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The expansion of Volkswagen’s global presence over the lastfew decades has led to increased financial and liquidityrelated risks. Consequently, Volkswagen was seeking a

comprehensive solution to manage financial transactions, globalcash flows and financial risks more accurately. In 2005,Volkswagen AG decided to replace its legacy in-house cash,payment and treasury management solutions with an integratedplatform based on SAP, referred to as the ‘Global TreasuryPlatform’. In summary, the Global Treasury Platform provided thefollowing capabilities and objectives:

SAP In-House Cash and Cash Management� Build in-house banking and payment facilities;� Reduce the cost of intercompany payments, transfers andallocations;

� Improve cash and liquidity management.

SAP Transaction Management including Market and Credit RiskAnalyser� Manage financial transactions and execute hedgingtransactions;

� Reduce financial risk levels and make risk exposure moretransparent;

� Analyse market and credit risk;� Improve corporate governance of the treasury function.

Until the end of 2008, the Volkwagen business unit Audimaintained a separate treasury function from Group Treasury.However, Audi has now finalised the replacement of its financialmanagement systems, and transferred its treasury, cash and riskmanagement operations to the Global Treasury Platform. This wasan important milestone in the overall migration project, enhancingoperational efficiency and visibility of information withoutaffecting the in-house services and expertise which Audi’s treasuryfunction provides.

Global Treasury PlatformFrom a group perspective, the establishment of a Global TreasuryPlatform has various objectives to which are attached measurableperformance indicators:

� Optimisation and improvement of all financial processes by re-engineering and centralising all treasury activities and reducingcapital cost;

� Increase in efficiency, transparency and data quality across theentire financial supply chain through standardisation andautomation;

� Harmonisation of processes and activities by replacing existinglegacy systems with an integrated system for cash and treasurymanagement;

� Reduction of capital cost and realisation of cost savings forexternal payments and intercompany clearing transactions; and

� Reduction in complexity and generation cost savings in the areasof purchasing, licensing, maintenance and development.

Centralising financial processsesDuring turbulent economic times in particular, and in an economicenvironment affected by the ongoing financial crisis, an effectivereporting and liquidity management is vital more than ever. The Global Treasury Platform at the Volkswagen Group provides

the foundation for an integrated payment factory and in-house

Centralising Treasuryand Cash ManagementProcesses in theVolkswagen Group by Michael Zucknick, Managing Consultant, IBM Global Business Services

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Fig 1: Global Treasury Platform

CM FI

Global Treasury Platform

Money Market and Foreign Exchange

TM CRA MRA

In-House Bank

IHC

Cash Management

Entity 1

FI

Entity 2

FI

Entity 3

FI

Electronic bankstatement processing

Electronic bankstatement processing

Electronic bankstatement processing

Financial Markets

Banks

Figure 1: Global Treasury Platform

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banking solution, as well as for anefficient treasury management function.As part of the corporate’s global strategy,the Volkswagen Group shares commonservices and resources in the finance andtreasury area using a single platform. Theshared service centre (SSC) approachmeets the demand for a more effectivetransaction handling and deliversoperational excellence. Group Treasury acts as a specialist

business unit for payments, financialtransactions and securities, limitmanagement etc. and provides theseservices to other Group companies whichare connected to the platform. Bystandardising transaction execution andimproving support services, costs can bereduced at the same time as enhancingautomation and control. However, within the Volkswagen Group,

Audi’s treasury function is also a‘competence centre’ providing expertiseto its subsidiaries and assisting them in allfinance and treasury related questions andprocedures. In order to continueleveraging these skills and in-houserelationships, the existing reporting andcommunication channels remainunchanged, so that cascaded knowledgetransfer and advisory services operateconcurrently with centralised technology.For example, Audi’s payments are nowrouted via the central payments factory(both credit transfers and direct debits)through corporate bank accounts ‘onbehalf of Audi’.

Benefits of centralisationIn addition to the operational benefits ofcentralising payments, it has also beenpossible to reduce both the number ofexternal bank accounts and the bankingcommunication channels. Furthermore,cost savings can be realised as the numberof cross-border payments is decreased.Intercompany payments are settled via thein-house bank thus reducing the amountof manual reconcilation resulting fromintercompany differences at month end.Rationalisation of banking connectivity

has been accompanied by a reduction inthe number of file formats. By using theGlobal Treasury Platform as a singlecommunication channel to the group’s

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It has been

possible to

reduce both the

number of

external bank

accounts and

the banking

communication

channels.

Fig 2: Overall Targets and Benefits

Fig 3: System Landscape and Interfaces

About Volkswagen Group

The Volkswagen Group, headquartered in Wolfsburg, Germany is one of the world’sleading automobile manufacturers and the largest car producer in Europe. In 2008,the group increased the number of vehicles delivered to customers to 6,257 million,corresponding to a 10.3 per cent share of the world passenger car market. 2008turnover was €113.8bn compared to €108.9bn in 2007. The group consists of ninebrands: Volkswagen, Audi, Bentley, Bugatti, Lamborghini, Scania, SEAT, Skoda andVolkswagen Commercial Vehicles. Each brand operates as an independent entity inthe market, ranging from low-consumption small cars to luxury class vehicles. Inthe commercial vehicle sector, the product offering spans pick ups, buses andheavy trucks. The group operates 61 manufacturing facilities in 15 European coun-tries and in a further six countries in the Americas, Asia and Africa, with cus-tomers in 150 countries. The group employs nearly 370,000 employees globally.

IBM and Volkswagen

IBM has had a long and trusted relationship with the Volkswagen Group for manyyears, providing software, hardware and services. The IBM Corporation is based inArmonk, New York. With more than 4,100 financial management resources locatedacross the globe, IBM has a strong record of serving as a trusted advisor to CFOsand finance leaders. Dedicated teams of research and thought leadership profes-sionals provide insights into the issues facing finance professionals. IBM FinancialManagement Consulting delivers comprehensive solutions - including strategy,processes, applications, infrastructure and technology - through its offerings in allfinancial management focused areas.

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financial institutions, all bank accountstatements are received centrally in astandardised format and distributed to thefinancial accounting systems of theconnected entities. Retrieving bankaccount statements in a standardisedformat (SWIFT MT940s) enables greaterautomation and reconciliation. Data isaggregated within the payments factoryand pushed through to the treasurymanagement system (TMS) enablingstraight through processing (STP) ofinformation and a more accurate view ofthe cash position. When it comes to liquidity

management, there have also beenconsiderable advantages in having a singleplatform. A single, integrated system,which is interfaced with the relevantaccounting systems facilitates acomprehensive and consistent view overgroup cash and provides accurate data onreal-time basis. This is enhanced further bygroupwide cash concentration in mostcurrencies.

Roll-out and realisationAt the beginning of 2008, Audi started toanalyse its current business processes anddesign future processes following centralspecifications and requirements. Someother entities of the Audi sub-group suchas Auto Union GmbH, quattro GmbH, etc.have been connected to the GlobalTreasury Platform before, so there wasalready existing experience of goingthrough this process. After the new

business process blueprints had beenapproved, the team started to implementthe new solution. Due to the integratedapproach of the Global Treasury Platform,and its connections with otherapplications, associated financialprocesses, such as general and sub-ledgeraccounting have also been affected aswell. Therefore, the impact on varioussystems such as accounts payable andaccounts receivable was taken intoconsideration.An extensive test phase was

accompanied by several training sessionsfor end users. In order to ensure a smoothgo-live for critical processes, the teamdecided to run the integration tests underreal conditions using actual data such asopen vendor and customer items.The standardisation and harmonisation

of existing finance and treasuryprocedures as well as the re-assignment ofoperational responsibilities had also animpact on the operational andorganisational structure. Therefore, adisciplined approach to changemanagement was essential during theentire transition.

Outlook and futuremilestonesIn addition to the existing capabilitiessupported by the Global Treasury Platform,such as reporting, liquidity management(forecasting and analysing liquidity needs),transaction processing, risk managementand payments, there are a variety of

objectives for the near future. Forexample, Volkswagen will be migrating toSEPA payments and implementing SWIFTCorporate Access in order to reduce thecost and increase the automation and STPfor payment transactions. There are alsofurther opportunities to centralisefinancial activities in the future such asliquidity planning, consolidation andreporting, and the potential to expand therange of financial products which thesolution supports.Overall, the Global Treasury Platform

has delivered substantial benefits toVolkswagen, by facilitating centralisedprocessing and data management, whilestill levaraging the expertise anddecision-making capabilities in parts ofthe business such as Audi. Thecentralised platform provides a basid forgreater efficiency and is preparingVolkswagen to meet future requirementsand challenges. �

Fig 4: Project Plan and Milestones

Michael ZucknickManaging Consultant, IBMDeutschland GmbH - GlobalBusiness Services

Michael Zucknick is working as Managing Consultant at IBMDeutschland GmbH - Global Business Services. He has sevenyears of consulting experience in the finance and treasuryarea focusing on the optimisation of business processes acrossthe financial supply chain.Prior to joining IBM, Michael worked with BearingPoint.

He has also been responsible for implementing various financeand treasury solutions at various large corporates helpingthem to integrate processes and technology.

Key Points

� In 2005 Volkswagen decided to replace its legacy in-housecash, payment and treasury management solutions with aGlobal Treasury Platform

� In 2009 Audi, which had maintained a separate treasuryfunction, transferred to the Global Treasury Platform

� Improvements to operational processes and a reduction inboth external bank accounts and banking communicationchannels have resulted from the centralisation

� Further benefits expected from the installation of theGlobal Treasury Platform include migration to SEPA andthe implementation of SWIFT Corporate Access

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