s172(1) and Corporate Governance Statements for Volkswagen Financial Services (UK) Limited relating to the financial year ended 31 December 2020.
Statement by the directors in the performance of their statutory duties in accordance with s172(1) Companies Act 2006
In making decisions throughout the year ended 31 December 2020 the board of directors of VWFS have acted in a manner they consider would most likely promote the success of the Company for the benefit of its members as a whole having regard to the stakeholders and matters as set out in s172 (1) (a-f) of the Act.
Factoring our stakeholders into our decision making
When carrying out impact assessments and making key decisions for the organisation it is important that we understand the needs and concerns of all stakeholders. This is done through stakeholder impact analysis being completed for all significant decisions that identifies the potential benefits and areas of concern for each stakeholder group and enables plans to be put in place to mitigate any risks identified and ensure that these are actioned. As an example during the recent assessment of the changes in dealer commissions and the impacts the proposed changes would have on our customers, the Company, our retailer network and also our suppliers were all considered. The needs of all of these groups were assessed when designing a possible solution and a pilot scheme was conducted and feedback received from the stakeholders. These stakeholder impact assessments assist directors when performing their duties under s172 of the Companies Act 2006 and provides the Board with assurance that the potential impacts on our stakeholders are being carefully considered by management when developing plans for Board approval.
The key stakeholders identified by the Company are:
Customers - Customers are central to the strategy of VWFS and the impact on the customer drives all key decision making within the organisation. The customer is central to the operation of the Company and its goals. Decisions on product design and pricing take into account both the existing and future needs of the customers but also ensures that customers are treated fairly and consistently. This is achieved through ensuring regulatory compliance with transparency in product details, and clear and understandable communications. The Enterprise Risk Committee, mandated by the Board of Directors, has the remit to embed a clearly articulated risk culture that places the customer at the heart of our business.
Suppliers - Suppliers play a key role in the success of the business and the Company. The Company works closely with key Suppliers to ensure decision making considers the impact on them. VWFS has close working relationships with a number of key suppliers. Management and Board members will regularly conduct meetings and visits to them to promote a positive working relationship beneficial to both parties, this can include involving them in early stages of significant initiatives, key Suppliers are both within and external to the Volkswagen Group.
Employees - Employees are central to the success of the Company and VWFS has a strong culture that ensures the wellbeing of its staff is continuously considered, monitored and supported. This is achieved through regular communication from the Board downwards, a culture that promotes open dialogue and challenge, an employee forum, employee development programmes, the wellbeing centre, the employee helpline, and policies and a culture that promotes inclusion and equal opportunities.
Community and the environment - VWFS supports a number of local charities through its Corporate Social Responsibility program. The Company provides opportunities for individuals, small groups or whole teams to volunteer time to support local charities. The Company understands it has an impact on the environment. Locally it is taking steps to reduce waste on site at its office locations, limit the use of non-reusable materials, encourage recycling and energy conservation. The Company also supports schemes such as ride to work that promote greener transportation methods, and provides onsite facilities to ensure staff can take advantage of them such as electric charging points, changing and bike storage facilities. In addition the Company is supporting the development of new technologies by the Volkswagen Group for cleaner vehicles, both new models of internal combustion engines and future generation electric vehicles.
When making its decisions, the Board considers the outcomes of relevant stakeholder engagement as well as the need to maintain a reputation for high standards of business conduct, and to consider the long-term consequences of its decisions.
Statement of Corporate Governance
The Company has continued to follow its existing Corporate Governance structure, policies and procedures throughout the year ended 31 December 2020 since these are already aligned to the best practice principles, these are summarised as follows:
Through the leadership of the Board of Directors (BoD) a clear understanding of the Company's purpose, strategy, culture and values are established. These are then cascaded and embedded in the organisation through policies, committees, and formal and informal communications. They are visible across the organisation and consistently applied across all departments, this is achieved through clear, consistent and regular communication to all employees. The BoD are then accountable to the Board of Volkswagen Financial Services AG and report to the shareholders of the parent company Volkswagen Finance Overseas B.V. The Management Board of Volkswagen Financial Services AG are responsible for approving the remuneration of the directors.
The Company operates through a clear governance process consisting of the Board of Management (BoM) and committees, which have clear terms of reference, there are then policies and procedures that apply across the organisation. The BoM is entrusted by the BoD with the general management of the Company with the exception of the determination of strategic, general policy and direction of the Company and the matters reserved to the BoD or VWFS AG. Matters of fundamental significance to the Company (including those that require BoD approval) must be agreed by both the Chief Executive Officer (CEO) and Chief Financial Officer (CFO). The appointment of members of the board is made with due care and consideration for the needs of the business and persons appointed have the appropriate levels of skill and experience to ensure it can achieve its strategy and objectives.
The BoM acts in accordance with all applicable laws and regulations, the Company’s articles of association, shareholder resolutions and directives and the requests and instructions of ultimate parent company, Volkswagen AG, and in accordance with the delegated authority of the BoD.
The members of the BoM collectively assist and direct the development, implementation and promotion of the Company’s vision, mission, strategy, values, risk appetite and behaviours, and in doing so act in the way to promote the success of the Company for the benefit of its employees, customers and other stakeholders in both the short and long term. This includes ensuring that appropriate resources and controls exist for the organisation to operate effectively and in line with its risk appetite.
The BoM is responsible for ensuring that the Company maintain and operate within an appropriate governance framework (i.e. relevant to the Company’s business, reputation, the materiality of the risks inherent and the relative costs and benefits of implementing specific controls), to ensure the management and oversight of risks, effective and efficient operations and delivery, appropriate internal, financial, performance/delivery and other controls, compliance with all relevant laws, regulations and other appropriate (e.g. industry) standards. The BoM ensure that the Company operates with reference to the risk appetite determined by the BoD and this is embedded at a strategic level within the business and that the responsibilities and communication channels are in place to and from the Enterprise Risk Committee (ERC) to ensure key risk measures are in place and monitored by the ERC in accordance with the Company’s Enterprise Risk Management Framework.
The ERC is one of several committees in place across the organisation to ensure that appropriate operational governance exists to support the purpose and strategy of the Company. All committees have clearly defined scope, accountability and duties. The ERC is a mandated sub-committee of the BoD to which it will report on a regular basis and its authority extends to all matters relevant to the Company. The Board continue to review and update the governance structure to ensure it is relevant and appropriate for the operational needs of the organisation and to support the achievement of the Company's strategy.