When Technology Excellence Drives People and Process Improvements

Headquartered in Chicago, Health Care Service Corporation (HCSC) is the country’s largest customer-owned health insurer, with nearly 16 million members in health plans across Illinois, Montana, New Mexico, Oklahoma, and Texas.

A decade ago, the company undertook a transformational project designed to centralize treasury activities, improve the treasury team’s effectiveness, and reduce their manual workload. “A lot of accounting and finance groups were performing tasks that should have been within treasury, so everything was very decentralized,” says Julie Qualiato, senior director of enterprise treasury operations. “The company’s approach to cash management entailed being very conservative and overfunding accounts.”

HCSC deployed a new treasury workstation and integrated it with the company’s forecasting solution, accounting software, platform for initiating wire and ACH transactions, and investment systems. This first phase of technology transformation resulted in much more effective cash management. “We soon were able to make more aggressive decisions, and we reduced idle Tier 1 cash by 90 percent,” says David Deranek, director of enterprise treasury operations.

The company was then ready to launch phase two of the technology transformation. “We realized we were literally swimming in data,” Deranek says. “We needed to find a way to harness that data to make better decisions.”

Treasury leadership tasked Deranek and Qualiato with examining every function and process throughout treasury operations. They interviewed, observed, and documented the workflows of the functional teams, and reported their findings each week to a leadership oversight group. They determined the maturity, capabilities, and proficiency of each team within treasury; the desired future state for automation within that area of the organization; and the connection of operational processes to strategic initiatives.

The ultimate goal was to create a treasury technology infrastructure that unified best-in-class internal treasury, risk management, payments, and working capital tools with data coming from external banking platforms, investment trading platforms, a reconciliation platform, HCSC’s accounting hub, and the corporate enterprise resource planning (ERP) system. “We wanted to create an active liquidity network that would join together all the systems that we house within treasury so we can improve capital efficiency to better serve our customers and members,” Deranek says.

He and Qualiato worked with HCSC’s treasury technology team to develop a treasury enterprise reporting (TER) data warehouse. The TER system connects to a wide range of internal and external systems, even incorporating a direct data feed from the company’s investment custodian.

“It’s kind of nostalgic at this point, because we’re not currently in the office, but we had a treasury work room with walls covered with whiteboards,” Qualiato says. “We would bring together people from disparate areas of treasury in that work room to talk about: ‘How could this working capital process work better? What information do we need? And what system should feed our reporting and analysis with that information?’ Consulting with other groups to find their pain points and figure out how to fix them was very valuable. It gave them a stake in improving the efficiency of their work life and helped ensure that everyone would embrace optimization and think more strategically.”

The technology project led the way for close collaboration among treasury staff on process improvements as well. “We had working capital meetings every week to determine what strategic decisions would be made,” Deranek says. “Not only how much we were going to hold in our parent and subsidiary accounts, but also how that supported and complemented our investment strategy moving forward. Those working capital meetings included the investment team, forecast team, and cash management team. Those meetings are an ongoing intellectual exercise in examining information to keep improving our decision-making.”

The group deployed a data visualization/analytics solution to produce web-based reports from the data warehouse. Then they developed reports showing cash positions, strategic investment allocation, reconciliations, and treasury financials. A daily dashboard offers forecast-to-actuals variance reporting. Each report’s information is presented in a format customized for its intended consumer, whether that’s the HCSC treasurer, CFO, board, investment team, or someone else.

This front end provides much better visibility into the various types of data within TER than treasury had previously. “The reporting is very dynamic,” Deranek says. “With the click of a button, we can drill into reports or we can gain insights into historical data.” Giving treasury teams easy access to this information helped improve their cash forecasting capabilities. It also improved their ability to determine HCSC’s optimal capital structure, as well as to meet long-term and short-term funding needs, manage term debt, and execute capital-raising strategies.

Deranek believes the project’s focus on data reporting and analytics is indicative of a crucial treasury trend. “HCSC has a small team of developers within treasury, and we leveraged their skills in collaboration with our treasury teams to bring our vision of a treasury analytics solution to life,” he says. “I believe this is the future direction treasury is heading. Transactional and process-oriented activities are important, but many of them can be automated. Understanding the organization’s systems and their interconnectivity—and then harnessing that data—is extremely valuable.

“We talk a great deal about people, process, and technology, because there’s a widespread interconnectivity between them in our organization,” he continues. “Having the right people, with the right skill sets, in the right places is essential to building a more proactive treasury. When you have that, you can architect a modern treasury that really enables skilled teams to do what is asked of them.”

See also:

• Automation Streamlines Bank Statement Management
• Payment System Integration via APIs
• On-demand webcast celebrating our three winning projects: 2021 Technology Excellence Awards: Harnessing Data Analysis & Automation

And join Treasury & Risk for a webcast celebrating the winners of our 2021 Alexander Hamilton Awards in Treasury Transformation! The live virtual event will take place on April 7 at 2pmET. Register today.

In fact, one offshoot of this project was development of an internal banking solution consultancy. Members of that team work with other HCSC business units to implement treasury services. “They’re basically the liaisons between the organization and our financial institutions, helping them navigate all the details around getting a bank service up and running,” Qualiato says. “For example, this team frequently needs to help business units set up a new lockbox or open a bank account or set up new communications that pass through our firewall but also meet the financial institution’s requirements. Previously, business groups might implement banking products on their own, without treasury’s involvement, but the process goes much more smoothly when our treasury consultants help.”

This approach has helped make HCSC more nimble. “In 2020, we were again asked to make a big shift,” Qualiato reports, “to keep more liquidity close at hand because of the uncertainty around the financial impact of Covid-19. Due to the new technology we implemented, we had the ability to switch things around very quickly.”

HCSC continues to re-evaluate its technology and processes, in the interest of ongoing improvement. Five years after deploying its treasury management system, the company performed a comprehensive review of treasury technology to seek out areas for further optimization. “We graded every process we were performing, and we made a lot of impactful improvements as a result,” Qualiato says.

“We want to keep that analysis fresh going forward,” Deranek adds. “We don’t want to get stale with how things are working today, because we always are aware that things are going to change. We need to be as state-of-the-art as we can.”