TRM, Hedge and Exposure Management, New Financial Product

Technical Data
Technical Name of Business Function	FIN_TRM_LR_FI_AN_2
Type of Business Function	Enterprise Business Function
Available As Of	SAP enhancement package 4 for SAP ERP 6.0
Technical Usage	Financial Services
Application Component	SAP Treasury and Risk Management (FIN-FSCM-TRM)
Directly Dependent Business Function Requiring Activation in Addition	Financial Services (EA-FS) TRM: Hedge Management, New Financial Instruments, New Key Figures (FIN_TRM_LR_FI_AN)

With this business function, you can use various new functions in SAP Treasury and Risk Management. New Exposure Management 2.0 enables you to manage exposure items for both open commodity items and open currency items. In Hedge Management, you can map the hedging of commodity price risks using the corresponding hedging transactions in the Transaction Manager.

The complete integration with the analyzers enables you to run analyses for both net present value and value at risk for the exposure positions. To meet the requirements for the hedging relationship effectiveness tests, in accordance with the accounting principles IAS39 and FAS133, you can now run retrospective and prospective effectiveness tests in Hedge Management based on linear regression analyses for exposures, hedged items, and hedging instruments.

You can also use the new product category forward securities transaction, which has been fully integrated in the position management and accounting areas of the Transaction Manager.

Integration

You can use forward securities transactions provided with this business function in Hedge Management for FAM as a hedging instrument to hedge market price risks. Hedge Management for FAM is provided via the delivered business function TRM, Hedge Management for FAM.

Prerequisites

You have installed the following components as of the version given:

Type of Component

Component

Is Needed Only for the Following Features

Software Component

EA-FINSERV 604

SAP_APPL 604

You have activated the following business functions:
- Financial Services (EA-FS)
- TRM: Hedge Management, New Financial Instruments, New Key Figures (FIN_TRM_LR_FI_AN)
- TRM, Hedge and Exposure Management, SWIFT (FIN_TRM_LR_FI_AN_2)
  (available business function)
For information on activating the individual functions in Customizing, see the release note FIN_TRM_LR_FI_AN_2: TRM, Hedge and Exposure Management, SWIFT (new) and FIN_TRM_LR_FI_AN_2: Exposure Management 2.0 (New).

Features

Hedge and Exposure Management
- In the new Exposure Management 2.0 area, you can create currency and commodity positions on which both Hedge Management and the analyzers are based. Open commodity items in Exposure Management can be hedged in Hedge Management using commodity futures transactions (commodity futures, options on commodity futures, and commodity forwards) from the Transaction Manager. For the operative exposure items, you can run analyses for net present value and value at risk in the Market Risk Analyzer.
- You can use the regression analysis to run retrospective and prospective effectiveness tests for exposures, hedged items, and hedging instruments. To test hedging effectiveness, you can calculate the following parameters:
  - Gradient of the regression lines
  - Axis intercept of the regression lines
  - Coefficient of determination R²
  - t-Test
  - F-Test
The life cycle of forward securities transactions, comprising rollover, advance maturity, dividend adjustment, cash settlement, or physical delivery, can be continually mapped in the Transaction Manager, and integrated in position management, accounting, and risk management. You can map forward securities transactions to the following product categories:
- Stocks (010)
- Investment certificates (020)
- Bonds (040)
- Investment (160)
To fulfill the P-GAAP requirements for group accounting involving an investment of over 50% in a company, the new position components Value Adjustment of Gains1025, Value Adjustment of Losses,1026 and Original Value Adjustment1027 have been integrated into position management.
To meet the disclosure requirements for financial instruments in accordance with IFRS 7 (as of 1/1/2007), you receive reports that take into account all the financial transactions and objects in SAP Treasury and Risk Management and the exposure items. These are then evaluated with regard to the market risk.
See also: IFRS 7 – Reporting