Creating a High Performance Treasury
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The document outlines the transformation of Health Care Service Corporation's (HCSC) treasury operations to enhance its effectiveness and strategic role within the organization. Key changes included the implementation of new technologies and processes to improve cash visibility, forecasting, and investment returns while reducing operational fees and expenses. The emphasis is on becoming a strategic business partner by developing strong relationships and integrating comprehensive treasury functions across the enterprise.
Creating a High Performance Treasury
- 1. Creating a High Performance Treasury David Deranek Director, Enterprise Treasury Operations Health Care Services Corporation
- 2. • HCSC is the 4th largest healthcare insurer in the U.S. operates Blue Cross Blue Shield in Illinois, Texas, Montana, Oklahoma, and New Mexico in addition to 30+ operating subsidiaries. • With 16 million health plan members and 20,000 employees, Health Care Service often flies below the radar as a mutually-owned company because it’s not publicly traded and included in the so-called “Big 5” public firms that trade on the New York Stock Exchange.
- 3. HCSC Treasury Metric Company Revenue $62 Billion Scope of Operations Number of Bank Relationships Number of Bank Accounts Number of Investment Accounts Size of HCSC Treasury Team Treasury Operations: Treasury Investments, Acct & Fin Rpt: Treasury Systems: Insurance & Risk: Cash Management & Investment Assets $12 Billion Cash Transaction Throughput $120 Billion Annually 16 20 2 3 14 200+ 85+ HCSC Treasury
- 4. Treasury’s Opportunity Three drivers for change 1) Affordable Care Act • Passed in 2010 • Significant effects on liquidity and cash planning • Drove need to re-engineer treasury operations 2) Centralization of HCSC treasury function • Brought together treasury functions across 30+ member organizations 3) Treasury as a Strategic Consultant • High Performance Culture, Strategy, and FP&A • Seat at the table with the CFO and Business Leaders
- 5. Enterprise Banking & Treasury Operations Capability and Maturity ModelWhere We Were in 2010
- 6. Scope of the review Observations • Observation of culture and behavior • Work loads and work load spread • Basic Processes not automated • Basic operations and systems understanding • Heads down department • Very operationally and process oriented “wire shop” • Understaffed – The enterprise needs outpaced capacity of staff • Other departments were filling Treasury’s "gaps” • Primary attention was on reporting Conclusions 2010: HCSC Treasury Assessment
- 7. Initial Objectives • Increase visibility of enterprise cash and liquidity to 100% • Enable proactive monitoring and improved controls of all $120B in annual cash throughput • Re-engineer cash receipts function • Improve controls protecting investments and payments • Increase productivity of treasury operations HCSC Treasury’s Mandate: Become Strategic
- 8. Strategic Objectives • Implement new strategic investment allocation strategy • Introduce Bank Scorecard Methodology • Build Treasury Strategic Integration Plan • Develop comprehensive business continuity plan (BCP) • Reclaim mandate of Treasury Operations: Cash Management Cash Forecasting Investment Management Balance Sheet Management Treasury Systems Architecture Corporate Governance – Audit FP&A Consultancy Staff Development - Enrichment HCSC Treasury’s Mandate: Become Strategic
- 9. Achievements 1) Selected and implemented Kyriba 2) Enabled achievement of strategic objectives, including: ü Increase visibility of enterprise wide cash ü Improve forecasting to optimize liquidity and working capital ü Increase investment portfolio returns ü Decrease fees and expenses ü Automate key treasury operation processes ü More time for strategic initiatives and consulting with our business partners ü Core component of business continuity planning HCSC Treasury’s Mandate: Become Strategic
- 10. HCSC Objective Achieved How Visibility of Enterprise Wide Cash Future State: Enterprise-wide visibility of cash and increased controls 100% Visibility into HCSC Cash • Automated connectivity to all HCSC banks and accounts (via TMS) • Allowed automation of cash positioning, reconciliation, accounting, and reporting • Set cash positions earlier in the day (by 9am) • Enabled single system to monitor, control, and report $120B in annual cash throughput Implementation of Treasury Strategic Objectives
- 11. HCSC Objective Achieved How Improve Forecasting to Optimize Liquidity and Working Capital Future State: Capital efficiency across all HCSC enterprise including subsidiary companies Reduced Tier I working capital balances from $4.0B to currently $50M bands • Automated reporting and daily forecast dashboards • Improved forecast accuracy to reduce variances • Increased confidence in working capital projections to reduce idle cash and maximize investment income Implementation of Treasury Strategic Objectives
- 12. HCSC Objective Achieved How Increase Investment returns by 2% Future State: Increase Efficiency of Working Capital Management at Enterprise Level allowing more capital to be used for investment purposes Investment Returns Increased 5% Short Term $40M Long Term $140M • Daily investment decisions made earlier (by 9:30am) • More tactical and strategic investments ü Increases returns on short term decisions ü Expanded Long Term Investments Implementation of Treasury Strategic Objectives
- 13. HCSC Objective Achieved How Decreased Fees and Expenses Future State: Consolidate Banking Relationships across Enterprise to gain discounting power of HCSC $2.4M Annually • Outsourced cash receipts lockbox • Bank scorecard methodology ü Optimized bank fees and services Implementation of Treasury Strategic Objectives
- 14. HCSC Objective Achieved How Automate Key Treasury Operations (to free time for strategic initiatives) Future State: Consolidate approach throughout Enterprise increasing, controls, subs capabilities, and economies of scale Automated ü Cash Mgmt ü Payments ü Cash and B/S Forecasting ü Corp. Governance & Audit Controls ü Business Continuity ü FSD 2020 Ready • Implemented TMS üAligned requirements between Treasury, IT, Accounting, Audit, Kyriba, banking partners üSeamless integration – transparent transaction flow • Identified best practices to streamline processes • Created opportunities to leverage best practices; environment of continuous improvement Implementation of Treasury Strategic Objectives
- 15. HCSC Objective Achieved How The HCSC Treasury Brand: Strategic Business Enterprise Partners and Consultants Proved Subject Matter Expertise Consulted 150+ Projects in 2016 “Treasury as Strategic Consultants” • Built out team of diverse professionals: CTPs, CFAs, CPAs, FPAs • Developed strategic capabilities within team • Demonstrated best-in-class in treasury functions • Freed time for development projects Implementation of Treasury Strategic Objectives
- 16. HCSC Objective Achieved How Business Continuity Plan ü 100% Transparency ü No customer or financial impact ü Seamless: no process disruption TMS Fully Automated and Secure Environment • 24 hour remote readiness • Secure at home laptops and tablets • Remote cloud server • Synchronized work/home communications network suite Implementation of Treasury Strategic Objectives
- 17. Much More To Do Treasury’s focus is on improving our core competencies scores by 80% for subsidiary companies by 2018. Where We Are in 2017
- 18. Added Objective: Industry Benchmarking & Recognition For validation of strategy and concept, HCSC Treasury added a new objective: Peer and Treasury Industry recognition Adam Smith Judge’s Choice Award Winner in 4 of 7 categories including: Treasury Transformation, Technology Excellence, Operational Risk Management, Financial Risk Management Proactive Treasury Management Award
- 19. Get Involved Build cross functional relationships in your organization that get you “in the room” with CFOs, Treasurers, Directors, Stakeholders, etc. Know their strategic objectives Ideate and Lead Create vision of how treasury should work at your organization Find the right technology and banking partners to deliver best practice Process Improve and Automate Make automation and continual process improvement your “Treasury Culture” Understand value of technology Develop functional expertise to determine what is/isn’t valuable Learn enough about technology and interconnectedness to know how everything fits together Our Path: Becoming a More Strategic Treasury
- 20. 20 David Deranek Director, Enterprise Treasury Operations Thank You