Dear,
In the last post we look at the SAP Banking capabilities for Investment Management in an environment of Capital scarcity.
After receiving some feed-back, I think there’s a little confusion with the concept of investment and SAP related functionalities, we’ll look at them in this post. In general, capital allocation activities are classified in two big groups; investing and trading.
The goal of an investor is making profit by allocating capital over an extended period of time, comparable to the life-time of the asset in which he’s investing. For instance, an investor would buy a building for renting it and make profit.
On the other hand, a trader goal is making profit by buying and selling assets in a short period of time.
Looking at the previous example, a trader would buy a building for selling it after some months at a higher price.
A couple of weeks ago, we saw how purely investment activities are managed with SAP Investment Management, and how can we integrate SAP Investment Management with SAP Bank Analyzer for managing efficiently the capital allocated to investment projects.
This week, we’ll see how to manage trading activities efficiently, by combining the functionalities of Treasury and Risk Management with the functionalities of Bank Analyzer.
The Treasury and Risk Management module has two sub-modules; Transaction Manager and Position Management.
• Transaction Manager manages the trading contracts.
• Position Management calculates the Accounting Values and Capital Consumed by the trading contracts.To some extend Position Management is an old version of Bank Analyzer (also called SEM-Banking).
Transaction Manager offers all the necessary functionality for the operational management of the trading contracts.
• Business Parthers of the contracts.
• Financial Conditions of the contracts.
• Clearing Accounts for managing the payments and collections. • Cash-Flows generation.
• Products Management for supporting most of the necessary trading contracts types (Forward Contracts, Options, Futures, Commercial Paper, Equities, Forex, Swaps, Bonds, etc.)
On the other hand, Position Management (SEM-Banking) offers Accounting and Capital Management functionalities, but this solution is being replaced by Bank Analyzer, which comes with a more robust architecture.
Fortunately, the integration between Transaction Manager and Bank Analyzer is quite simple.
Transaction Manager Data-model uses Financial Transactions and Business Transactions as Bank Analyzer does.
Transaction Manager also supports securities (called classes), that would be integrated in the Bank Analyzer Source Data Layer as Financial Instruments.
As you can see, integrating Transaction Manager as trade solution, with Bank Analyzer for covering the Accounting and Capital Management requirements is an excellent alternative for the management of trading contracts in an environment of capital scarcity.
For instance, a real estate company promotes and manages the construction of a building, but it gets the necessary capital issuing bonds that will be acquired by investors.
Traders could be interested on those bonds, as they expect its value to rise, and sell them when the market value has risen.
The capital allocation will be managed with a Transaction Manager contract, with the Holding Category “Held for Trading”.
Position Management (SEM-Banking) could also manage the accounting and capital consumption effects of the trading contract, but as we said they’re old solutions meant to be replaced by Bank Analyzer.
Finally, trading contracts can require the management of logistics operations, particularly when the trading partners have agreed on physical settlement of the contract.
We’ll talk about this scenario in a future post.
Looking forward to read your opinions.
K. Regards,
Ferran.
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