| 2011 SAICAD All rights reserved. |
 | |  | |  | |  | |  | |  |
SAICAD
Hedge Management
Hedging refers to the mitigation of particular risk positions by means of a counteracting hedging transaction.
In many companies, hedging is a central risk management activity, and due to the rapid development of FAS 133, IAS 39,
IFRS 9 ; hedge accounting has become a key focus area for Treasury departments.
SAICAD uses SAP Treasury and Risk Management application and systems such as REVAL , SunGard , to represent
derivative financial instruments and hedging relationships in accordance with FAS 133, IAS 39 and IFRS 9.
Our Hedge Management Methodology is as under :
Our consultants will assist in :
For Example : Our client wanted to use Hypothetical derivative for their Balance Sheet Hedging programs. We studied the
requirements of the hedging program and designed FX options and Swaps based -- hypothetical derivatives. These
Hypothetical derivatives could be used in SAP Treasury and also replicated in REVAL.
Another client wanted to create back-to-back deriviative (FX Option) trades in a legacy system and replicate them
automatically in SAP Treasury. We developed interfaces between the legacy system FxALL and SAP, whereby both legs of the
Option trade were created and automatically assigned to a hedge relationship with SAP Treasury.
Exposure Management : Our consultants have the capability to derive and identify exposures from different origin and legacy
systems. For example some commodity exposures may lie in a legacy system and some foreign exchange risk may exist in
a spreadsheet. We have the capability to extract such exposures and bring them into enterprise systems such as SAP or
REVAL . We have developed simple spreadsheet - based upload templates for this purpose.
We have also developed techniques to help our clients plan/forecast their currency/interest rate/commodity exposures and
upload them to enterprise systems such as SAP.
Another important aspect of the exposure identification process is the integration with the client's Revaluation and Translation
programs. We have developed special techniques in SAP , which allow the identification and creation of raw exposures from
the currency translation and Revaluation program.
Hedging refers to the mitigation of particular risk positions by means of a counteracting hedging transaction.
In many companies, hedging is a central risk management activity, and due to the rapid development of FAS 133, IAS 39,
IFRS 9 ; hedge accounting has become a key focus area for Treasury departments.
SAICAD uses SAP Treasury and Risk Management application and systems such as REVAL , SunGard , to represent
derivative financial instruments and hedging relationships in accordance with FAS 133, IAS 39 and IFRS 9.
Our Hedge Management Methodology is as under :
- We work with the clients to understand and if required modify their :
- Fx Policy
- Interest Rate Policy
- Hedge Strategies
- We create hedge plans ( as per the risk category such as : Interest rate risk, currency risk, and hedge period)
- We help identify the Fx and Interest rate risk exposures (exposure management)
- Create a hedged item for an exposure
- Link the hedged item to a derivative to create a hedging relationship
- Perform periodic valuations for hedge accounting purposes as per the concerned GAAP
- Perform Hedge effectiveness Testing
- Perform Hedge accounting (re-classification if required)
- Hedge Documentation to meet the Audit and Accounting standard requirements (FAS 133, IFRS 7)
- Provide SAS-70 Hedge management reports
Our consultants will assist in :
- Hedge Strategy definition
- Balance Sheet hedge program
- Cash Flow hedge program
- Net Investment hedge program
- Exposure Identification
- Translation exposures
- Economic Exposures
- Hedge Effectiveness Testing
- Dollar-Offset
- Volatility reduction
- Regression
- Hedge Accounting entries
- Parallel accounting (if required)
- Reclassification, dissolution, de-designation
- Hedge Documentation (compliant to Accounting standards requirements)
- Hedge Reporting (compliant to SAS 70 audit requirements)
For Example : Our client wanted to use Hypothetical derivative for their Balance Sheet Hedging programs. We studied the
requirements of the hedging program and designed FX options and Swaps based -- hypothetical derivatives. These
Hypothetical derivatives could be used in SAP Treasury and also replicated in REVAL.
Another client wanted to create back-to-back deriviative (FX Option) trades in a legacy system and replicate them
automatically in SAP Treasury. We developed interfaces between the legacy system FxALL and SAP, whereby both legs of the
Option trade were created and automatically assigned to a hedge relationship with SAP Treasury.
Exposure Management : Our consultants have the capability to derive and identify exposures from different origin and legacy
systems. For example some commodity exposures may lie in a legacy system and some foreign exchange risk may exist in
a spreadsheet. We have the capability to extract such exposures and bring them into enterprise systems such as SAP or
REVAL . We have developed simple spreadsheet - based upload templates for this purpose.
We have also developed techniques to help our clients plan/forecast their currency/interest rate/commodity exposures and
upload them to enterprise systems such as SAP.
Another important aspect of the exposure identification process is the integration with the client's Revaluation and Translation
programs. We have developed special techniques in SAP , which allow the identification and creation of raw exposures from
the currency translation and Revaluation program.