businessblueprint em mfa trm money market

BusinessBlueprint_EM_MFA_TRM Money Market

ABC Corporate Fund Management

Table of Contents51Organization Structure

51.1Organizational Structure for Transaction Management

51.1.1Definition and Meaning

51.1.2Definitions at ABC

81.1.3Relationship / Dependencies on other organizational entities

92Master Data

92.1Transaction Management

92.1.1Business Requirements (as-is)/Expectations

92.1.2Process Explanation (to-be)

102.1.2.1Business Partner Roles

122.1.2.2Product Types

142.1.2.3G/L Accounts

142.1.2.4Special Organization Consideration

142.1.2.5Description of Improvement

142.1.2.6Description of Functional Deficiencies

152.1.2.7Approach to cover Functional Deficiencies

152.1.2.8Interface Considerations

163Business Processes


163.1.1Money Market Investments/Borrowings

163.1.2Process Explanation (To-Be)

173.1.3Description of Improvement

173.1.3.1Description of Functional Deficiencies

194Annexure

194.1Authorization

214.2Reports

224.3Data Migration


324.5Glossary

Executive Summary

Company Profile

SAP Implementation

Objectives, Scope and Approach

Objectives

Along with the process re-engineering and mapping the project team has to manage Organization Change Management. The purpose of Organization Change Management is to ensure that ABC achieves the expected results from its investment in SAP technology in a short span of time. As part of this service, XXX will work closely with ABC to introduce the change process, stress the importance of organizational alignment, and introduce the necessary tools and techniques needed to address issues in the Organization.

Scope

The scope for the current implementation of SAP Corporate Finance Management (CFM) software at ABC is as below:

1. A comprehensive planning process for better control over money market.2. To support management of financial transactions and positions from the trading stage through back office to the transfer to financial accounting.3. Flexible reporting to analyze financial transactions.In the light of the above, the following key areas will be covered as part of the current SAP implementation at ABC .

a. Transaction management in the area of money market.b. Analytics and information system for the above areaThe locations that would be covered as part of the current implementation are:

1. For Transaction Management: Head office, Mumbai.Approach

XXX follows an implementation methodology called as Accelerated SAP (ASAP), which will be used as the base approach for the implementation at SAP. ASAP is a solution from SAP to streamline customer implementations and deliver faster business results.

ASAP incorporates a Step-by-Step Approach and avoids non-value added tasks. It utilizes the Business Engine of SAP R/3 and is based on R/3s best business practices. ASAP provides a baseline for Business Process Requirements, Configuration /Testing, and End-user Procedures/Training.

In the current phase of the project, Business Process Requirements, as detailed in the following pages, have been discussed and agreed in the form of Blue Print Document.1 Organization Structure

The following organizational definitions have been done at ABC .1.1 Organizational Structure for Transaction Management

1.1.1 Definition and Meaning

For the purpose of the implementation of the SAP CFM module, the following considerations have been made while arriving at organizational structures at the treasury department at ABC .

1. Division of responsibilities and activities at ABC for the purpose of day-to-day operations at the treasury department (general divisions)

2. Organizational entities that have to be mapped in the SAP system.

In the context of the above (organizational entities to be mapped to the SAP system), the following are the key entities for transaction management.

Portfolio: An organizational unit that enables financial transactions and positions to be brought together and aggregated position analyses to be undertaken. Portfolios are also used to control and evaluate risk items in risk management.

Valuation Areas: Used for position management (example: Operative valuation area and parallel valuation area).1.1.2 Definitions at ABC

1. Based on responsibilities and activities

The following organizational definitions have been done at ABC for transaction management for the money market area.

The structures of activities are divided into the following:

1. Trading

2. Back Office

3. Accounting

This division of operations helps ensure

1. Clear segregation of roles and responsibility in the treasury function and

2. A system of tracking the transaction flows to the respective individual who carries out the same.

The key activities that fall under transaction management are given as below:

i. Front office / trading:

a. Entering into deals

b. Rollovers

c. Reversals

ii. Back office:

a. Checking/verifying the deal details

b. Settlement

c. Confirmation Letters

d. Processing reversals

iii. Accounting:

a. Postings into the books of accounts

b. Posting accrual and deferrals on transactions

c. Carrying out Balance Sheet valuation

Organizational entities that have to be mapped in the SAP system

Portfolios

The key considerations while evaluating a set of portfolios for ABC were:

1. Its amenability to reporting requirements

2. Its help in evaluating returns and carrying out further analysis

3. Its help in tracking each transaction

4. Its scalability for newer areas of operations

The proposed structure of portfolios at ABC is given below:

A portfolio will be defined for every area of treasury activity. The portfolios will be as below:

Money Market Investment Portfolio (Short Term Investment/Borrowing)Newer portfolios can be added if, for example, the company enters into newer areas of operationsValuation Area:

There will be one operative valuation area as per Indian Accounting Rules. This valuation area will be used for reporting all its treasury activities.1.1.3 Relationship / Dependencies on other organizational entities

Relationship with entities in Financial Accounting

Portfolio: A portfolio is created in a company code. The portfolios for ABC , as mentioned above will be linked to the company code ABC HOValuation Areas are assigned to company codes in financial accounting.2 Master Data

2.1 Transaction Management

2.1.1 Business Requirements (as-is)/Expectations

The following outlines the master data in the area of transaction management that will be maintained in the system at ABC .

For Inter Corporate Deposits/BorrowingsMaster list of CorporateShort-term deposit with Banks

Master list of BanksCommercial PaperMaster list of Corporate

Certificate of DepositMaster list of CorporateWorking Capital Demand LoanMaster list of BanksPacking Credit in Foreign CurrencyMaster list of BanksRupee Packing Credit

Master list of BanksNon-Convertible Debentures

Master list of Corporate2.1.2 Process Explanation (to-be)

The creation of master data for transaction management would involve creation of master data of the following:

1.Business PartnersA detailed sheet containing all the information requirements for master record creation for transaction management will be made available during the realization phase of the project.

Work StepsDescriptionPerformed BySAP Transaction / Function

1.Generic Activities for Business Partner creation

Create Business Partner rolesTreasury AccountantSAP Transaction

2.Master Data for Money market transactions

a. Business Partner Creation

Create business partners in the SAP role of CounterpartyTreasury AccountantSAP Transaction

Create Business Partner standing instructionsTreasury AccountantSAP Transaction

Maintain Credit rating for business partnerTreasury AccountantSAP Transaction

The proposed structure of master data at ABC is given below:2.1.2.1 Business Partner RolesBusiness Partners Role represents different capacities in which a Business Partner may act.e.g. Borrower, Agent, Sponsor

For ABC , the following business partner role is suggested:

a. Counterparty Role

Assigned to Business Partners with whom ABC has financial transactions. It could be either payment transactions or receipt transactions or both.e.g. with whom ABC Ltd. has financial transactionsCounterparty*

A Ltd.

B Ltd.

C Ltd.

D Ltd.

E Ltd.

F Ltd.

G Ltd.

Citibank N.A.

* The List is indicative.2.1.2.2 Product Categories

1. Fixed-Term DepositsThe trading of fixed-term deposits includes transactions with fixed interest rates and an end of term arranged at the start.2. Deposits at Notice

Investment and borrowing takes place without defined due dates.

3. Commercial Paper

Commercial Paper transactions are transactions on which no interest payments are made during the term of the transaction. Instead, two business partners agree on a repayment amount to be repaid to the borrower at the end of the life of the contract.4. Interest rate instrumentsAn interest rate instrument is a transaction with additional structural characteristics such as variable interest and installment repayment.5. Cash Flow transactionsTransactions, whose structural characteristics cannot be mapped by standard product categories, can be managed by cash flow transactions.6. FacilitiesFacilities are agreements between a lender and a borrower, which control the general conditions for a series of drawings against a credit line. The lender can give drawing authorization to several borrowers.2.1.2.3 Product Types

The different Products types are as under:

1. Inter Corporate Deposits (ICDs)An ICD is an unsecured loan extended by ABC Ltd. to another corporate at an interest rate depending upon period and credit rating of the borrower.2. Short-term Deposits with Banks

Short-term Deposits includes transactions with fixed interest rates and an end term arranged at the start.3. Inter Corporate BorrowingsAn Inter Corporate Borrowings is an unsecured loan extended by another corporate to ABC Ltd. 4. Rupee Packing Credit/Packing Credit in Foreign CurrencyA Rupee Packing Credit/Packing Credit in Foreign currency is a fund based limit forming a part of working capital limit. The Bank grants pre-shipment and post-shipment credit.5. Working Capital Demand Loan

A Working Capital Demand Loan is a fund based limit forming a part of working capital limit.6. Commercial PaperCommercial Paper transactions are transactions on which no interest payments are made during the term of the transaction. Instead, two business partners agree on a repayment amount to be repaid to the investor by the borrower at the end of the life of the contract.7. Certificate of Deposit

Certificate of Deposit includes transactions with Banks with fixed interest rates and for a short period of time.8. Non Convertible Debentures

Non Convertible Debentures are Debentures issued by the Company at fixed rate of interest for a fixed tenure. As the name suggests, these debentures do not get converted to Equity or Preference Shares during the tenure. The following product types were proposed:

Sr. No.Product TypeSAP Product Type/Category

1 Short-term Deposits with Banks51AFixed-term Deposits

2Commercial Paper53ACommercial Paper

3 Inter Corporate Deposits / Borrowing55A Interest rate instrument

4 Rupee Packing Credit55BInterest rate instrument

5 Working Capital Demand Loan55CInterest rate instrument

6Certificate of Deposit55DInterest rate instrument

7Non Convertible Debentures55EInterest rate instrument

8Treasury Bills55FInterest rate instrument

9Packing Credit in Foreign Currency55GInterest rate instrument

2.1.2.4 G/L AccountsThere will be an individual investment/borrowing accounts. This account will be balance sheet type account.

Apart from these G/L accounts for investments/borrowings, the following G/L accounts will be maintained:

1. Interest received on Investments viz. Inter Corporate Deposits, Short-term Deposit with banks2. Interest paid on Borrowings viz. Inter Corporate Borrowings, Interest on Packing Credit loans, Working Capital Demand Loans.3. Accrual of Interest on Investments viz. Inter Corporate Deposits, Short-term Deposit with banks4. Accrual of Interest on Borrowings viz. Inter Corporate Borrowings, Interest on Packing Credit loans, Working Capital Demand Loans.5. TDS on Interest received on Inter Corporate Deposits, Short-term Deposit with banks.6. TDS on Interest paid on Inter Corporate Borrowings.2.1.2.5 Special Organization Consideration

Not applicable in this section

2.1.2.6 Description of Improvement

1. Standing instructions help map general agreements between the business partner and ABC . This helps in regulating the areas (money market) in which ABC deals with the partner, the partners bank details (which account any payments to the business partner needs to be made), the types of correspondence regularly used with the partner.

2. Master agreements will help in avoiding repetitive tasks for monitoring the execution of individual transactions. This will help in tracking limits per investment/borrowing instrument per business partner.

2.1.2.7 Description of Functional Deficiencies


2.1.2.8 Approach to cover Functional Deficiencies


2.1.2.9 Interface Considerations

Not applicable in this section3 Business Processes


3.1.1 Money Market Investments/BorrowingsThis includes investments/borrowings in instruments like: 1 Inter Corporate Deposits/Borrowings2 Rupee Packing Credit/Packing Credit in Foreign Currency3 Working Capital Demand Loan4 Commercial Paper5 Short term Deposit with banks

6 Certificate of Deposit

7 Non Convertible Debentures

8 Treasury Bills3.1.2 Process Explanation (To-Be)

The organizational structure for ABC in the area of Money Market would be the same as mentioned in section 1.1.2. The broad split of the functions with the area of coverage is given as below.

1. Trading

2. Back Office

3. Accounting

The activities for each area with reference to Money Market transactions are given as below:

1. Trading: The trading area contains functions for entering Money Market transactions. It also enables to call up information on transactions or make changes at a later date. The following activities would involve:

a. Entering into deals

b. Rollover of deals

c. Reversals, if any

Back office: Once the financial transactions are entered in the trading area, it is settled in back office. The Back office area contains functions for checking and changing the transactions. Transaction post processing primarily involves adding any missing transaction data that is needed to process the transaction further as well as preparing for posting and payment. Correspondence is in the form of internal or external confirmations. The following activities would involve:1. Checking/verifying the deal details once they have been entered into by the front office2. Settling the deals entered into the system3. Preparing confirmation letters to the business partners4. In case transactions have been reversed by the front office, entering reversal details

Accounting: The financial transactions are processed in the Accounting area. The accounting area functions for transferring data to Financial Accounting, postings of accruals/deferrals and valuation.The detailed explanation for the to-be processes can be found in Annexure 4.5.3.1.3 Description of Improvement

1. As exists, all transactions are carried out of the system. Only accounting entries are passed after execution of the transactions. The proposed system will help in creating deals as is executed, on a real time basis.

2. As it currently exists, information relating to daily surpluses is obtained as a separate, offline activity. It has to be manually aggregated collecting data from different, offline sources. The proposed system would ensure availability of the information as required.

3. Any investment analysis (yields, returns, cash flows) is currently carried out manually. With the implementation of the transaction manager component, transaction data will be available readily for analysis.4. There is an automatic link to accounting GL balances are updated automatically from the transactions

5. Accruals and valuations were done manually, but now it will be done on the system.3.1.3.1 Description of Functional Deficiencies

Transaction supplements: ABC would require certain transaction supplements that are specific to their requirements. For example, when a deal is to be confirmed, it would need to be approved by two approving authorities. While the transaction generates a dealing slip, this needs to be modified to incorporate the format and contents that ABC requires as part of the normal approval hierarchy. The output requirements will change based on the transactions entered (example, normal investment notes for investment transactions, borrowing notes for borrowing).

4 Annexure

4.1 Authorization

The topic of authorizations in CFM can be covered under two broad categories.

1. Role based authorizations: These refer to the role an employee plays in an organization and how this role is mapped in the SAP system. Role based authorizations help allocate SAP users (employees) to areas of activity (example: transaction processing, report extraction).

2. Trader authorizations: More specific to CFM, these authorizations determine the areas of activity (Money Market, Securities) that a trader (as defined in the system) has access to. They are detailed as below:a. Role based authorizations: SAP delivers certain standard roles for CFM. They contain certain predefined activities that the user assigned to this role can play. An overview of the roles as delivered in the standard CFM system is given as below. These activities for each role will be assigned to user(s), depending on their roles during the realization phase.

Role in Treasury DepartmentSample authorizations

AdministratorAll technical authorizations for maintaining the CFM system.

TraderAuthorizations to carry out front office activity (entry/exit from deals etc)

Limit ManagerControl of limits of exposure to business partners. This role is essentially a controllers role.

Risk ControllerThe risk controller analyzes and calculates the company's risks and opportunities on the basis of market data, in order to develop risk-oriented strategies and assess the consequences of certain decisions.

Back Office ProcessorAccess to back office activity

Fund ManagerThe fund manager plans and manages the company's liquidity.

Staff AccountantAccess to accounting functions in CFM

Trade ControllerThe trade controller evaluates performance, proposes strategies and monitors the effects of these strategies.

Treasury ManagerThe treasury manager checks that all the

strategies defined for the money market, market risk, limit management and cash management areas have been observed.

b. Trader authorizations: This activity will be carried out during the realization phase of the project. 4.2 Reports

All standard SAP reports will be provided under this implementation. System generated reports in CFM (Money Market) will be provided as part of this implementation.4.3 Data Migration

Sl. No.Description of Data to be Uploaded/ EnteredManual/ SAP program (if Program- Standard/ BDC/ LSMW)Data SourcePre-requisite data / processRemark

1Business Partner Master dataLSMWCurrent records in ABC Sequential, flat file needs to be supplied as per a specified format. If the number of Business partners are not high, manual entry of master records can be an option

2Open transactions inter corporate deposits / borrowings-do--do--do--do-

3Open transactions Export Packing Credit-do--do--do--do-

4Open transactions Working Capital Demand Loan-do--do--do--do-

Detailed to-be process list


SlSlProcessStepActivityExplanation/CommentsSystemPerformed by

1Money Market Operations

1Identify partners with whom ABC deals for ICDs/Export Packing Credits/Working Capital Demand Loan

1Identify business partners based on policy

ABC has a procedure for identifying business partners (Banks, other financial institutions, corporate) that it deals with. This is carried out as a business activity outside the system.ManualTreasury manager - head office

2Create Business Partner in the system (New business partners can be added or existing business partners can be blocked in the system)

Once business partner has been decided, a business partner master record has to be created in the system. SystemHead office - treasury accountant

3Set limits for business partner (based on policy)

Limits for transactions for each business partner to be set based on policy.

SystemHead office - treasury accountant

2Entry into deals with business partner

aInvestment deals

1Receive information about fund availability for investment

Run daily cash position reportSystemHead office - treasury accountant

2Receive information from advisers about avenues for investment

This information is available as a fax, mail, over phoneManualHead office - treasury accountant

3Decide on the investment instrument(s) for the day

Information about existing investments will be available through system reports. However, this activity will be done manuallyManualHead office - treasury manager

4Enter deal in the system

The deal is saved in the system - it is not confirmedSystemHead office - treasury accountant

5Prepare investment note

Generate an internal correspondence for the deal (dealing slip). This can be used as an investment note. An additional note can be attached along with this (ABC format).SystemHead office - treasury accountant

6Send investment note for approval to the relevant authority

Signatures are required on the correspondence slipManual

7Verification of deal entry and settlement

Back office activity - will be carried out once signatures are received on the dealing slip/correspondence/investment noteSystemHead office - treasury accountant

8Confirmation and correspondence for deals for business partners

Back office activity - will be done once deal is settledSystemHead office - treasury accountant

9Posting of cash flows for deals entered

Accounting activity - done once correspondence is generatedSystemHead office - treasury accountant

10Funds transfer to business partner

ManualManual

11Receive instrument from Business partner

ManualManual

12Update investment position

Gets automatically updated and will be available in reportsSystemNo action

bPlanned / Unplanned Borrowings

1Receive information on anticipated / unanticipated payments

Notice of unanticipated payments come on an ad-hoc basis and hence cannot be planned forManual

In case of planned borrowings, carry out analysis on whether to exit from an already existing FD or borrow the funds. This analysis is based on the penal interest rate for the FD vs. the rate of borrowings. System will provide the details of the fixed deposit. The analysis needs to be done outside the systemManual / SystemHead office - treasury accountant

2Receive information for borrowing rates of banks for WDCL-EPC & brokers for Inter Corporate Borrowings (ICBs)

Manual activity - treasury personnel have to call up the respective banks to get their quote / brokers to arrange for ICBsManualHead office - treasury accountant

3Enter deal into the system

Deal will only be entered - it will not be confirmed till signatures have been received from the approving authoritySystemHead office - treasury accountant

4Prepare borrowing note for the funds required

Internal correspondence (dealing slip) can be generated for the deal. This can be sent for signatures from the relevant authority. This can be supplemented with the borrowing note. SystemHead office - treasury accountant

5Get borrowing note approved by the relevant approving authority

Manual activity - the personnel have to go to get signatures from relevant approving authority on the dealing slip/borrowing noteManual

6Verify and confirm the deal

Back office activity - will be done once approval is received in the form of signatures on the dealing slip / borrowing noteSystemHead office - treasury accountant

7Generate confirmation correspondence for the deal to business partner

Back office activity - will be done once deal is settledSystemHead office - treasury accountant

8Posting for cash flows

Accounting activity - done once correspondence is generatedSystemHead office - treasury accountant

3Periodic activities for deal maintenance and monitoring

1Post accruals and deferrals of income from deals

Run accrual/deferrals posting at the end of the monthSystemHead office - treasury accountant

2Verify incoming receipt or income from deal (interest flows)

Create a bank statement when the information relating to actual physical inflow is received from the bank SystemHead office - treasury accountant

3Post actual interest receipts

Interest receipts are posted during the posting of flows in the systemSystemHead office - treasury accountant

4Periodic activities for legal reporting

Valuate the investments for balance sheet

Run periodic program for valuation of investments for balance sheet buildingSystemHead office - treasury accountant

5Reporting and MIS activities

1Transaction Journals (per product type ICD, EPC, WCDL, CP)

System generated reports in CFMSystemHead office - treasury accountant

2Cash flow journals (per product type ICD, EPC, WCDL, CP)


3Prepare Money Market Position List and position trend


4Money market revenue list (operative revenues)


5Money market position list (accruals)


6Utilization of limits per business partnerVolume utilization report can be run in the SAP system for each master agreement, which will display the total utilization of limits for the business partner.SystemHead office treasury accountant

7Business partner wise analysis of investments (Maturity, instrument)SystemHead office - treasury accountant

2Periodic activities

1Valuation of investments for Balance sheet

Covered in earlier points

2Half yearly reporting to board (calendar year)

Can use standard CFM reports

3Communication with banks/business partners w.r.t discrepancies

Manual activity

4.5 Glossary1. Business Partner: A business partner is a person, group or an organization in which you have a business interest. Typical business partners include banks or central treasury departments.

2. Business Partner Roles: A marker used to assign functions to your business partner depending on the business relationship (for example, counterparty, issuer, borrower), and to control field selection for the partner data. A business partner may have more than one role. 3. Correspondence: A communication that can be printed automatically or manually. Correspondence includes:

i. External correspondence (confirmation letter)ii. Internal correspondence (dealing slip) related to financial transactions.

4. House Bank: A business partner that represents a bank through which you can process your own internal transactions.

5. Key date valuation: Key date valuation is the valuation of transactions or positions for accounting purposes at the market value on a specific key date. Depending on which valuation principle is used, key date valuation includes creating or reversing provisions, posting write-ups and write-downs as well as posting unrealized gains and losses.

6. Master Agreement: This refers to the arrangements and conditions that are applied to individual transactions. Some of the criteria of a master agreement are:

i. Permitted company codes ii. Termiii. Permitted business partners iv. Permitted transaction types and the minimum and maximum transaction termsv. Permitted currencies, including minimum amounts, and the total transaction volume in the respective currency.

7. Standing instructions: Standing instructions are general agreements made with a business partner for processing transactions of the same type. They include transaction authorizations, payment details for incoming and outgoing payments and correspondence with a business partner. The standing instructions are proposed as default values when you enter transactions in the system.

8. Valuation Area: In the financial subledger you can set up different valuation areas in order to value your financial transactions according to different accounting regulations. Example: Valuation area 1 as per Indian rules, Valuation area 2 as per US GAAP.

ABC Limited

ABC MONEY MARKET IMPLEMENTATION

BUSINESS BLUEPRINT

SAP Corporate Finance Management

Version- 1.0

March 2006

PAGE 10XXX ABC Confidential

businessblueprint em mfa trm money market

Documents

transaction management

business process requirements

current sap implementation

business requirements

change process

organizational structure

business processes

sap technology