Published: March 01, 2012
ZF Friedrichshafen AG (‘ZF’) is a leading, worldwide automotive supplier for driveline and chassis technology with 117 production companies in 26 countries. The ZF Group employs a workforce of about 70,000 employees, around 30,000 of which are located outside Germany. In 2010, ZF generated revenues of €12.9 billion and is one of the top ten automotive suppliers worldwide.
ZF Friedrichshafen AG (‘ZF’) has a centralized treasury responsible for cash management, including in-house banking, interest rate and FX risk management.
Three years ago, we decided to extend the scope of treasury. As we were experiencing some difficulties with our interfaces to the SAP In-House Cash software, the electronic banking tool, the SAP ERP system and the market data system. Therefore we wanted to supplement our existing technical infrastructure with a new treasury solution with embedded electronic banking capabilities with automatic interfaces to all of our systems. This integration was previously conducted manually, which resulted in significant administration and the risk of error or missed data files.
We already had a legacy system in place, but following four changes of owner over a period of two years, we wanted better continuity, more consistent support and greater confidence in the future direction of the product. Furthermore, it had not been possible to automate interfaces with our other in-house systems, and we relied on a manual import and export process each day. Consequently, we recognized the need to evaluate and select a new solution to address these issues.
We identified a number of core functional requirements, and a list of features that would be ‘nice to have’, but we did not know whether we would be able to find a solution that would support all of these criteria. We reviewed the market, compared treasury systems with a scoring model, and ultimately made the decision to implement the treasury and risk management (TRM) solution from ecofinance, which is now part of Reval. We were attracted to the system’s integration capabilities and functional breadth, and we had a good impression of the company and its support capabilities. We conducted a rigorous testing process and confirmed that the system could support all of our needs. We quickly found that our initial confidence in the product had been justified, and the implementation was completed in only six months.
One major factor in the ongoing success of our TRM at ZF is its ability to support our treasury strategy as it evolves. We are already using the system in ways that we had not anticipated when we started. For example, we have implemented credit line management, including our subsidiaries, so we can now monitor our borrowings more closely and manage counterparty risk more effectively. Another key area for us is compliance. It is our strict policy that all deals that result in a payment need to be confirmed according to a ‘four eyes’ principle, which we have enabled in our treasury system. We have also automated and streamlined our internal communications. Subsidiaries are provided with convenient access to reporting and are able to send FX and money market deal requests to the central treasury. Previously, confirmations had to be printed in the headquarter and faxed to the subsidiaries, which was very labor-intensive. Now, these are emailed automatically to subsidiaries directly from the system.
Implementing a new TRM has resulted in an entirely new workflow at ZF, with greater transparency over data and processes, and convenient, robust and auditable communications both with subsidiaries and external counterparties. We can manage access rights very precisely, for example by business entity as well as by business function, which supports our operational risk management requirements. The system is very easy to use and specific data can be accessed quickly through the use of data filters or reports.[[[PAGE]]]
We found that while there is always a temptation to try to fit a new system into existing business processes, it is far better to adapt business processes to optimize the use of the system. We import bank statements from our banks into the TRM automatically, and this data is then combined into a daily cash position based on projected incoming and outgoing payments, and deal requests from subsidiaries. We can there make well-informed decisions about our total borrowing requirement or the amount and tenor of surplus cash investments. While we were producing a daily cash position previously, this was spreadsheet-based, took a great deal of time to produce and was inevitably prone to error.
We have streamlined our payments processing in accordance with our initial objectives. We integrate a German electronic banking platform in the ZF Group, EBICS-based, as well as support different payment formats required by individual banks. We have also implemented SEPA payments. We now receive all of our electronic banking transactions in the TRM, and the relevant data can then be passed to SAP. Similarly, subsidiaries send their external payments to suppliers (i.e. those that are not part of the in-house bank) that are again routed through the system.
In addition to what we have achieved so far, we have further plans to extend our usage of the treasury system. For example, compliance is a major issue at ZF, and we lacked visibility and control over the signatories on each bank account. Ecofinance has succeeded to develop a functionality to manage all of our bank accounts and signatories (eBAM – electronic bank account management) and we are going to implement this feature this year.
We have also provided our US subsidiaries with system access to document their treasury deals. Further roll-out in Asia is planned in 2012. As all reports are translated into English, we all have the same visibility over data throughout the ZF group. We also did not want to implement an additional treasury system in the ZF Group for Brazil, as we would lose the benefit of a single, integrated solution. Therefore, we are now starting to adapt the TRM for our group companies there.
The relationship with ecofinance, and subsequently Reval, has proved very successful and continues to enhance our business substantially. We have been fortunate in that the company is not simply a technology partner, but a strategic business partner that understands and responds proactively to our needs. The coming years will inevitably bring change, and therefore new functional requirements, some of which can be anticipated and some of which cannot. Working with the right solution partner is essential in ensuring that these evolving needs will be met and that our future business strategy will be supported.
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