Risk Analyzers

In this article, I want to give a very brief outline on the Risk Analyzers and show the steps for configuring the credit risk and market risk analyzers and a very short one on the portfolio analyzer. I need to stress that I left SAP consulting quite sometime back to pursue other things and hence, this article will have its shortcomings. As usual, I hope that at least one person find this article helpful.

When I was trying to understand the analyzers, it was very difficult for me to get a hold of it, until I read my ‘SAP Treasury Bible’. The concept that threw open the whole analyzers to me was:

1. analyzers are just just analyzers to analyze things – for eg: financial instruments – since this is a separate module which can be used to analyze instruments not only created from within SAP, but even outside instruments: there should be a commonality in similar type of instruments to enable analysis, that is to say the ‘characteristics’ of similar instruments should be uniform;

2. The database of the analyzers are separate. That is, the instruments created even within SAP need to be transferred to the analyzers database.

Hence, the first step in the analyzers is to make sure that the different instruments coming in from different sources are harmonized by ensuring specific characteristics are attributed to the instruments – called the ‘financial object’.  This is done by derivation based on different rules. Some of the characteristics will be derived from the characteristics in the incoming instrument itself – for example a ‘fixed deposit’ instrument and a ‘bond’ instrument may derive and assign the values ‘fixed deposit’ and ‘bond’ to the ‘type’ characteristic. The derivation of the characteristic values is done very similar to the derivation of characteristic values in profitability analysis. Once this is done, you have uniform instruments in the analyzers database on which you can do various kinds of analysis using the ‘analysis characteristics’. The analysis characteristics provide a harmonized view of the concepts of an external system.

You will generally use Treasury and Risk Management with active financial object integration. This generates a financial object for each operational financial instrument position. The Analyzers don’t refer to position management, but to external position. Accounting aspects like valuation area-dependent segments of position are not taken into consideration.

I would recommend once again to read and understand the analyzers from my ‘SAP Treasury Bible’ to someone who is really interested in understanding and then mastering the analyzers. Of course, it goes without saying that domain knowledge is essential to fully appreciate and comprehend the analyzers.

Note: All quoted passages from the book are in italics.

Credit Risk Analyzer – The Credit Risk Analyzer (TRM-CR) enables the active control of default risks by computation of attributable amounts and specification of limits. In the context of of Treasury and Risk Management, only the counterparty risk is considered, that is, the risk of loss of value of a receivable due to degradation of credit standing of the business partner. The three key functions used for this task are attributable amount determination, limit management and testing of limit utilization.

In attributable amount determination the attributable amount is determined for the receivable subject to default risk. The basis of calculation is typically the net present value or the nominal amount of the receivable.

In limit management, you can create limit types according to different limit characteristics (eg: company code, business partner, trader, currency).

The checking of transactions can take place using integrated single transaction checks or during end-of-day processing. Integrated single transaction checking can be performed directly during the creation or change of a transaction in the Transaction Manager. End-of-day processing is performed in the Credit Risk Analyzer.

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Use:  The Typical Application of the Credit Risk Analyzer is Integrated Single Transaction Checking. This allows immediate calculation of attributable amount determination upon creation or change to a financial transaction and comparison with the limit specifications. Also in end-of-day processing, the attributable amount determination and the utilization of limit specifications can be performed.

Market Risk AnalyzerThe core task of the Market Risk Analyzer (TRM-MR) is the analysis of market risks in financial positions you are managing. Changes to market prices can influence the value, transaction value, or the timing of payment flows. Risks can be analyzed according to their casual risk factors, like exchange rates or interest rates, using arbitrarily definable risk and portfolio hierarchies. The level of real transactions and market data can be extended if needed with business simulations and market data scenarios, in order to show the change potentials of alternative backup strategies.

The Market Risk Analyzer can therefore be divided into these functional areas:

  • Market data management
  • Net present value calculator (also called the fair value calculator)
  • online reports
  • Results database

Portfolio Analyzer – The portfolio Analyzer groups tools for the calculation of yield and performance figures as well as for the comparison of those key values with benchmarks. The basis for calculation is the structuring of your portfolio into portfolio hierarchies that define a flexible view of your positions with different levels of aggregation. On each of these levels, you can calculate the yields of a variety of variants, and compare those benchmark figures with one another.

The Portfolio Analyzer is concentrated on the results database, because the greater runtime requirements in comparison with the Market Risk Analyzer largely forbid online analysis. The structure of the portfolio hierarchies as well as the yield and benchmark calculations are versioned, so that an audit of the basic calculations is possible at any time, as are the reproduction and history of calculation results.

Key Values – Time weighted Average Yied, Dietz Time Weighted Average yield, Modified Dietz Time Weighted Average yield, Money Weighted Average Yield


Customization Steps

Below are some of the steps required to setup the Risk Analyzers in SAP.

Market Data Management

Define Reference Interest Rates

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Define Yield Curve Type

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Basic Analyzer Settings

Define Analysis Characteristics

Here you create the characteristics required. For example want to analyze by product type, Trader etc. In this case, you have to create the characteristics here. Please note that the user defined characteristics should start with ‘WY’

Below is an example of the ‘Trader’ characteristic created as ‘WYTRD’

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A ‘live’ example of analysis characteristics might look like this:

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Define Analysis Structure

This is required to create the structure for reporting in MRA & Portfolio Analyzer. However, the characteristics used in the structure will only be available in CRA as analysis characteristics for limit management.

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The characteristics created by the user as well as pre defined ones are available for creation of the structure. Move these from the right box to the left box using the arrow keys. Please note that company code is by default taken by the system automatically and hence not available here.

Give a structure name, then save and activate it. This activation activates the structure across all clients.

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Select ‘Other Objects’ and then check all the boxes as below and click the execute button (or F8).

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Activate the structure for the required client

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Edit Segment-Level Characteristics

The characteristics which is needed for the portfolio hierarchy should be marked as segment relevant here. Otherwise it will not be available there. This is also true for characteristics required for the Credit Risk analyzer. Hence, if you are maintaining limits based on any characteristics (for eg trader, business partner) then these have to be ticked here as segment relevant.

Please note that since segment level takes a lot of resources, it is better that segment is not ticked for transaction number if you have this as one of your characteristics.

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A ‘live’ example of segmental characteristics:

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Define Characteristic Values

It is advisable that you maintain the values from here only for those characteristics which are user defined and with own value maintenance. For others (for eg like Product types, transaction types etc) maintain it where it is supposed to be maintained.

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A ‘live’ example :

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Maintain General Derivation Strategy

The General characteristics values like Asset Indicator etc needs to be derived into the financial object in the Analyzer when the Financial Transaction in created in Transaction Manager. For this, the derivation strategies for the analysis structure created above are defined in these steps.

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A ‘live’ example image

Activate Financial Object Integration

You now have to activate Financial Object Integration for the individual TRM components necessary for the analyzer.

The Activation should be done for each component of the Analyzer. For MRA, the ‘Analysis’ component should be activated, for CRA ‘Default Risk Limit’ component should be activated.

If you set the indicator ‘partially active’ then, if the characteristic values are not fully derived or entered when a TRM transaction is saved, it will allow the save with a warning. On the other hand if the ‘fully active’ indicator is selected, then you cannot save until all the characteristics are derived or entered manually while creating the transaction.

Please note that in case all the values are not derived and saved, then you can manually enter these in the financial object using post processing.

You give the product types for which FO integration is required under each component.

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Derivation Strategy for Individual TRM Types

You have to maintain the ‘Characteristics value’ Derivation strategy for individual components like MM, Securities etc.

Please note that since Financial Objects are created for securities and futures account at the class level unlike others where a financial object is created for each individual transaction, the derivation is for the class position (please note that with EHP4, even for securities, financial objects can be created for each individual transaction)

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‘live’ examples:

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Define Portfolio Hierarchy

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Define Valuation Rule

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Assign Valuation Rule via Product Type

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An example worksheet of mapping product types to valuation rules>Yield Curves etc

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Define and Setup Evaluation Types

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‘live examples’
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Assign Cash Flow Indicator for Securities with Update Types

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Generate Cash Flow Indicators Automatically

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Review and make any changes to the Cash Flow Indicators

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Market Risk Analyzer Settings

Define Cash Flow Type and Assign Cash Flow Indicators

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Note: most of these settings might be already setup in the SAP default system itself

Define Value at Risk Type

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VaR(Value at Risk)

We are ‘x%’ certain that we will not loose more than ‘v’ dollars in the next ‘n’ days

The variable ‘v’ is the VaR of the portfolio

It is a function of two parameters, ‘n’ the time horizon and ‘x’ the confidence level

 

Credit Risk Analyzer

Global Settings

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Menu Path – SPRO>Treasury and Risk Management>Credit Risk Analyzer>Basic Settings>Global Settings

•Set the flag ‘Default Risk Active’

•Specify the Evaluation Type (for eg RM01). The evaluation type is needed to determine the attributable amount, if it has net present value as a basic key figure (link this to the part where the basic key figure is set up)

•Set the flag ‘Deriv. Active’. By setting this you can specify that the default risk rule and the other control parameters needed for the processing of a financial transaction within default risk limitation should be derived automatically upon creation of the transaction in the transaction manager.

•Set the flag ‘Sec. Acct pos’ to derive the default risk rule etc as mentioned above for securities account class postings

•Set the flag ‘workflow is active’ if a message is to be sent to a responsible person when a limit is exceeded within the integrated single transaction check

•Set the flag ‘ CM link is active’ if you want the connection of the Credit Risk Analyzer to the Cash Management is to be activated.

Activate Integrated Default Risk Limit Check

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Define Valuation Factor Determination

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This defines a procedure that determines whether the attributable amount should be calculated for counterparty/issuer risk or country risk.

Because the country risk is exclusively the part of SEM banking, under ‘CP/Country risk’ you can only select the counterparty/issue risk and under ‘Recovery Rate Basis’ you can only select the business partner rating.

This setting is later used for assigning ‘Risk sensitivities’, ‘Counterparty/issuer default probabilities’ and ‘Recovery rates’

Define Collateral Valuation Rule

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Even if you are not considering the deposit of collateral, you should still create at least one collateral valuation rule, as it is needed for the definition of the determination procedure.

The collateral valuation rule determines whether a collateral reduces the attributable amount by the same amount is covers the economic, political or maximum risk from both areas.

Since we will consider only the counterparty/issuer risk, create a collateral valuation rule that has ‘ECONOMIC’ for both its primary risk reduction and its secondary risk information

Define Determination Procedures

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The determination procedure specifies the parameters which, together with a default risk rule, control the calculation of attributable amount

Field ‘Valuation Factor’ – specify the procedure created for the valuation factor determination in the preceding steps

Field ‘Risk Category’ – if the determination procedure is for ‘settlement risk’ then select the ‘settlement’ risk’ value and if the determination procedure is for ‘credit risk’, select the ‘credit risk’ value

According to current trading usage for a forward exchange rate contract, the settlement risk starts two days prior to the value date in the transaction

Field ‘Exposure’ – set to ‘Gross’. If set to gross, then the collateral settings have no reducing effect on the attributable amount for a financial transaction. On the other hand if ‘Net’ is selected, then the collateral provisions are subject to the rules specified in the ‘collateral valuation rule’ field

Field ‘Collateral valuation rule’ – this is a required field and enter the rule created under ‘Define collateral valuation rule’ in the previous step

Risk commitment period describes the period of time within which the dissolving of a transaction is difficult or impossible.

Thus the default probabilities are defined depending on the risk commitment period and generally rise with increasing risk commitment periods.

Flag ‘Interpolation of the default probability’ is set, then the default probabilities are interpolated linearly between two risk commitment periods. If the flag is not set then for one risk commitment period, the default probability of the next larger risk commitment period will be used.

Please note that determination procedures are to be created as many as required. In a scenario with settlement risk and two credit risk analysis, we have to create 3 different determination procedures

Define Default Risk Rule

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The basic control of Attributable Amount Determination is exerted by means of the ‘Default Risk Rule’. Hence, if we have to analyze more than one risk, then we have to maintain different ‘Determination Procedures’ for that ‘Default Risk Rule’

For eg: if for a Foreign Exchange Transaction, we want to look at both the settlement risk and the credit risk for default risk limitation and further we want to measure the credit risk in two different ways, then we must store three different ‘Determination Procedures’ for that assigned ‘Default Risk Rule’. One determination procedure must be active during settlement and two other determination procedures are used during the term of the instrument.

The default risk rule specifies the economic input parameter for attributable amount determination. Thus each Financial object must be assigned a default risk rule for default risk limitation

For financial transactions with the same default risk rule, the attributable amounts are determined using the same economic parameters

The date determination area in default risk rule definition is used to define how the ‘Market Value Change Period (MVCP)’ and the ‘Risk Commitment Period (RCP)’ will be determined for the financial transaction.

Typical periods are ‘end of term’, ‘fixed interest period’ or ‘capital tie-up’.

However, fixed values can be entered, in which case the corresponding value needs to be specified in months.

If you want to ignore these values, then the fields can be left blank

The MVCP is used in the determination of add on factors

The RCP is needed for the determination of the default probabilities and checking against the limit specifications

The ‘General Control Parameters’ frame defines the default setting for the ‘Recovery Rate’. If required this can be left blank if the recovery rate is being derived in the financial instrument

The ‘settlement risk’ flag is set if the settlement risk is to be calculated for the default risk rule

Define Single Transaction Check Product

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Define Start Date for Risk Calculation

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For money market transactions, you can use the customizing activity ‘Define Start Date for Risk Calculation’ to select the date as of which the financial transaction should be considered for risk calculation. You can select either the start of term or the date of conclusion

Define Variable Assignment ID

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Edit Settings for Determination Procedures

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Enter Basic Settings for Limit Management

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Define Generated Characteristics

You need to define the characteristics here which you want to use for limit management

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Define Limit Types

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An example worksheet of mapping of limit types

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Define Limit Product Groups

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Portfolio Analyzer Settings

Please note that I have not done any actual implementation of the portfolio analyzer and these steps are taken from the notes during my learning process.

Set Initial Table Values for Assignment of TM Flow Type to PA Flow Type

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Note: most of these settings might be already setup in the SAP default system itself

Maintain PA Flow Types

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Assign CFM-TM Flow Types to PA Flow Type

Do this if this has not been already done

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Flag Flows as Relevant to Performance Management

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Generate Proposals for PA Cash Flows

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Generate Proposals – Explanation from SAP Help
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Create Benchmarks

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Assign Benchmarks to Nodes in Portfolio Hierarchy

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Define Yield Ranges

You do this only if you require any value other than the defaults

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Create Key Figures and Evaluation Procedures

This part in my opinion is the tricky bit in the portfolio analyzer. I made a recording of these steps, but I am not sure whether it is in a presentable form. However, reading the mentioned will give you a solid understanding.

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Define Initial Layout

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Define Formulas for Analyzer Information System

You do this step if you want to see calculated fields in the report.

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Some General Notes:

1. In the General Data part of Financial Object, there is a section – Analysis(RM). In this section there is an ‘Analysis Active Indicator’. This should be selected automatically via the derivation rules. The Analysis active indicator makes a financial object visible for the evaluations of the Market Risk Analyzer and Portfolio Analyzer. Hence if this indicator is not set, then the Financial object will not be selected for evaluation.

2. In the same section, there is the ‘validity’ fields for entering the financial objects validity start and end period. This validity period is not used in nay analytical question. However, it is recommended that these dates are filled in with a few ‘extra’ days at the beginning and end of the actual validity of the financial object. Correctly specified validity can be used to achieve a significant performance boost in your system. This is because the objects not in the relevant period for an analysis are filtered out in the first evaluation step itself.

3. Analysis structure is client independent. If you want to use multiple analysis structure for different clients in the same system, you should activate the analysis structure for each client. For each client, there is always exactly one analysis structure activated.

4. The characteristic ‘company code’ is required by each and every financial object. To achieve this, the characteristic ‘company code’ is always automatically a part of the analysis structure.

5.  Be very careful with the action of activating an analysis structure (Activate in the main screen of transaction AFWA, in the Current Analysis Structure in Client frame)

If you are actively using analysis structure ‘1234’ in a production system with existing financial objects, and activate a second analysis structure ‘ABCD,’ the second structure directly takes on the role of the active analysis structure and the first analysis structure ‘1234’ is deactivated. The result is that you will no longer see any financial objects at all, because all the existing financial objects store their characteristics values in the tables of the analysis structure ‘1234’ which has just been deactivated. If you don’t notice the error immediately and system operation continues without the analysis structure ‘1234’ being reactivated, all new and changed financial objects will write their data to the new data structures. The result will be an inconsistent system state. The repairs you will have to make then will be very tedious, lengthy, and expensive, because there is no reversal function of any kind.

6. Note that for analysis characteristics that refer to operational SAP tables, the tables can be directly changed by the JBRCU and JBRCV maintenance transactions. Because these transactions are located in the application menu, you can use them to make direct changes to values of characteristics in SAP tables from both application and customizing data. As these SAP tables generally control or map operational processes by their nature, you can cause inconsistencies here.

For instance, if you enter characteristic value maintenance for the currency characteristic with these transactions, you can directly change the system-wide currency settings. You should therefore use these transactions only to change analysis characteristics with their own value maintenance.

7. Only characteristics used to form segments can be used in portfolio hierarchies.

8. Rule of Thumb for Characteristic use – The selection of characteristics for segment formation should in any case be done in such a way that under no circumstances more than 10,000 different characteristic value combinations of segment-relevant characteristic can occur. It is important to know that only the actually occurring combinations are relevant, not the theoretically possible ones. Because this is often difficult to estimate, however, very differentiating characteristics, like ‘transaction’ or ‘contract’ numbers, should be avoided.

If you need to report such differentiating characteristics, however, under the last leaf of a portfolio hierarchy you also have both online individual analyses and drilldown reporting.

9. In an existing operational system, when you activate analyzers, there might already be operational positions in the system. In that case, you can generate financial object in batch runs for the existing operational positions using the below mentioned transactions.

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Please note that at the time of creation of financial objects, characteristic derivation should be complete in order to avoid postprocessing (Post process Transaction AFO_FOI_PP)

10. It is normal for the requirements for your analyses to change over time. These new requirements will sometimes require changes to the financial objects.

– Sometimes, in addition to your previous analysis characteristics, you need new ones;

– Relabel an existing analysis characteristic as segment-forming;

– You may need to change the derivation rules and that they are now going to be used on existing financial objects;

Some changes like the addition of a new characteristic may apply only to the analysis (RM) component of the financial object while other changes like the derivation rule change may affect both the analysis (RM) component and the default risk limit component of the financial object. Hence, actions to effect the changes should be performed specifically for each component. Given below are the transactions to perform these changes.

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Process

Below are some sample processes.

Limit Maintenance

Step No: 1
Step Name: Maintain Limits
Menu Path: Accounting>Financial Supply Chain Management>Credit Risk Analyzer>Master Data>Limits>Maintain
Transaction Code: TBL1
Business Condition: Limits need to be set up for various limit types
Expected Results: Limits are set
External Process Ref:
Client Specific Process Ref: Eg:
1. Limit is to be set up for the combination of Company Code>Trader>Product Type

2. Limit to be set up for the combination of Company Code>Industry

Review of Limit Utilizations

Step No: 1
Step Name: Generate Limit Utilizations
Menu Path: Accounting>Financial Supply Chain Management>Credit Risk Analyzer>Tools>End-of-Day Processing>Generate Utilizations
Transaction Code: KLNACHT
Business Condition: At the end of every day, the limit utilizations should be generated for the transactions which were entered during the day.
Expected Results: Utilizations from the concluded transactions are calculated and updated against the various limit combinations
External Process Ref:
Client Specific Process Ref: This needs to be executed at the end of everyday using background processing
Step No: 2
Step Name: Confirm the completeness of the Generation of Limit Utilizations in Background Processing
Menu Path: System>Services>Jobs>Job Overview
Transaction Code: SM37
Business Condition:
Expected Results: The Status of the background Processing Job ‘RKLNACHT’ should be ‘Finished’.
External Process Ref:
Client Specific Process Ref:
Step No: 3
Step Name: Review the ‘End of Day Processing’ Log
Menu Path: Accounting>Financial Supply Chain Management>Credit Risk Analyzer>Information System>Reporting>End-of-Day Processing: Logs
Transaction Code: KLEH
Business Condition: Review the Log to check whether there have been any errors in the processing
Expected Results:
External Process Ref:
Client Specific Process Ref:
Step No: 4
Step Name: Are there any Errors?
Menu Path:
Transaction Code:
Business Condition:
Expected Results:
External Process Ref:
Client Specific Process Ref:
Step No: 5
Step Name: Correction of Errors
Menu Path:
Transaction Code:
Business Condition: Analyze the errors listed in the Log and take necessary steps to correct the same
Expected Results:
External Process Ref:
Client Specific Process Ref:
Step No: 6
Step Name: Do Post Processing
Menu Path: Accounting>Financial Supply Chain Management>Credit Risk Analyzer>Tools>End-of-Day Processing>Execute PostProcessing
Transaction Code: KLNACHT2
Business Condition: Once the errors have been rectified, run the post processing. The system automatically creates work list for the errors. Select these work list from the drop down and execute.
Expected Results: On completion, the limit utilizations are updated with all the transactions reflected.
External Process Ref:
Client Specific Process Ref:
Step No: 7
Step Name: Review the Limit Utilization Report
Menu Path: Accounting>Financial Supply Chain Management>Credit Risk Analyzer>Information System>Reporting>Utilizations>Overview:Selection Using All Characteristics
Transaction Code: TBLB
Business Condition: To view the Limit utilizations for various limit types at the end of the day
Expected Results: Limit Utilization Report is generated
External Process Ref:
Client Specific Process Ref:

Limit Transfers

Step No: 1
Step Name: Create Limit Transfer
Menu Path: Accounting>Financial Supply Chain Management>Credit Risk Analyzer>Master Data>Limits>Maintain
Transaction Code: TBL1
Business Condition: Unused limits of one limit constituent to another
Expected Results:
External Process Ref:
Client Specific Process Ref: Ex: If one Trader has exceeded his limit in one Product Type and he has unused limits in the other product type, then you can use this transaction to transfer the unused limit for a specific period.
Step No: 2
Step Name: Process the created Limit Transfer
Menu Path: Accounting>Financial Supply Chain Management>Credit Risk Analyzer>Master Data>Limits>Collective Processing of Limit Transfers
Transaction Code: TLL5
Business Condition: The limit transfers created needs to be processed
Expected Results: The limits are transferred and the Utilization is adjusted
External Process Ref:
Client Specific Process Ref:
Step No: 3
Step Name: Review the Limit Utilization Report
Menu Path: Accounting>Financial Supply Chain Management>Credit Risk Analyzer>Information System>Reporting>Utilizations>Overview:Selection Using All Characteristics
Transaction Code: TBLB
Business Condition: To view the Limit utilizations after the transfer of the Limit
Expected Results:
External Process Ref:
Client Specific Process Ref:

Upload Reference Interest Rates

Step No: 1
Step Name: Upload Reference Interest Rates
Menu Path: Accounting>Financial Supply Chain Management>Treasury and Risk Management>Transaction Manager>Securities>Environment>Market Data>Spreadsheet
Transaction Code: TBEX
Business Condition: You need to update the Reference Interest Rates for the day to create the Yield Curve
Expected Results: The relevant Reference Interest Rates are updated in the system.
External Process Ref: The Reference Interest Rates for the day is obtained in Excel Form and this needs to be uploaded into the system.
Client Specific Process Ref:

Evaluate Yield Curve

Step No: 1
Step Name: Evaluate Yield Curve
Menu Path: Accounting>Financial Supply Chain Management>Treasury and Risk Management>Basic Functions>Market Data Management>Manual Market Data Entry>Interest>Enter and Evaluate Yield Curve
Transaction Code: JBYC
Business Condition: You need to:

1. View the Yield Curve
2. View forward Interest Rates
3. View the Discounting Factor

Expected Results: The relevant data is displayed
External Process Ref: Reference Interest Rates relevant to the yield curve has been loaded in the system
Client Specific Process Ref:

Maintain Scenario Shifts in Yield Curve

Step No: 1
Step Name: Maintain Scenario Shifts in Yield Curve
Menu Path: Accounting>Financial Supply Chain Management>Treasury and Risk Management>Market Risk Analyzer>Simulation>Scenarios>Scenario Administration
Transaction Code: TV21
Business Condition: You need to create various scenarios with different changes to current reference interest rates in order to view  its impact in various reports.

For eg: to view the impact in the NPV

Expected Results: Scenario is created.

You can also view the Yield curve based on the changes you have made

External Process Ref:
Client Specific Process Ref: In the Scenario, you can adjust/change the interest rates either across the board for all the reference interest rates forming part of the yield curve or change rates for each of the reference interest rate forming part of the yield curve

Market Risk Analyzer – Some Reports

Step No: 1
Step Name: Do NPV Analysis
Menu Path: Accounting>Financial Supply Chain Management>Treasury and Risk Management>Market Risk Analyzer>Information System>Mark-to-Market>NPV Analysis
Transaction Code: JBRX
Business Condition: You need to view the Net Present Values (NPV)  of your Financial Instruments and do an analysis.
Expected Results: NPV values based on the selection criteria is displayed
External Process Ref:
Client Specific Process Ref: You can analyze and compare the NPV values with the different scenarios
Step No: 2
Step Name: Compute Macaulay Duration
Menu Path: Accounting>Financial Supply Chain Management>Treasury and Risk Management>Market Risk Analyzer>Information System>Sensitivity Analysis>Sensitivity Key Figures
Transaction Code: AISS
Business Condition: Macaulay Duration,Fisher-Weil Duration and Convexity needs to be analyzed
Expected Results: Macaulay Duration,Fisher-Weil Duration and Convexity  are calculated and shown in the Portfolio Hierarchy
External Process Ref:
Client Specific Process Ref:
Step No: 3
Step Name: Sensitivity Analysis
Menu Path: Accounting>Financial Supply Chain Management>Treasury and Risk Management>Market Risk Analyzer>Information System>Sensitivity Analysis>Sensitivity Analysis
Transaction Code: JBRJ
Business Condition: You need to perform a Portfolio evaluation with systematic changes to market parameters.

This permits you to determine how sensitive the portfolio values are to changes in these influences. For example the Exchange rate and the yield curve.

Expected Results: For each portfolio node, the NPV based on the scenario given is ‘Actual NPV’. In addition, each changed NPV is shown based on the market price changes (Simulated NPV). The absolute difference between the two is listed as Profit/Loss
External Process Ref:
Client Specific Process Ref:

VaR Analysis

Step No: 1
Step Name: Value At Risk Individual Analysis
Menu Path: Accounting>Financial Supply Chain Management>Treasury and Risk Management>Market Risk Analyzer>Information System>Value At Risk>VaR Individual Analysis
Transaction Code: RMV0
Business Condition: You need to perform a Value at Risk Analysis of the Portfolio.
Expected Results: Depending upon the analysis parameters the Value At Risk, Net Present Value, Delta, Gamma and Profit and Loss values can be obtained
External Process Ref:
Client Specific Process Ref:
Step No: 2
Step Name: Value At Risk Analysis at Portfolio and Risk Hierarchy Levels
Menu Path: Accounting>Financial Supply Chain Management>Treasury and Risk Management>Market Risk Analyzer>Tools>Drilldown Reporting>Report>Display
Transaction Code: JBW0
Business Condition: You need to perform a Value at Risk Analysis at Portfolio Hierarchy and Risk Hierarchy Levels
Expected Results: Depending upon the analysis parameters the Value At Risk, Net Present Value, Delta, Gamma and Profit and Loss values can be obtained at Portfolio Hierarchy and Risk Hierarchy levels
External Process Ref:
Client Specific Process Ref:

Create Risk Hierarchy

Step No: 1
Step Name: Creating the Risk Hierarchy for Value At Risk
Menu Path: Accounting>Financial Supply Chain Management>Treasury and Risk Management>Market Risk Analyzer>Master Data>Risk Hierarchy
Transaction Code: JBRR
Business Condition: In the risk hierarchy you define the break-down of market risk into its components. The risk factors provide the basis for the risk hierarchy
Expected Results: The risk hierarchy is generated
External Process Ref:
Client Specific Process Ref: For eg: In some institutions, the Hierarchy for Security Prices is only created.

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24 Responses to Risk Analyzers

  1. abhisheks16 says:

    How can i get SAP Treasury Bible?

  2. Jhon says:

    Excellent.Just see the posting.Let me gone thru it.Need some application demo in this area.More writings always welcome.Complex subject presented in simple manner

    Thanx

  3. Joseph Vipin says:

    Hi Sir
    I was doing the credit risk analyzer but when i run the utilization report it is only showing the unutilized limit even after purchasing instruments and doing settlement. Am i missing any steps here. Please advice

    Regards
    Joseph

  4. Jhon says:

    Any writing on commodity management will be helpful.

    • Hi Jhon

      I have left SAP for sometime now and I do not think I will be writing anymore on SAP subjects – atleast for the time being.

      • Cris says:

        Hello, Gopa,

        How are you?

        I would like to download this articles that you post.
        How do I do? I looked for a way to download, but I didn’t find it.
        Many thanks,

        Cristina.

  5. Zehran says:

    Excellant Article.. Save me lot of time doing ground work..Thank you

  6. Ignacio says:

    Excelent article! Thank you

  7. venkat says:

    Sir , you generously published your Knowledge area, tks lot …god bless you

  8. Rao says:

    Hello sir,

    I know that you are not actively working in SAP treasury. I am preparing myself in analyzers going thru various information. I am not expecting 100% correct answers since you are not actively working. But you may help me for my basic questions if possible only:

    1. when do we need to maintain the financial objects manually? I mean in what situation?
    2. The transaction I entered in Money market/securities etc will be pulled into risk database automatically or do I need to do any thing for this?

    Pls try to answer these.

    Thanks.
    Rao

    • Hi Rao

      1. You should not maintain financial objects manually. It defeats the very purpose of automation. You may create for example, Financial objects “manually” by a batch process in a new implementation where you want to create the financial objects for instruments already created in the system prior to activation of the analysis structure.

      2. As mentioned in the article, transactions entered in money market/securities will be automatically created as financial objects in Risk Analysers database, if the settings are done – refer: ‘Activate Financial Object Integration’ in the article. You will additionally also create derivation rules to derive characteristic values for the financial object while it is being created – refer…’Maintain General Derivation Strategy’ and ‘Derivation Strategy for Individual TRM Types’ in the article.

      I wish you all the best in your career.

      Thanks

      Gopa Kumar

      • Rao says:

        Thank you Gopa Kumar.

        Now I would like to activate the country risk and did this in SAP Banking area ( I think, this is the place I should activate this). But this is not showing in my transaction as active check box like CP risk active ( But I got the field enabled in my transaction).

        Sorry. Not able to attache the screen shot.

        Can you pls help me on this?

        Thanks.
        Rao

      • Rao says:

        Hi Gopa Kumar,

        Can you give bit idea about STC product(Single Transaction Check product) in Credit Risk?. What is this and when should we use it?

        And what is the difference between STC product and end of the day processing?

        Thank you.
        Rao

  9. Chandra says:

    HI Gopa Kumar,

    I am struggling to understand how the effective interest rate and Amortization (SAC) and calculated in SAP. Can you help me in understanding the SAC Amoritization calculation and in which case we use LAC and in which case SAC is used.

    Appreciate if you can share some vedio or some simple example with calculation.

    Also is there any place where I can get more details on this Amortization calculation.

    Regards,
    Chandra

  10. Sam says:

    Thanks a Lot Gopi

  11. Yiğit says:

    Dear Gopa Kumar,

    How can we check limit for FX transaction in the following cases?

    Start term and end term from nominal amount
    Days between start term and end term from NPV amount

    Regards
    Yiğit

  12. swaroop says:

    very good article .. thanks for sharing your knowledge ..
    regds,
    swaroop

  13. Ignacio Kristof says:

    I have been struggling to understand this from several books. This blog is awesome MANY MANY THANKS!!!

  14. Ramesh Ramaswamy says:

    Hi Gopa
    are you from fourth signal?

    regards
    Ramesh

  15. Hi Raju says:

    Kumar .. you are really great ..sharing such a good information .not an easy task..godbless you

  16. ahmed samir says:

    I really can’t say or describe how happy i’m knowing your blog, it’s really appreciated sharing this amount of knowledge,, God bless you sir.

  17. NAVEEN BAGGAM says:

    i need TRM training canu any one guide me on this.

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