SAP® Commodity Risk Management
Commodity Trading and Risk Management
SAP CTRM
Hedging price fluctuation risks and managing risk positions
Commodity prices fluctuate constantly. Some commodity prices fluctuate by double-digit percenÂtages within a year. SAP Commodity Risk Management offers the possiÂbility to hedge the resulting financial risks and thus implement the company’s own hedge strategy.
SAP’s Commodity Risk Management solution can be divided into various blocks:
SAP CTRM
Overview
Commodity DerivaÂtives Management
SAP Commodity Risk Management can be used to map both exchange-traded and OTC transacÂtions in accordance with current accounting regulaÂtions. For this purpose, the SAP solution provides forwards, swaps, futures, and options in various forms. These derivaÂtives are based on specific contracts (Derivative Contract SpeciÂfiÂcation — DCS). These are exchange-dependent and can also be managed in the solution.
CalcuÂlation of Key Figures for Commodity DerivaÂtives
Market Risk Analyzer with Mark to Market and Option Price CalcuÂlaÂtions: In addition to the mapping of derivaÂtives, SAP’s Commodity Risk Management also offers the possiÂbility to calculate various key figures for the positions in the portfolio. As an example for such key figures, the mark to market or the time value of options can be mentioned.
MTM Reporting & Commodity Position Reporting
Mark to market consideÂration of the derivative portfolio and management of the risk position: Two key requiÂreÂments in the commodity environment are the consideÂration and active management of the risk position and the current mark to market valuation. The risk position of each derivative can be viewed in Position Reporting. The current mark to market valuation can be viewed in the correÂsponding mark to market reporting. If the SAP Commodity Sales & ProcuÂrement or SAP AgriculÂtural Contract Management solution is also used, a holistic view of the physical and derivative risk and mark to market positions can also be taken here.
Order TransÂmission and Trade Execution
The solution “Commodity Derivative Order and Trade Execution” (CDOTE) available with S/4 HANA 1809 SP 2 has two goals:
On the one hand, it is the link between the logistical and derivative part of the SAP Commodity solution portfolio. Thus, with the help of the solution, price risks resulting from the logistical processes can be triggered directly at the broker and, upon confirÂmation by the broker, be created directly in SAP Commodity Risk Management as a derivative.
On the other hand, the solution generally serves as a channel to the broker and from the broker to the SAP system. The solution impleÂments the message format for commodity futures defined with FIX 4.4 and FIX 4.5 and further offers the possiÂbility to map format adaptÂaÂtions customer-specific. This allows commuÂniÂcation with the broker system. Independently of this, a link to the broker can also be estabÂlished without FIX by means of correÂsponding APIs.
SAP Commodity Risk Management
Interested?
Do you need support with setting up or expanding your SAP Commodity Trading and Risk Management (SAP CTRM) solution?
Do you have any questions about commodity management, commodity pricing, commodity procuÂrement and best practices?
Contact us! We will be happy to support you from process recording to impleÂmenÂtation in the system.
