How SAP Helped Clean Up a Messy, Fragmented Treasury Landscape

By January 17, 2024No Comments

Using SAP’s FX risk solutions across its hedging portfolios is paying off for one company where SAP is the sole ERP.

Adopting SAP’s risk management solution to manage FX risk has allowed the treasury team at one NeuGroup member company to reduce manual tasks, use real-time data to increase agility and enhance data analytics, optimize its hedging programs and save money by retiring non-integrated, third-party treasury applications.

  • At a recent meeting of NeuGroup for Foreign Exchange, the company’s senior financial risk manager said implementing SAP Risk Management for SAP S/4HANA has helped transform what was a messy, “very fragmented treasury landscape” into a far more efficient, unified system that is less prone to human error.

A single source of truth. It’s essential to point out one key advantage this treasury team had compared to some NeuGroup members considering similar projects: The entire corporation uses a single instance SAP ERP. Having a single source of truth and data has made implementation of SAP’s risk module and applications more straightforward than for companies with multiple ERPs.

  • “The reason this works for us is because we do run SAP company-wide,” the member said. “So everything is in SAP. If you had a more fragmented landscape, I think it would be more complex.” She added, “The reason this was such a success is because all of the data was there, all you have to do is think about what you want to do with it.”
  • That’s not to say the member’s SAP Risk implementation journey has been easy or fast. It formally began in 2019 with the preliminary goal to replace non-integrated treasury applications and manual processes with full automation in SAP. Treasury had started analyzing and planning two years earlier, in 2017, a process that took longer than expected.
  • Then, the Covid pandemic made it “very challenging to implement the first phase of the SAP plan,” the member said. In-person meetings with consultants or workshops became impossible. Nonetheless, treasury implemented trade deal management, connecting its FXall trading platform to SAP S/4HANA. It also automated payments and accounting associated with FX settlement and set up a data integration hub.

Game-changing changes. In the fall of 2021, treasury began using a cloud-based SAP balance sheet exposure app and stopped using FiREapps, a risk management solution offered by Kyriba. This took about six months and included running the two solutions in parallel for three months.

  • The member called this switch a game changer “because it allowed us to view our exposures in SAP versus looking at them in FiREapps, sending somebody that report, opening up a trade sheet, trying to come up with whatever the trades were.” She added, “So this really allows us a lot of flexibility and to react very, very quickly.”
  • Treasury also has stopped using a third-party TMS, Reval, saving hundreds of thousands of dollars annually. FX costs have dropped significantly due to straight-through processing and real-time data in SAP.
  • “We really were able to pretty much automate everything within SAP,” the member said. “We created many different dashboards as well. At any point in time you can look at all your different positions, where all your cash is, offsetting exposures as well.” Treasury also created an FX rates dashboard shared with the whole company.

A finance innovation team. To create dashboards, the member has benefitted from finance innovation teams within the corporation that are skilled and have access to data within SAP S/4HANA. “We worked with a team that had access to all the back-end tables and they were able to create some incredible things for us,” she said. “I think you do need a pretty solid analytics team; it’s not something that you can build yourself. That’s in part because of levels of access.”

  • In the past, she said, her team would spend six hours pulling data, typing it into a spreadsheet, using pivot tables to summarize large datasets. “Now, we literally click and all the data’s there consolidated, super customized, all the visualizations are there.” She added, “Everything is real-time. We can look at balance sheet exposures, hedges outstanding, all of that; and we can look at what we have on the books for cash flow.”
  • Another major advantage of adopting SAP’s treasury modules and applications is the additional tech support treasury receives thanks to the companywide commitment to SAP. “We are now part of the company’s SAP machine which is constantly looking to improve and upgrade,” the member said. “And we are now partners in a process with them. They show us a new upgrade and say, ‘we can push for these additional things. What is it that you want to do?’”

Road ahead. In 2023, treasury implemented solutions from the SAP Analytics Cloud, including its cash flow hedging program. It’s still in the process of automating hedge accounting. The member said the integration treasury has with the balance sheet exposure app “is not perfect” and will be improved in the fourth and last phase of implementation this year.

  • Treasury also plans to implement hedge effectiveness and reporting capabilities. The member said the current hedge effectiveness process at the company is not bad, taking her about six hours four times a year. “But I don’t want to do it,” she said with a laugh. “So I’m going to automate it.”
  • Treasury also now benefits from being under a SAP internal control reporting umbrella, simplifying a process involving outside vendors providing data to auditors. That has become vastly easier since “everything is in SAP now,” the member said, adding “that’s been wonderful, to be honest.”
Justin Jones

Author Justin Jones

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