Power Your Profitability Insights with SAP

Performance Management for Financial Services

November 2017

CUSTOMER
Agenda

Challenges for Managing Profitability

Charting the Course for Profitability

SAP Performance Management for Financial Services

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Challenges for Managing Profitability
Why profitability management and cost
optimization, and why now

Investments in digitalization require cost savings elsewhere.

Therefore, demand for cost transparency is higher than ever.

Sophisticated cost models require allocations and analysis on

the most detailed level, joining information from multiple
data sources, and best done in real time.

But IT projects are supposed to return investments quickly.

Therefore, solutions must be productive in short a time
period.

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Challenges in performance and scale can
obstruct insight

Process performance
▪ Business performance is impacted by poor profitability reporting
and month-end closing runtimes.
Data volumes
▪ Limited profitability insight and root-cause understanding are due
to large or incomplete data sets.
Speed of analysis and reporting
▪ Lack of access to trusted profitability data in a timely manner leads
to suboptimal business decisions.
Yet…
Challenging times mean ever-pressing needs.
▪ Access to trusted, timely, accurate, and detailed profitability
insight could determine corporate success or failure.
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Charting the Course for Profitability
Put profitable growth within your control

▪ Revenue growth
▪ Cost reduction
▪ Prioritization of investments and resources

Build Reduce Improve

Achieve revenue and Achieve revenue and profit Improve customer

profit goals with goals with lower costs and satisfaction and retention
competitive products efficient resource allocation

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Use this information strategically

Successful companies rapidly deliver high-quality innovative products and services

through profitable channels. To achieve this they…

Build… Reduce… Improve…

desirable products and win product and service costs customer satisfaction and
profitable business retention

Achieve revenue and Achieve revenue and profit Grow market share,
profit goals with goals with lower costs loyalty and increase
competitive products service levels

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SAP Performance Management
for Financial Services
SAP Performance Management for
Financial Services

A strategic platform for many industries

complementing the financial performance functions
of SAP S/4HANA
Business scenarios for distributing costs and
revenues and for funds transfer pricing (FTP) on
individual instrument level or on aggregated level
Strong integration with our planning tool,
SAP Business Planning and Consolidation
(SAP BPC), enabling the use of allocation rules of
actuals for planning data
An SAP HANA database application that can run
on any data model
Tool flexibility that enables rapid implementation
Results that are available within seconds or
minutes rather than hours
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SAP Performance Management for Financial Services
Why, how, and what

Find answers to questions about revenue, costs, charges,

adjustments, profitability, resources, activities, rates,
cost drivers, business partners, and sales operations
▪ What’s the profitability of a product in different sales channels?
▪ Which tariffs are profitable for a particular service?
▪ Which customer groups are most profitable with which products
or services?
▪ What are channel costs in cities with less than 5 customers?
▪ What profitability will result if IT expense decreases by 7%?
▪ How many square meters does my sales department occupy?
▪ What was the monthly CPU time consumed by the sales
department?
▪ How many customers bought our new product last month?
▪ Are planned operating expenses higher or lower than actual
costs?
▪ What’s my return on equity?
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Advanced profitability analytics can aid insight and decisions

Cost and revenue allocation Customer profitability

for financial products (banking, (banking)
insurance)

Solvency II capital Customer, product, and route

calculations (insurance) profitability analysis

Complement to management
Funds transfer pricing accounting in areas of
(banking) SAP S/4HANA and SAP BPC

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SAP solutions for real-time customer and product profitability
SAP Performance Management for Financial Services interacting with SAP S/4HANA

Transactions Analysis Simulation Prediction

New dimensions

Aggregation and analysis of granular data for profitability reporting

Revenues

Costs
Advanced
costing on detailed level in SAP Primary costing on ERP dimensions in
Performance Management for SAP S/4HANA
Financial Services

SAP HANA

Time

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SAP Performance Management for Financial Services
Three main components

The first one is a business data aggregator, which integrates with your operational systems and
your data warehouse at high speed − without copying data.

Data model of source systems SQL-based data access via views

Interfaces for SAP applications

Real-time access
Business data
aggregator

Databases SAP applications Functions Other apps and data

SAP HANA, Oracle, IBM, MSQL SAP S/4HANA, ERP, SAP BW, Web services, microservices, MS Excel, CSV, and
Server, Teradata, Hadoop, and SAP BPC, finance risk data R language, and so on other files
so on platform, and so on
Approximately 3 Gbyte/minute read performance single thread. Approximately 2 Gbyte/minute write performance single thread. If data access performance of Gbyte/s is needed or direct access is not allowed, then (nonpermanent) replication
should be used.

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SAP Performance Management for Financial Services
Three main components

The second one is a calculation engine, which can process high volumes of data.
Allocation FTP Risk Planning Enrichment Valuation Calculation
management support
Solvency II

Assessment Integration Driver- and

Matched Life and
and global with SAP Derivation Present value model-based
maturity non-life risk
recharges BPC calculations

Counter- Predictive
Top-down Net present Cost
party default Lookup Capital growth analytics
distribution value
risk
planning Calculation library
engine
Activity- Currency
based
Replicating
Market risk
Sales ▪ Pure SQL script and unit
Effective
R Language
portfolio planning capital
costing conversion
▪ Completely executed in
the database layer
rather than the
application layer
▪ Unmatched speed of an
in-memory database

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SAP Performance Management for Financial Services
Three main components

The third one is a simulation application, which provides real-time data insights with
end-to-end traceability.

Finance & Risk

Scenarios Forecasting Calculation Drill-down Auditability
Engine
Simulation
application

Simulation
application

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SAP Performance Management for Financial Services
A perfect combination of all 3 components

Scenarios Forecasting Drill-down Auditability

Allocation FTP Risk Planning Enrichment Valuation Calculation

management support Simulation
Solvency II application
Assessment Integration Driver- and
Matched Life and non-
and global with SAP Derivation Present value model-based
maturity life risk
recharges BPC calculations

Counter- Predictive
Top-down Net present Cost
party default Lookup Capital growth analytics
distribution value planning Business
risk library
data
aggregator
Activity- Currency
Replicating Sales Effective
based Market risk and unit R Language
portfolio planning Calculation capital
costing conversion
engine

Databases SAP applications Functions Other apps and data

SAP HANA, Oracle, IBM, MSQL SAP S/4HANA, ERP, SAP BW, Web services, microservices, MS Excel, CSV, and
Server, Teradata, Hadoop, and so on SAP BPC, finance risk data platform, R language, and so on other files
and so on

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SAP Performance Management for Financial Services
Cost and revenue allocation: allocation methods

Support of all major allocation methods known for

revenues, costs, capital, reserves, or any other type of key
figure, both in the costing and account-based approach:
▪ Global recharges and expenses are used to charge services
across branches, which happens either at the start of a
performance model or after consolidation at the end.

▪ Assessments are common for transfers on cost-center level and

can be configured flexibly as cyclic iterations, accumulations,
step ladders, or normal transfers.

▪ Top-down allocations and distributions are used to bring

coarse granular key figures down to product, customer, and other
dimensions using one to several accurate drivers.

▪ Activity-based costing plays an important role, if resource and

activity drivers are used for allocation.

▪ Revenue splitting takes care of the distribution of all external

and internal revenue streams.

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SAP Performance Management for Financial Services
Cost and revenue allocation: allocation types

Direct: Distributes key figures from the sender to the

receiver according to common characteristics from both
sides and based on the distribution base on the receiver
side
Indirect: Distributes key figures from the sender to the
receiver using a distribution base on the receiver side
Generic: Uses direct allocation logic if the sender and
receiver have common characteristics; otherwise, uses
indirect allocation logic
Global expenses indirect: Follows the logic of indirect
allocation; also includes offset records
Global expenses direct: Follows the logic of a direct
allocation; also includes offset records

If the system does not find matching characteristic values (no receivers are found for a given sender record) when using direct allocation or
indirect allocation (if some characteristics are marked as “self”), sender records that do not match become “unassigned items.” The system
processes these with the management of unassigned Items function.
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SAP Performance Management for Financial Services
Cost and revenue allocation: additional features

Supports all required levels of granularity (individual

financial instruments, flights or railway connections, consumer
products, service tariffs, clients, households, and so on)

Is able to run through an unlimited number of allocation

rules and with highest complexity
Includes defining automated fallback rules for
unassignable items
Provides functions for ad hoc simulations and “what-if”
analyses
Can send allocation results as debit and credit postings
to the general ledger
Interfaces with SAP BPC for applying allocation rules to
planning data
Is easily extendable for custom-specific purposes

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SAP Performance Management for Financial Services
Concepts: business-focused solution

Create Create Analyze

Integrate Collect Enrich Define Execute
cost allocation and
data source data data reports allocation
driver rules report

Software can be configured by the

business department.

IT personnel can focus on installation

and data integration, but don’t need
to model calculations.

Modelling Execution Analysis

user user user
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SAP Performance Management for Financial Services
Customers

Business scope Key differentiators

Bank-wide ▪ Flexible data model Bank in Honduras Bank in Argentina

profitability analysis and calculation rules
on detailed level Bank in Switzerland Bank in South Africa
▪ No data duplication

Bank in UK Bank in Russia

Cost and revenue ▪ Highest data volumes Insurer
allocation on detailed Dairy Company in Mexico in Germany
▪ Any dimensions and
level cost drivers Life Insurer Bank in Insurer
in South Korea Switzerland in Switzerland

Allocations and Life Insurer in Taiwan

▪ Very fast processing
capital calculations

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SAP Performance Management for Financial Services
Benefits

Feature Benefits
Optimum efficiency in executing allocation ▪ Best-in-class processing times, turning overnight batches into a dialog application
logic directly in SQL script ▪ Processing of huge data volumes

Ability to use any data model ▪ Very fast and easy implementation and adjustment, with existing know-how
No permanent storage of input data in the ▪ Fewer redundancies, less reconciliation, less data volume, shorter E2E process chains,
application necessary, but access to original and better TCO
data source at runtime
Highly flexible configuration ▪ Business user empowerment
▪ Ability to create own business scenarios
Interfaces to SAP Bank Analyzer set of ▪ Reuse of existing data storages
applications, SAP BW, SAP BPC, and SAP ▪ Fast implementation of E2E business processes, including planning and general ledger
S/4HANA (or ERP) update
Sample content for cost and revenue ▪ Fast implementation and knowledge transfer
allocation and funds transfer pricing for banks ▪ Adoption of industry best practices

Permanent adoption of latest innovations ▪ Full leveraging of SAP HANA database capabilities
▪ Cloud enablement

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SAP Performance Management for
Financial Services: key points

The solution provides full transparency of

profitability down to individual item level.

The complete code pushdown of application logic

to the database layer provides unique
capabilities never seen before.

The innovative way of reading input data enables

an independent implementation of an application
on the SAP HANA platform at manageable time
and cost, providing experiences for larger
transformation projects.

The solution fits optimally into the SAP HANA

platform, allowing customers to drastically reduce
data redundancy and get rid of costly
reconciliation issues.
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Why SAP Performance Management for Financial Services?

Business focused

Right tool for fast processing of

high data volume

Deeply integrated with

SAP S/4HANA and SAP BPC

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Thank you
Appendix
SAP Performance Management for Financial Services
Powerful insights to sources of organizational profitability

Strategic and business focused solution

▪ Centralized environment for cost and profitability management
suitable for many types of organizations and industries
▪ Variety of allocation methods, with user flexibly in model design
▪ Distribute costs and revenues and calculate Funds Transfer Pricing
(FTP) on aggregated or individual instrument level

Fast processing of high data volumes

▪ An SAP HANA application that can run on any size data model,
without data replication
▪ In-memory database for super-fast processing of high data-
volumes; users to see profit results quickly

Deep integration with SAP S/4HANA and SAP BPC

▪ Strong integration with SAP Business Planning and Consolidation
(SAP BPC)
▪ Optimized for the SAP S/4HANA platform, allowing enhanced profit
insights for SAP customers

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SAP Performance Management for Financial Services
Solution Architecture

Product
Systems

Any DB Data
Warehouse
NetWeaver
Business Any DB
Suite
Read input data Store results
Any DB
FS-PER
Business
Suite
Data Any DB
Warehouse

Any DB More Potential

Source Data Others
Apps Warehouse
HANA DB
Any DB
Others

Any DB

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SAP Performance Management for Financial Services
Flexible calculation and configuration supporting all industries

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SAP Performance Management for Financial Products
Concepts: Business focused solution

Iterative configuration approach: Configure, test, adjust, test again … in real-time

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SAP Performance Management for Financial Products
Concepts: Simplification

Step-by-step roadmaps guide the users through each function to ease the configuration

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SAP Performance Management for Financial Products
Concepts: Simplification

Inline documentation can be added directly in each function as well as separate structuring
elements in the model

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SAP Performance Management for Financial Products
Concepts: Simplification

Built in drill-down for each field in each function to trace results back step-by-step through all
functions interim results until the source data is reached

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SAP Performance Management for Financial Products
Concepts: Business focused solution

Comprehensive, documented Sample Content to accelerate the initial configuration and establish
best practices in modeling

Documentation
(132 pages)

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SAP Performance Management for Financial Products
Concepts: Simplification

Built in reporting and interactive simulation for business experts and management

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© 2017 SAP SE or an SAP affiliate company. All rights reserved.

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