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Commodity Trading & Exposure Management

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Commodity Trading & Exposure Management Fact Sheet | Commodity & Treasury Management Commodity Trading & Exposure Management Increasing volatility of foreign exchange I. Identification of Commodity and II. Structuring Exposure FX Exposure • Par Time Budget (FX) rates and commodity prices confront • Logistic Process (Stock, Sales • Risk Category corporations with a new level of complexity. Purchases) • Strategic Positions This is due to legal and process require­ ments of different commodities. Paper trades are handled differently from Commodity / Exposure physical trades, not only on settlement Management but also on issues like taxation and pricing. Process This poses a challenge on the IT landscape. To understand the different level of III. Risk Management IV. Controlling complexity it is necessary to analyse a • Exposure Management • Daily and monthly reporting • Hedge Management • Valuation sample process of commodity settlement. • Diversification • Compliance • Limitation • IAS/IFRS Compliance With the background of numerous successful projects BearingPoint combines business knowledge with IT skills in As a result the exposure and the relating • Physical Trades require dispatching and trading, logistics and risk management commodity price risk increases, leading to scheduling of the delivery – inventory (end to end process). Therefore our significant P&L effects, operational risks management and valuation of the company is well positioned to analyze and and compliance issues. stocks implement your commodity processes. The main challenges imposed by paper • Handling of different qualities and BearingPoint has an exclusive partner­ trades, which are settled through a cash penalties and its allocation ship with SAP for Treasury & Risk payment at the end of the term, are: Most Commodity Management Systems Management. Logistic processes are • Risk calculation of market prices and are either specialized on handling handled via the fully integrated Global valuations Paper Trades or Physical Trades. Due Trade Management. • Credit exposures to the structure of the complexity of commodity contracts, very few systems The Key Question is to be aware of the • Hedge accounting overall exposure and the risks depending cover all functionalities that are required on the accuracy of transaction data as • Generation and distribution of to manage Physical and Paper Trades well as automatic controls. confirmations and mostly without an efficient full • Application of relevant taxes integration into an ERP System. The general Challenges for companies • Generation of invoices which are exposed to commodity markets The Solution are: • Generation of netting statements BearingPoint provides an efficient • Update of margin requirements and • Increased volatility of commodity approach to implement appropriate calculation of required margin amounts prices processes and adaptable IT landscapes • Lack of transparency on commodity • Financial reporting and risk controlling to manage commodities and exposures (commodity, FX) in order to meet today’s exposures Additional challenges for trades, which market challenges: • Poor data quality, lack of consistency are settled through a physical delivery and completeness of the respective commodity – physical • Analysis and process improvement • Missing system and process trades, are: within commodity trading departments integration (no single point of truth) • Integration of trading and logistics • Lack of controls processes • Implementation of global commodity and exposure management solutions Fact Sheet To get there. Together. Helping our clients get sustainable, measurable results Reasons for combination of Commodity Trading system and SAP BearingPoint is an independent management and technology consultancy. Owned and Commodity Management system can SAP provides possibility to upload operated by its Partners throughout Europe, High degree of flexibility of SAP be chosen and implemented data from trading systems using BearingPoint provides its clients with the allows system adjustments to meet disregarding essential Back Office standards interfaces routing the data the specific needs of each client best possible value in terms of tangible, functionalities directly to accounting or logistics measurable results by leveraging business and technology expertise. The company currently employs 3.200 people in 14 European countries and serves commercial, financial and public Many companies already use SAP is a standardized system for SAP for financial accounting which a lot of knowledge is available services clients. BearingPoint offers its clients and/or logistics in the market a seamless cross­border approach, strong focus on results, an entrepreneurial culture, profound industry and functional knowledge, as well as solutions customised to clients’ specific needs. The firm ranks high in client satisfaction, has • Set­up of an end­to­end process Case Studies long­standing relationships with reputable for commodity trading and risk organisations and is seen as a trusted adviser. management BearingPoint has a successful track record BearingPoint has European roots, but operates in implementing commodity solutions of with a global reach. • Integration with logistics processes more than 10 years and is a preferred and • Valuation and accounting (e.g. IFRS) special expertise partner for SAP in this For more information, please visit: • Integration with hedge management topic. www.bearingpointconsulting.com Key Benefits BearingPoint’s market analysis shows We are BearingPoint. that a combination of Commodity Trading Management & Technology Consultants The benefits of BearingPoint’s solution system and an ERP system (i.e. SAP) is a include: very common solution. • Straight through processing and reduction of manual effort Implementing a streamlined, integrated process for Commodity Trading enables • End­to­end support to set­up a active steering of cash flows to enhance Contact: complete commodity/exposure profitability and manage risk more management solution effectively. Vahan Gürmann, Partner • Comprehensive and flexible group vahan.gürmann@ wide monitoring of exposure and risks A well defined, synchronised and bearingpointconsulting.com documented process of front office • Reduction of functional redundancies physical and financial trades with SAP (e.g. by centralisation of managing logistics and SAP Treasury including commodity trading, settlement, risk Risk Management provides fulfilment of management and logistics) regulatory and compliance requirements • Monitoring and fulfilment of accounting such as SOX and IFRS. and compliance requirements BearingPoint Switzerland AG Pfingstweidstrasse 60 CH­8005 Zürich Finance Front Office Mid Office AP / AR Controlling Manager www.bearingpointconsulting.com Approval of Scheduling Creation of Review of Trade entry credit of Shipment Invoice Profitability exeption SAP SAP SAP SAP SAP + other systems © 2011 BearingPoint Switzerland AG, Zürich. All rights Business Values Process Advantages reserved. Printed in the EU. The content of this docu­ • Integration of Commodity Trading and ERP • Real time view of physical and paper ment is subject to copy right (“Urheberrecht”). Changes, system positions cuts, enlargements and amendments, any publication, • Transparency along the entire supply chain • Facilitation of Hedge Accounting translation or commercial use for the purpose of trai­ • Commodity Trading system serves as basis • End-to-end process nings by third parties requires the prior written consent for commodity accounting compliance of BearingPoint Switzerland AG, Zürich. Any copying for personal use is allowed and only under the condition that this copy right annotation (“Urheberrechtsver­ merk”) will be mentioned on the copied documents as well. FC 0594 CH Fact Sheet.
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