Interview with Johannes Krauß, the New Managing Director of TRUMPF Bank

Since 2001 the TRUMPF Bank has been offering customers of TRUMPF, the mechanical engineering company based in Ditzingen, Germany, attractive financing models for its high-tech products. The TRUMPF Group is today one of the most innovative suppliers of machine tools and continues to be a leader in laser technology. SCHUMANN has been supporting the TRUMPF Bank since 2012 with its software CAM in the areas of credit risk management, process automation and annual financial report analysis.

In October 2023, long-standing employee Johannes Krauß was appointed as the Managing Director of the TRUMPF Bank and is responsible for its operative business, including risk management. We had the opportunity to talk to Johannes Krauß about the current economic challenges that are faced by a captive company.

We are currently experiencing significant macro-economic changes. It is therefore of great importance that these factors are taken into account in risk evaluation and in the AI models for risk analysis. Which particular challenges are faced by captive companies, especially TRUMPF Financial Services?

For us as a captive company it is a daily challenge to find a suitable balance between the regulatory requirements and the requirements of the group. As a small bank with around 30 employees it is decisive that our processes are designed efficiently and that a large proportion of the non-risk-relevant areas are completely automated. In addition, we strive to make the greatest possible use of the value-creation chain that a full banking licence provides to an industrial group. As a captive company, our core business is the financing of sales. Nevertheless, our full banking licence and the expertise in the bank open up numerous possibilities within the group. We have implemented a group-wide risk management system, access to the financial markets, and we utilize investment facilities, so we can create added value for the TRUMPF Group.

That means that the group-wide risk management is implemented by the TRUMPF Bank within the group?

The risk management for the determination of after-sales limits has been rolled out by the TRUMPF Bank throughout the TRUMPF Group. We have around 74 subsidiary companies worldwide and have therefore begun to introduce the credit risk management software CAM software globally. We also use the interface to an integrated business information agency. The payment records of our subsidiary companies for their customers over recent years are also utilized and are connected with an appropriate questionnaire in order to evaluate the risk content of the customer relationship and the payment terms.

How did the rollout of the software to the various subsidiaries go, especially in view of the fact that you have 74 subsidiaries worldwide? This number seems to indicate a complex task.

Multiple sessions were carried out in which the focus was the CAM software. Firstly, user sessions mainly for Europe were performed, then for Asia and finally for the USA. Using an iterative approach, we took a close look at the software and subsequently adapted the processes.

What considerations led to your entry into manufacturer financing and to the foundation of the TRUMPF Bank?

The foundation of the TRUMPF Bank and our entry into manufacturer financing were mainly pushed forward by Professor Berthold Leibinger, the former owner and head of the company. Through his activities on the Supervisory Board of BMW AG, he realized that the automotive industry was ahead of the mechanical engineering industry in terms of manufacturer financing. This led to the recognition that the mechanical engineering industry should also be able to offer manufacturer financing. The company started with manufacturer financing in 2002, firstly in the form of joint ventures and then in 2006 and 2007 by taking the first leasing contracts onto its own balance sheet, a step which was then extended to Europe as a whole. This development finally led to the foundation of a fully licensed bank out of the leasing company in 2014. An important aspect of this decision was the intention to utilize our presence in the EU.

We have previously discussed the regulatory requirements in relation to risk management. What made you decide to work with SCHUMANN and introduce CAM?

The start of our partnership with SCHUMANN was originally for the financial analysis software FINOYO. As an international company it was a challenge to evaluate worldwide financial reports because it was not economical to build up the necessary language competence internally. We therefore made the decision to perform financial report analyses using CAM. Over time, a close partnership developed and CAM became the leading master data system for TRUMPF Financial Services. Beyond this, the entire KYC process is also performed using CAM. In 2022 this partnership was extended through the development of a leasing calculator and the implementation of a completely digitalized application procedure. Especially during the corona period, this turned out to be extremely helpful because the company was in a position to say goodbye to paper-based credit applications and to digitalize the entire process.

You mentioned that you perform KYC checks using CAM. Could you explain the specific stages of these checks and the special challenges they present?

It is excellent that CAM provides interfaces which make it possible to integrate external partners quickly and easily, so that it is simple to carry out the standard processes. We perform a weekly screening of the entire portfolio against PEP and sanctions lists, which has become even more important since 2021. We also determine the financial beneficiaries in CAM via an information agency and produce all the necessary documentation directly. This involves the use of a KYC questionnaire, which is documented in a two-stage authorization process.

Now that we have talked about CAM in more detail, which of its advantages is the most important in your opinion?

The advantages of our long-standing partnership with the company SCHUMANN go beyond CAM. We value the loyalty of the SCHUMANN employees and profit from a consistent and agile team that makes it possible to develop our bank constantly. The specialist know-how and the IT expertise of SCHUMANN are important assets that we value and use in our partnership. We are able to realize new ideas quickly and agilely, which makes it possible to move on directly to the proof of concept. This added value and our mutual enthusiasm for the development of new solutions are the reasons we consider CAM and the company SCHUMANN to be highly innovative.

The 7th update to MaRisk includes requirements to take sustainability risks into account in risk management, how is your company dealing with this?

The consideration of ESG risks has been one of the biggest challenges of recent years because they not only affect particular areas of the company but the entire bank. The establishment of sustainability as a theme necessitates a cross-departmental approach. To start with we updated our business strategy, adapted our risk inventory, and are currently working on extending our ratings to include ESG risk factors. These processes are iterative and demand data compilation and evaluation in stages. We work together with a business information agency that is fully integrated into CAM in order to support these changes.

Considering the complexity of the project, is it a challenge for you to realize these adaptations to risk evaluation in order to take into account sustainability risks?

No, because of the experience we have gained in the past, the implementation of this system is really just an extension of our risk model in order to integrate the ESG themes appropriately.

Now we come to the final question in our interview: Which plans do you have for the future development of the project with SCHUMANN?

There will certainly be some exciting projects. At the moment we are actively working on the complete integration of our rating system into CAM. This will mean that not only the master data processes, the KYC process, the offer calculator and the financial report analyses will be available in CAM, but also the rating. All the necessary data for this is already available in the CAM system. This means that our Sales Department and our risk managers will have a system that enables them to obtain a comprehensive overview of customers and to accompany them throughout the entire business process, keeping the risks in constant view.

Thank you very much for this detailed and interesting interview.

You're welcome.