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Technology as an Enabler of Treasury Strategy
by Christine Schöllhorn, Head of Cash Management, ZF Friedrichshafen AG
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.
Introducing a business solution
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.
Supporting our treasury strategy
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.
Driving best practices
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.