Debt and Investment
Management

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Debt and Investment Management

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Debt and Investment Management Banner Vector

Manage your financial investments and borrowings, like fixed or variable interest rate deposits, loans, commercial papers, or investment certificates. Straight-through processing of financial transactions from front office, middle office, back office, and accounting.

The debt and investment management process helps you to secure short-term liquidity at the best interest rates and manage your medium- to long-term debt and investments optimally. These functions help you to automate labor-intensive processes, such as the confirmation of financial transactions and accounting postings, giving you more time to focus on value-added activities. You can manage operational and accounting requirements.

The product types represent the different kinds of financial instrument. They control the processing of the associated financial transactions and treasury positions.

Manage your financial investments and borrowings, like fixed or variable interest rate deposits, loans, commercial papers, or investment certificates. Straight-through processing of financial transactions from front office, middle office, back office, and accounting.

The debt and investment management process helps you to secure short-term liquidity at the best interest rates and manage your medium- to long-term debt and investments optimally. These functions help you to automate labor-intensive processes, such as the confirmation of financial transactions and accounting postings, giving you more time to focus on value-added activities. You can manage operational and accounting requirements.

The product types represent the different kinds of financial instrument. They control the processing of the associated financial transactions and treasury positions.

Overview of Financial Instruments

Money Market

A fixed-term deposit (product type 51A) is an interest rate instrument within the money market area with a fixed interest condition and final repayment. This includes the transaction types fixed-term deposit investment and fixed-term deposit borrowing.

With cash flow-based transactions you can manage transactions whose structural characteristics cannot be mapped by the standard product categories. You can enter and process transactions by entering their cash flow. A cash flow is a chronological sequence of flows: you enter the term alongside the cash flow that results from the transaction structure. This enables you to map your financial transactions flexibly.

Current account-style instruments are similar to interest rate instruments. The differences between the two kinds of instrument are as follows:

  • The current account-style instruments support negative nominals while the interest rate instruments do not.

  • The current account-style instruments support final repayment only whereas interest rate instruments support installment repayment and annuity repayment in addition to final repayment.

Current account-style instruments are similar to interest rate instruments. The differences between the two kinds of instrument are as follows:

  • The current account-style instruments support negative nominals while the interest rate instruments do not.

  • The current account-style instruments support final repayment only whereas interest rate instruments support installment repayment and annuity repayment in addition to final repayment.
    Available for intercompany trading process.

A deposit at notice is an investment or borrowing without defined due dates. The deposit at notice therefore not only includes the functions available in the fixed-term deposit area, but also a function for giving notice; in other words, in addition to entering the amounts and conditions, you enter the notice period and the interest payment date and frequency. Two product types are available for deposit at notice.

  • 52A Deposit at Notice
    This product type is based on product category 520 Deposit at Notice, which allows you to enter fixed interest rate conditions.

  • 52B Deposit at Notice(variable)
    This product type is based on product category 550 Interest Rate Instrument, which has the term category At Notice and allows to enter FixedVariableScaled (Incremental), and Scaled (Interval) interest conditions.

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 investor by the borrower at the end of the life of the contract.

An interest rate instrument is a money market transaction with more structural characteristics, such as Fixed, Variable, Scaled (Incremental), and Scaled (Interval) interest conditions.

  • Interest rate instruments with term category Fixed-Term have a repayment method (for example, final repayment, instalment repayment, or annuity repayment).
    The product type 51A (Fixed-Term Deposits) (fixed-interest condition, final repayment) and the flexible product type 55A (Interest Rate Instrument) are available.

  • Interest rate instruments with term category At Notice do not have term end dates. The repayment flow is generated only when the Give Notice function is executed.
    The product type 52B (Deposit at Notice (Variable)) is available.

Facilities 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 people (= borrowers), who are entitled to draw varying amounts at any time up to the total approved credit line. The utilization of this credit option for a facility is called a drawing. The lender calculates charges for the borrower (commitment interest). The charges that incur are calculated according to different methods.

Derivatives

Interest Rate Derivatives

Interest Rate Derivatives

A swap is an exchange of payment flows over a fixed period. You define these payment flows when you conclude a swap. However, their absolute amount may depend on future events (such as variable interest payments, where the amounts depend on the level of reference interest rates in the future).

Interest Rate Swap (62A)

Interest rate swaps are transactions that exchange payment flows on the basis of different interest rates in the same currency. You agree on a certain term, usually over a year. An interest rate swap enables you to hedge possible interest rate risks.

Interest Rate Swap (62A)
Cross-Currency Interest Rate Swap (62B)

Cross-Currency Interest Rate Swap (62B)

A currency swap is an exchange of payment flows comprising interest payments and capital payments in different currencies at an agreed exchange rate. You can use currency swaps to hedge possible currency risks. They also allow you cheaper access to the respective foreign currency markets.

Derivatives

Interest Rate Derivatives

Interest Rate Derivatives

A swap is an exchange of payment flows over a fixed period. You define these payment flows when you conclude a swap. However, their absolute amount may depend on future events (such as variable interest payments, where the amounts depend on the level of reference interest rates in the future).

Interest Rate Swap (62A)

Interest Rate Swap (62A)

Interest rate swaps are transactions that exchange payment flows on the basis of different interest rates in the same currency. You agree on a certain term, usually over a year. An interest rate swap enables you to hedge possible interest rate risks.

Cross-Currency Interest Rate Swap (62B)

Cross-Currency Interest Rate Swap (62B)

A currency swap is an exchange of payment flows comprising interest payments and capital payments in different currencies at an agreed exchange rate. You can use currency swaps to hedge possible currency risks. They also allow you cheaper access to the respective foreign currency markets.

Securities

Investment Certificates

The Money Market Funds (MMF) are deemed as an instrument with lower risk and higher liquidity, with a relatively lower return as well. The MMFs are traditionally traded at a stable 1.00 currency unit. Depending on the rules and regulations, the MMFs are required to declare their net asset value to be variable on a daily basis, or fixed for a period. For money market funds the following product types are available:

  • Money Market Fund (02A)
    For this product type profit distribution and dividend adjustment conditions are available. You can use this product type for investment funds, which pay their dividends in a regular rhythm and each dividend flow is real profit distribution.
    The dividend amounts can be entered as fix amounts or calculated for factor-based dividends.

  • MMF Accrued + Accum. Dividend (02B)
    For this product type accrued dividend, accumulated dividend, and dividend adjustment conditions are available. You can use this product type for investment funds, which communicate their accrued dividends, for example, on daily base but the payment of the dividends (accumulated dividend) is done monthly.
    The dividend amounts can be entered as fix amounts or calculated for factor-based dividends.
    For this product type, the accrued dividends are relevant for Accrual/Deferral of Expenses and Revenues function. You can use the Run Accrual/Deferral app to accrue the accrued dividend of money market funds.

  • MMF Accum. Dividend (02C)
    For this product type accrued dividend, accumulated dividend, and dividend adjustment conditions are available. You can use this product type for investment funds, which communicate their accrued dividends, for example, on daily base but the payment of the dividends (accumulated dividend) is done monthly.
    The dividend amounts can be entered as fix amounts or calculated for factor-based dividends.

Bonds (04A)

Bonds are interest bearing securities that guarantee the payment of interests and the repayment at the end of term. You can create the class data for bonds using product type 04A (Bonds). You can create different kinds of bond by defining class data and the conditions accordingly:

  • Fixed-interest bonds

  • Floating-rate notes

  • Zero-coupon bonds

You can manage the following processes for bonds:

These processes cover master data management, the trading and processing of securities transactions (including the placement and redemption of issued bonds), as well as paying and posting in Financial Accounting. In addition, various functions for managing security positions and for period-end closing are available. Treasury Reporting provides you with a broad range of apps for analyzing your debts and investments in bonds.

Securities

Investment Certificates

The Money Market Funds (MMF) are deemed as an instrument with lower risk and higher liquidity, with a relatively lower return as well. The MMFs are traditionally traded at a stable 1.00 currency unit. Depending on the rules and regulations, the MMFs are required to declare their net asset value to be variable on a daily basis, or fixed for a period. For money market funds the following product types are available:

  • Money Market Fund (02A)
    For this product type profit distribution and dividend adjustment conditions are available. You can use this product type for investment funds, which pay their dividends in a regular rhythm and each dividend flow is real profit distribution.
    The dividend amounts can be entered as fix amounts or calculated for factor-based dividends.

  • MMF Accrued + Accum. Dividend (02B)
    For this product type accrued dividend, accumulated dividend, and dividend adjustment conditions are available. You can use this product type for investment funds, which communicate their accrued dividends, for example, on daily base but the payment of the dividends (accumulated dividend) is done monthly.
    The dividend amounts can be entered as fix amounts or calculated for factor-based dividends.
    For this product type, the accrued dividends are relevant for Accrual/Deferral of Expenses and Revenues function. You can use the Run Accrual/Deferral app to accrue the accrued dividend of money market funds.

  • MMF Accum. Dividend (02C)
    For this product type accrued dividend, accumulated dividend, and dividend adjustment conditions are available. You can use this product type for investment funds, which communicate their accrued dividends, for example, on daily base but the payment of the dividends (accumulated dividend) is done monthly.
    The dividend amounts can be entered as fix amounts or calculated for factor-based dividends.

Bonds (04A)

Bonds are interest bearing securities that guarantee the payment of interests and the repayment at the end of term. You can create the class data for bonds using product type 04A (Bonds). You can create different kinds of bond by defining class data and the conditions accordingly:

  • Fixed-interest bonds

  • Floating-rate notes

  • Zero-coupon bonds

You can manage the following processes for bonds:

These processes cover master data management, the trading and processing of securities transactions (including the placement and redemption of issued bonds), as well as paying and posting in Financial Accounting. In addition, various functions for managing security positions and for period-end closing are available. Treasury Reporting provides you with a broad range of apps for analyzing your debts and investments in bonds.

Business Benefits

  • Review the financial status

  • Automate the management of investments and borrowings, including creation of the financial transaction, confirmation of contracts with counterparties, payments, interest rate adjustments, and accounting

  • Take better operational and strategic decisions using the comprehensive reporting and analysis tools

  • Improve internal operational compliance, such as by setting counterparty limits

  • Increase your focus on value-added activities instead of on manual procedures

Key process flows covered

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Create and process financial transactions

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Automated correspondence (external and/or internal confirmations)

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Process payments including condition-based incoming payments such as dividends

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Transfer values to the general ledger

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Adjust interest rates and update planned records for securities

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Perform month-end accounting processes

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Monitor and report your treasury positions and financial transactions

Key process flows covered

Create and process financial transactions

Automated correspondence (external and/or internal confirmations)

Process payments including condition-based incoming payments such as dividends

Transfer values to the general ledger

Adjust interest rates and update planned records for securities

Perform month-end accounting processes

Monitor and report your treasury positions and financial transactions

Prerequisites

To run the process, you must ensure the following:

  • The Treasury Risk Manager defines user data. See also: Define User Data

  • The Treasury Specialist – Back Office creates business partners in the issuer, depository bank, and counterparty roles.

  • The Treasury Specialist – Middle Office or the Treasury Risk Manager defines financial positions for financial status reports.

  • The Treasury Specialist – Middle Office defines the limits.

  • On the launchpad under <strong”>Correspondence, make the settings with which to run the automated correspondence in the following apps:

    • Assign Profile and BP Group – External Recipients

    • Assign Profile and BP Group – Internal Recipients

  • Master Data

  • Market Data

    • Decide on how you enter your market data, such as FX rates, interest rates, security prices, and factor values:

      • You can use the Import Market Data app to import market data from spreadsheets.

      • You can use the datafeed to incorporate current and historic market data into your financial transactions by means of the SAP Market Rates Management service. In this case, you must subscribe to the Market Data Service provided by the SAP Cloud Platform.

    • The Yield Curve Framework is preconfigured. You need to make additional settings only if you want to consider credit spreads in the net present value calculation:

  • Legacy data transfer

Prerequisites

To run the process, you must ensure the following:

  • The Treasury Risk Manager defines user data. See also: Define User Data

  • The Treasury Specialist – Back Office creates business partners in the issuer, depository bank, and counterparty roles.

  • The Treasury Specialist – Middle Office or the Treasury Risk Manager defines financial positions for financial status reports.

  • The Treasury Specialist – Middle Office defines the limits.

  • On the launchpad under <strong”>Correspondence, make the settings with which to run the automated correspondence in the following apps:

    • Assign Profile and BP Group – External Recipients

    • Assign Profile and BP Group – Internal Recipients

  • Master Data

  • Market Data

    • Decide on how you enter your market data, such as FX rates, interest rates, security prices, and factor values:

      • You can use the Import Market Data app to import market data from spreadsheets.

      • You can use the datafeed to incorporate current and historic market data into your financial transactions by means of the SAP Market Rates Management service. In this case, you must subscribe to the Market Data Service provided by the SAP Cloud Platform.

    • The Yield Curve Framework is preconfigured. You need to make additional settings only if you want to consider credit spreads in the net present value calculation:

  • Legacy data transfer

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