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 percen­tages within a year. SAP Commodity Risk Management offers the possi­bility 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 Deriva­tives Management

SAP Commodity Risk Management can be used to map both exchange-traded and OTC transac­tions in accordance with current accounting regula­tions. For this purpose, the SAP solution provides forwards, swaps, futures, and options in various forms. These deriva­tives are based on specific contracts (Derivative Contract Speci­fi­cation — DCS). These are exchange-dependent and can also be managed in the solution.

Calcu­lation of Key Figures for Commodity Deriva­tives

Market Risk Analyzer with Mark to Market and Option Price Calcu­la­tions: In addition to the mapping of deriva­tives, SAP’s Commodity Risk Management also offers the possi­bility 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 conside­ration of the derivative portfolio and management of the risk position: Two key requi­re­ments in the commodity environment are the conside­ration 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 corre­sponding mark to market reporting. If the SAP Commodity Sales & Procu­rement or SAP Agricul­tural 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 Trans­mission 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 confir­mation 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 imple­ments the message format for commodity futures defined with FIX 4.4 and FIX 4.5 and further offers the possi­bility to map format adapt­a­tions customer-specific. This allows commu­ni­cation with the broker system. Independently of this, a link to the broker can also be estab­lished without FIX by means of corre­sponding 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 procu­rement and best practices?

Contact us! We will be happy to support you from process recording to imple­men­tation in the system.

Our expert Sebastian Nötzel will be happy to help you.

Sebastian.Noetzel@cobicon.de

+49 175 8782097