their data is stored Therefore, in the case of raw exposures,the exposure activity type has a similar function to the product type in transaction

management

You can maintain the exposure activity type in the Customizing step D EFINE E XPOSURE A CTIVITY

T YPES All possible system settings were enhanced considerably between EHP4 and EHP6,

especially for the activity type Consequently, the settings in your system may differ

slightly from those shown in this E-Bite, which correspond to an EHP6 system Open theCustomizing step D EFINE E XPOSURE A CTIVITY T YPES and double-click an exposure activity type.

Alternatively, choose N EW E NTRIES to create a new exposure activity type As you can see in

Figure 10, a large number of settings are associated with the exposure activity type

Figure 10 Settings for the Exposure Activity Type

You can choose F IELD S ELECTION to access field selection This is where you specify whethercertain fields are displayed for raw exposures of this activity type and whether they areready for input or even required entry fields

In the case of the exposure activity type, you first specify which risks you want to manage

in your system You can control this using the foreign exchange exposure category (FX

E XPOSURE C AT.) or the commodity exposure category ( C TY E XPOSURE C AT.).

The next step is to define the exposure approach category In the E XP A PPR C AT field, you

can choose from the following: W ITHOUT P RICES, F IXED P RICES, F LOATING P RICES, and F IXED AND

F LOATING P RICES Note that this setting enables the system to control more than you may

think The W ITHOUT P RICES setting, in particular, differs from other settings.

If you are using a release older than SAP ERP EHP6, the W ITHOUT P RICES setting is

pre-assigned This is the classic setting and it is also active if you upgrade your system If you

use exposure management with the business function FIN_TRM_COMM_RM_2, the

following settings are available to you: F IXED P RICES, F LOATING P RICES, and F IXED AND F LOATING

P RICES These settings were exclusively developed for use within the Logistics module

integrated into Treasury and enable you to manage floating prices If you want to use

these new functions, you should use the new exposure approach categories However,note that the new exposure approach categories do not use any functions that are notuseful in a scenario involving the Logistics module integrated into Treasury In particular,this applies to the A UTOMATIC P OSITION M ATCHING and C OMMODITY S PLIT settings You are already

familiar with the commodity split from Section 2.3 and automatic position matching from

Section 3.1

The next step is to define the R ELEASE T YPE for the exposure activity type Here, you can

choose between A UTOMATIC and M ANUAL The process of releasing a raw exposure, which is

described in detail in Section 4, is always the same If you have selected A UTOMATIC as therelease type, a raw exposure is automatically released when you create a raw exposureand each time you change a raw exposure With the M ANUAL setting, you always have tostart the release manually

The next setting is the P RICE D ETERM (price determination) setting Here, you make settings

in relation to how you want the system to update non-fixed commodity prices Choose Z ERO

U PDATE so that non-fixed commodity prices are assigned the value 0 If you want to

manually update the prices in the R AW E XPOSURE M AINTENANCE transaction (FTREX1), choose

the M ANUAL U PDATE setting.

If you choose the U PDATE WITH C URRENT C OMMODITY P RICES setting, the system updates the

market price currently saved in the system The U PDATE WITH C OMMODITY P RICES ON B ASIS OF

C OMMODITY C URVE setting is the final option available to you If you choose this setting, thesystem reverts to a commodity curve for future prices If you choose this option, you mustalso define a commodity curve type

The last setting in the exposure activity refers to the D EFINE G LOBAL S ETTING Customizing step

in Section 3.1 As the name implies, a global setting is usually valid for the entire exposuremanagement area However, this setting also overrides the global setting for the

corresponding exposure activity type

3.3 Free Attributes

There are many different ways in which you can create raw exposures in exposure

management SAP has already defined several characteristics you can use for reportingand grouping purposes If, however, an important characteristic for your company doesnot exist in the system, you can use free attributes to map this characteristic Use theCustomizing activities under S ETTINGS FOR F REE A TTRIBUTES for this purpose Different lengths

are available for the attributes Choose between fields in the header data of the rawexposure and fields that are maintained at the raw exposure position level

As you can see in Figure 11, you use the attribute ID to control which free attributes youwant to define The S HORT T EXT, D ESCRIPTION and LONG N AME information is used for the display

screen and is language dependent Therefore, if you are running a multilingual treasurysystem, you can maintain multilingual free attributes here If no text is available in therelevant language, the system reverts to the English translation

Figure 11 Settings for Free Attributes

4 Releasing Raw Exposures

It is now time to further process the foreign currency risk and commodity price risk

information saved as raw exposures The goals of exposure management are to

determine the total risk position of a company in the form of one or more exposure

positions and to hedge these positions by means of derivative financial instruments

Before the information contained in the sub raw exposures is aggregated for exposurepositions, the raw exposures must be released The purpose of the release is to controlthe content However, it can also serve to version the information Versioning allows you

to retrospectively check how a particular raw exposure looked at the time it was released

4.1 Manual Release and Automatic Release

As you already know from Section 3.2, you use the release type to control whether thesystem is to expect a manual release or an automatic release is to be performed So far,there are three places in the system where a manual release can take place:

On the initial screen of the Raw Exposure Maintenance transaction (FTREX 1).

When processing raw exposures in the Raw Exposure Maintenance transaction

( FTREX 1 ).

In the R AW E XPOSURE D ISPLAY S CREEN transaction (FTREX2)

In the case of an AUTOMATIC RELEASE, the release process is automatically triggered after a rawexposure is created or changed If you have a very large number of raw exposures thatwere automatically created by the Logistics module integrated into Treasury, for example,not having to start the release manually can be a major advantage

The release is a simple manual or automated step During the release process, the

system performs a large number of important processing steps, which we cover in furtherdetail in the next sections If exposure management has been fully set up in your system,all these steps run in the background The Customizing settings explained will help you toquickly see which steps are performed by the system

4.2 Connection to SAP Business Workflow

For the release process, it is possible to connect SAP Business Workflow, which enablesone or more additional employees to approve releases Since the settings here are thesame as those you use in other SAP applications for SAP Business Workflow, we will justbriefly mention the most important points here For further information, refer to the

literature available on SAP Business Workflow

In Customizing, under R ELEASE • A SSIGN U SER/ R OLES TO R ELEASE S TEPS, you assign users and roles

to release steps Here, you define, for example, responsibilities for individual release rules

In other words, you define which releases particular employees are permitted to approve

In Customizing, under R ELEASE • A SSIGN R ELEASE P ROCEDURE TO R ELEASE O BJECT, you define whenthe system starts the business workflow For example, you can choose whether the

system always starts a workflow after a raw exposure has been released Alternatively,you can specify that it never starts a workflow You can also start a workflow based onstatistical rules If, for example, you want to start a business workflow for samples only,you make this setting here

In the last Customizing step for the release, you make settings to determine which releaseprocedure is used This step is in Customizing, under R ELEASE • A SSIGN R ELEASE P ROCEDURE TO

R ELEASE O BJECT Here, you specify which workflow you want the system to use Since SAP

delivers a standard workflow, this step is optional However, it enables you to fully adjustthe system to the requirements of your own individual workflow

If the business workflow is active, the system issues the following status message when araw exposure is released: "Release workflow successfully initiated for raw exposure…".Furthermore, on the H EADER D ATA tab page, you can see that the release status is now

R ELEASE INITIALIZED.

4.3 Derivation Strategy for Exposure Fields

Once SAP Business Workflow has been released, it is time to complete the next

processing step in the release process Here, you have numerous options in relation toinfluencing how your raw exposures are processed in the system

If, at first, a raw exposure is only the mapping of your operative business transaction, it isperfectly natural that additional information must be derived Consequently, the

Customizing step D EFINE E XPOSURE F IELDS D ERIVATION S TRATEGY is available in the release process

to enable you to define derivation rules

When you open this Customizing step, you see the derivation tool you are already familiarwith from other parts of SAP Treasury and Risk Management

Since free attributes are also available to you here, you have a great deal of flexibility interms of defining derivation rules, assignments, initializations, or enhancements in order tospecify and process characteristics for your raw exposures The flexibility that the toolsafford you here will suffice in most cases

If you have requirements that go beyond the flexibility provided by the tools, you can alsoimplement the BAdI BADI_TEX_DERIVE_EXP_FIELDS from the enhancement spot

ES_TEX_DERIVE_EXP_FIELDS, which is available in Customizing, under B USINESS A DD- I NS ( BA D I S) FOR E XPOSURE M ANAGEMENT • BA D I : E NHANCEMENT FOR E XPOSURE F IELD D ERIVATION.

You cannot call this BAdI unless you have created an E NHANCEMENT step in Customizing,

under D EFINE E XPOSURE F IELDS D ERIVATION S TRATEGY One of the most important characteristics youcan specify here (using the derivation tool) is the exposure position type, which we discuss

in Section 4.5

4.4 Product Type

First, allow us to discuss a term that should be very familiar to you from Treasury

transaction management In the Customizing step D EFINE P RODUCT T YPES FOR E XPOSURES, you

define exposure product types In transaction management, and also in the rest of

Treasury and Risk Management, the product type is the main Customizing parameter.That is why we must define a product type here Finally, the risk position is to be valuatedand hedged For this purpose, the system accesses the Market Risk Analyzer functionsand hedge management functions, which use the product type as an input parameter forprocessing

This connection to other components is the reason product types are used in exposuremanagement The product type is of no significance in relation to further processing inexposure management itself Furthermore, the product type does not have any directinfluence on the release process However, it is an input parameter for the Customizingsettings associated with the exposure position type

4.5 Exposure Position Type

You have already learned that the raw exposure activity type is the key characteristic forraw exposures For risk positions (in the form of exposure positions), the exposure

position type plays a similar central role, in that it defines a large number of key settingsthat determine how an exposure position is released, how it behaves, and how its data isstored The Customizing setting is available under D EFINE E XPOSURE P OSITION T YPES Open this

step in Customizing and maintain a name and description for the exposure position type(see Figure 12)

Figure 12 Settings for Exposure Position Types

If you set the D EFAULT checkbox, this enables you to specify which exposure position type is

to be used if an exposure position type has not already been derived by means of a

derivation strategy, for example (see Section 4.3) Only one exposure position type can bemarked as D EFAULT

The P RODUCT T YPE setting assigns a product type to our exposure position type for the

connection to hedge management and the Market Risk Analyzer As already mentioned in

Section 4.4, the product type does not have any other influence on the exposure position.The M ATCH E XP P OS. T YPE entry is relevant only if automatic position matching is active Asdescribed in Section 3.1, the system reduces the exposure position of the preceding

activity in the event of automatic position matching You can use the M ATCH E XP P OS T YPE

setting to control which exposure position type you will reduce

It is now time to discuss one of the most important settings in exposure management:differentiation of the exposure position and how to control it Here, you can make a keysetting in relation to the granularity at which exposure positions are created during therelease process for raw exposures You may already be familiar with the term

differentiation from position management In fact, the software architecture of the

exposure position is similar to the architecture of position management

When you create a raw exposure, commodity price risks and foreign currency rate risksare identified and stored in the form of sub raw exposures Differentiation now defines howthe sub raw exposures of various raw exposures are aggregated to create exposure

positions For this purpose, the system examines certain distinctive attributes of sub raw

exposures These are known as differentiating characteristics In the system, these

characteristics are also known as D IFFERENTIATION C RITERIA If a sub raw exposure differs in

terms of one of these criteria, it will be managed using separate exposure positions If alldifferentiation criteria are identical, these sub raw exposures are managed on the sameexposure position

The system has already pre-assigned some differentiating characteristics One example isthe exposure risk category, which specifies whether a sub raw exposure is a foreign

currency risk or a commodity price risk For logical reasons, foreign currency risks andcommodity price risks are always managed on separate exposure positions In addition tothe differentiation criteria already pre-assigned by the system, there are other

characteristics for which you can make individual settings in Customizing according to yourcompany's requirements For example, Customizing for the exposure position type

contains the A GGREGATE indicator Here, you can make settings in relation to whether the

system should aggregate exposure positions at all or whether each sub raw exposureshould create its own exposure position in each case This indicator is used to control

differentiation here If the A GGREGATE checkbox is not selected, the primary key for the subraw exposure is specified as a differentiating characteristic Therefore, each new sub rawexposure creates a new exposure position If the A GGREGATE checkbox is selected, the key isnot a differentiating characteristic

You can use the N O P L. P ER indicator to control a similar effect This indicator enables you

to control whether the P LANNING P ERIOD and P LANNING Y EAR characteristics are differentiationcriteria or not For further details, refer to the relevant (F1) help

Planning Period and Planning Year

If the planning period and planning year are relevant for differentiation purposes but

have not been maintained in the raw exposure line item yet (see Section 2.1), the

system derives this information from the raw exposure date Exposure managementuses the planning year variant to calculate the period This variant is defined in

Customizing for the exposure position type

The other settings for the differentiation criteria are easier to understand than the N O

P L. P ER and A GGREGATE indicators If you select an exposure position type in Customizing and

choose A DDITIONAL D IFFERENTIATION C RITERIA, you access the settings shown in Figure 13

Here, you can define additional characteristics as differentiation criteria You do this usingthe free attributes you learned about in Section 3.3 If, for example, you use a derivation

strategy to fill these free attributes (see Section 4.3), you can greatly influence

differentiation, and therefore aggregation, of the risk position

Figure 13 Additional Differentiation Criteria for an Exposure Position

4.5.1 Non-Derived Exposure Transactions

So far, you have learned about (sub) raw exposures and exposure positions In the

previous section, we also showed you how to use differentiation to create exposure

positions from raw exposures

In this step in the raw exposure release process, the system uses exposure transactions

as an internal data structure Generally, the person using exposure management is unable

to see these exposure transactions Furthermore, they are usually not stored in the

database However, there is one exception whereby exposure transactions can be madepersistent for the user

These are known as non-derived exposure transactions and can only occur when

automatic matching is active in the system As already described in Section 4.5, this

setting is used to reduce each exposure position with the M ATCH E XPOSURE P OSITION T YPE For

this purpose, the system generates a "counter-exposure transaction" with the M ATCH

E XPOSURE P OSITION type Usually, this does not cause any problems If, however, the raw

exposures, for example, are not released in the correct sequence, suitable exposure

positions, which could be reduced, may not exist for some of these released exposuretransactions If this is the case, these exposure transactions are stored in the databasefor the purpose of manual post-processing

You can use the Process Unmatched Transactions transaction (FTREX21) to

post-process these saved transactions This program is available in the menu under T OOLS • E DIT

U NMATCHED T RANSACTIONS. Here, you have two options for the further processing of unmatchedexposure transactions: assign an exposure position manually or completely exclude theseexposure transactions from further processing You then start the Edit Unmatched

Transactions program (Transaction FTREX21) and select the exposure transactions

affected As shown in Figure 14, the system then displays the corresponding unmatchedexposure transactions

You can then choose R AW E XPOSURE to navigate from here to the raw exposure display

screen You can use M ATCH T RANSACTION to assign this exposure transaction to a suitableexposure position or use E XCLUDE T RANSACTION to exclude this exposure transaction from

further processing

Figure 14 Manual Matching of Exposure Transactions

5 Exposure Position

Now that we have learned how to manage and release raw exposures, it is time to learnabout exposure positions Once all the release steps are processed, the system createsexposure position flows from the exposure transactions you are familiar with from theprevious section Each of the exposure position flows is assigned to an exposure position.The exposure position value is the total value of the exposure position flows for one

exposure position on a particular key date

5.1 Position Values for Exposure Positions

If you want to display exposure positions with their position values, call the Overview ofExposure Positions transaction (FTREX12) This transaction is available in the menu,

under E XPOSURE P OSITIONS Like the Raw Exposure Display Screen transaction (FTREX2), this

transaction also has numerous selection criteria Figure 15 shows some of the selectionparameters available here

Figure 15 Selection Screen for Exposure Positions

In the R ISK screen area, you can specify which risk you wish to select (either a foreign

currency risk or a commodity price risk)

In the D UE D ATE/ P ERIOD screen area, you restrict your selection from a time perspective Note

that the system uses the Customizing setting D EFINE P ERIODS to determine the periods on thebasis of the exposure due date If you are using free attributes, these are also availablefor selection

The selection options in the N ON- A GGREGATED P OSITIONS screen area are available only for thoseexposure positions that have a non-aggregating exposure position type In particular, youspecify the (sub) raw exposure IDs here However, if these sub raw exposures have anaggregating exposure position, these fields are not differentiating fields for the exposureposition or available for selection here For more information on the exposure positiontype, see Section 4.5

Last but not least, you can also make direct selections according to the exposure position

ID or use the usual criteria (for example, L AST C HANGED BY) The H IDE Z ERO R ECORDS selectionalso belongs to these fields Exposure positions that no longer have any position valuesare excluded from the selection.

When you start the selection, the system displays all selected exposure positions in anALV list If you create a suitable variant for this list, you can display subtotals, for example,and therefore determine additional key figures

In addition to displaying the exposure positions, this screen provides you with the option ofprocessing exposure positions directly or navigating to other areas of SAP Treasury andRisk Management This transaction has various buttons for this purpose, each of which ismarked in Figure 16 For example, you can forward an exposure position to hedge

management by selecting the corresponding entry in the ALV list and choosing T RANSFER TO

H EDGE M ANAGEMENT

If you choose T RANSFER TO H EDGE M ANAGEMENT, the system asks you to enter the company code

and hedge plan so that it can trigger the forwarding action If you choose D ELETE E XPOSURE

P OSITION IN H EDGE M ANAGEMENT , you can cancel the transfer to hedge management and

therefore delete the exposure position from hedge management

Figure 16 Navigation Screen for Exposure Positions

The other buttons in are used to navigate to the detail screen for the exposure position Ifyou choose F INANCIAL O BJECT, this brings you to the exposure financial object in the risk

analyzer

If you choose R AW E XPOSURE, the system brings you back to the original raw exposure that

generated the exposure position you have selected As you already know from the

previous section, this original raw exposure is not necessarily unique in terms of

aggregating exposure positions Therefore, the system displays the first raw exposure itfinds for this exposure position

The F LOWS button shows all flows associated with an exposure position It enables you toconveniently navigate to the Exposure Flow Display transaction (FTREX13)

5.2 Exposure Position Flows

Exposure position flows form the basis for exposure positions You use the Exposure FlowDisplay transaction (FTREX13) to display exposure position flows This transaction is

available in the menu, under E XPOSURE P OSITIONS • D ISPLAY E XPOSURE P OSITION F LOWS.

Call the transaction and select the flows that were created as a result of releasing yourraw exposure Once again, this transaction also contains a large number of selection

parameters (see Figure 17), most of which correspond to the selection parameters in theOverview of Exposure Positions transaction (FTREX12), which we learned about in thelast section

Only the F LOW A TTRIBUTES screen area contains additional attributes Furthermore, in the

P OSITION screen area, you can use radio buttons to control whether the system is to perform

the selection indirectly by using the exposure position (S EARCH BY P OSITIONS option) or you

want to search the flow records directly (S EARCH F LOWS D IRECTLY option)

If you search using the exposure position, you also have the option of specifying the

exposure position ID when making your selection The selection results are shown in

Figure 18

Figure 17 Selection Screen for Exposure Position Flows

Figure 18 Display Exposure Position Flows

5.3 Commodity Exposure Report

In the previous sections, we described each of the steps you need to perform in order tomanage exposure information in the system In addition to information on the exposureitself, the Commodity Exposure Report transaction (TISCER) enables you to evaluateinformation on derivative commodity transactions you are currently managing in SAP

Treasury and Risk Management

This transaction is available for commodity price risks and commodity transactions only.Foreign currency exposures cannot be reported here That is why you cannot call thistransaction in the general SAP menu under T REASURY AND R ISK M ANAGEMENT • T RANSACTION M ANAGER

• E XPOSURE M ANAGEMENT 2.0 Instead, the transaction is available under the following

commodity-specific menu: T REASURY AND R ISK M ANAGEMENT • F INANCIAL R ISK M ANAGEMENT FOR

C OMMODITIES • I NFORMATION S YSTEMS • TISCER – C OMMODITY E XPOSURE R EPORT

The commodity exposure report evaluates the dataset for each commodity over a period

of time You determine the period by specifying a K EY D ATE and C UT O FF D ATE.

First of all, choose one of the product group options provided in the G ROUPS screen area:

L ISTED D ERIVATIVES, E XPOSURE P OSITION, or C OMMODITY OTC . Depending on your choice of productgroup, the system then makes additional specific parameters available for selection (see

Figure 19)

Figure 19 Commodity Exposure Report

Once you confirm your selection, the system displays the financial transactions or raw