By ditching a web of hundreds of spreadsheets and emails in favour of a TMS from Salmon Software, the liquidity management team at the Zurich Insurance business unit Switzerland and CI EMEA has been able to facilitate accurate and insightful short- and long-term cash forecasts as well as enhance its treasury payments & reporting capability.

Celebrating its 150th anniversary this year, Zurich Insurance Group (Zurich) is a global multiline insurer with around 55,000 employees providing a suite of insurance products and services in more than 215 countries and territories. Zurich’s customers range in size from individuals and SMEs to multinational corporations.

With a market capitalization of CHF60.0bn (approximately US$65.38bn) in 2021^[1] and a recently-announced business operating profit of US$5.7bn in 2021^[2], Zurich is entering its next 150 years on a solid footing. This is particularly the case for the Swiss-based liquidity management team of the Swiss business unit and CI EMEA, which has recently implemented the Salmon Software TMS, Salmon Treasurer.

Before the implementation, the main challenge facing the liquidity management team was that the processes were highly manual. For example, there was a significant dependency on partners due to various services being outsourced to Zurich’s service centers around the world resulting in a vast number of emails containing business-critical data coming in daily.

Mauro D’Ambros, Head of Liquidity Management, Zurich, recalls: “We would receive the same information from various sources in various formats. We had to be very mindful of this – we could receive something on February 11 from Person B that we’d already received on February 7 from Person A. The numbers could be slightly different for the same payment as well, where the first email might be an assumption and the second one was the real payment, for example.”

Depending on the day and month, the team dealt with outflows that could vary greatly, all of which were being managed in Excel. Moreover, if one person was working in the spreadsheet, nobody else could do so at the same time.

Another area where the use of spreadsheets was hampering efficiency was counterparty risk analysis. If D’Ambros wanted to know Zurich’s exposure to a counterparty for the past six months, this was not possible at the click of a button. He had to open a huge number of Excel spreadsheets before keying in that respective number into another spreadsheet and then drawing a graph, all manually.

Finally, Zurich wanted to be able to support its cash forecasts, as the figures from the various departments for its long-term liquidity planning could only be compared with the actual data with a great deal of effort.

“The entire project aimed at getting away from these highly manual processes and the dependencies that we have to make a state-of-the-art treasury solution,” recalls D’Ambros. “We also wanted to be able to run reports and do analysis at the click of a button.”

Scoping, analyzing, selecting

Having identified the issues they wanted to fix, Zurich embarked upon a rigorous selection process that would eventually lead them to Salmon Treasurer. This began with an analysis phase and the scoping of the project to identify exactly what was required.

“This process looked at what our current daily tasks were and what they should look like in the future,” notes D’Ambros. “We did an analysis of cash flow data sources to map out where we were getting the information from. We had to identify various dependencies that rely on our data and understand from whom we wanted to get the data in future.”

Several internal challenges had to be overcome. For example, the team required a functional and technical data blueprint for the entire IT environment. Another major issue to be addressed was the classification of data from the various upstream systems with issues such as GDPR to be tackled in advance of any system implementations.

Once the analysis phase had started, the vendor selection process began in earnest. An initial market analysis of potential vendors revealed many of the ‘usual suspects’ for Zurich. However, the company still made a number of reference calls. These weren’t to vendors but rather to contacts known to the team members and trusted consultants to broaden the list of potential partners.

“The next step was to carefully structure our RFP,” continues D’Ambros. “We put together a thorough document with 230 questions and involved the procurement function in this process. In addition to the questionnaire, the RFP also considered the system landscape, what it looks like now and how we want it to look in the future, our selection criteria and so on.”

Evaluating the feedback from the RFP enabled Zurich to start ruling out some of the potential vendors. As a next step, the company then held half-day workshops with the remaining potential vendors providing them with information from elements such as MT940s, various static data items (e.g. internal and external counterparties, bank accounts, etc.) as well as reporting requirements that should be presented by the vendors during the workshops. Each workshop went through a specific agenda and included seven to 10 participants from various Zurich departments. These participants scored every point covered by the workshop, and there was a weighting per agenda topic in the scoring.

“The top two potential vendors from the workshops were presented to the steering committee, which had been involved from the very beginning, and we updated on a weekly or monthly basis depending on what was happening,” comments D’Ambros. The final step was a financial viability process with a dedicated Zurich team. Once all of this was complete, we were pleased to sign with Salmon Software.”

There were various reasons why Zurich selected Salmon. One important driver emerged during the workshop process, as D’Ambros explains.

“We gave every system provider some vendor homework to do. Some did this well and others less so. From Salmon’s response, it was clear that they really cared about us. Their dashboards presented at the workshop were amazing and so it was clear to us that they were taking this seriously. We could also tell that they were keen to get Zurich on board, as we would be both their first customer in Switzerland and their first insurance company.”

The Zurich team also knew that some of the other vendors had significant programming changes in the pipeline and were essentially developing new systems. “We knew we would not be presented with a completely new Salmon Software within the next five years – there will be enhancements every year, but we don’t have to expect a dramatic change that requires us to adapt everything again,” admits D’Ambros.

New TMS swings into action

At the time of the signing, Zurich had already started the cloud-approval process for the TMS with Salmon. This included delivering IT solution blueprints and a specification regarding the architecture and security due diligence, software procurement, governance processes and gaining legal approval. Overall, a few months were spent on this process.

Once that was complete, work began on ensuring the optimal number of interfaces between the TMS and the various data sources with which the Zurich team wanted to work.

“We started defining and agreeing on the requirements and testing the implementation of the interfaces,” recalls D’Ambros. “This took quite a long time, almost a year in fact. Having started with 10 to 12 interfaces, we’re now up to 15!”

In parallel with the interface work, phase one of the implementation swung into action. This included setting up both the short-term forecast and the static data. “We started collecting the static data information, such as bank accounts, which was quite a challenge as there were various teams within Zurich taking care of different bank accounts so we were collecting data from various sources,” recalls D’Ambros. “It was hard to know if we had the complete picture or not because we were dealing with a huge number of bank accounts.”

Once the bank account information had been collated, the entire set-up of the system could begin including the naming conventions – what was the unique identifier and what was the long name, what made sense for the liquidity management team and what did not. In addition, there was the possibility to add custom fields. Much of what Zurich wanted from its new reporting capabilities would come from these custom fields, so the challenge was to look ahead and consider which fields they wanted and how these would be structured. Around 10 custom fields were added. During the implementation and afterwards, more were added. We have now reached 19.

“Once we had that ready, we imported the static data and then started working with Salmon on designing and testing the dashboards,” explains D’Ambros. “Salmon’s dashboards are extremely flexible. They have a variety of standard dashboards, but you can tell them exactly what you want and they will configure the dashboards that way. While we didn’t want to replicate our old spreadsheets, we did use these as the starting point to design the dashboards. This helped us understand what information we wanted to see in which row and in which cell, the filters we wanted to apply and which graphs we wanted to include.”

User training on the short-term cash management also started with Salmon during this initial phase including testing of the application to ensure it did exactly what was required. This was particularly important to get right due to the nature of Zurich’s business.

“In a typical corporate treasury environment, you often try to adapt the existing processes in such a way that few adjustments have to be made to the new treasury management software. However, due to the complexity of our business, we needed a system that could adapt to us.,” explains D’Ambros. “That was a real benefit of Salmon, which we discovered earlier in the workshop. They presented their TMS but wanted to hear our needs and how we wanted to work with it. They added updates to align with our wishes so we didn’t have to change too many processes.”

Phase one of the implementation ran in parallel with the existing operations for almost six months before going live in September 2021. Phase two, the long-term forecast, had already begun as the main challenge here was also an Excel-based issue.

“When we had the workshops with Salmon, we brought up the fact that we have a long-term forecast and we knew they had a module, but we thought this could be enhanced to work even better,” says D’Ambros. “We agreed with Salmon that if we selected their offering, they would implement a brand-new module within Salmon Treasury from scratch based on our inputs. Salmon started developing the module and, when I got to see the first draft of it, I was astonished by how good it was. This module was supposed to work for all Salmon customers, not only Zurich.”

With this module, Zurich again went through the static data set-up, testing and gave Salmon feedback about potential enhancements for the next versions. Having received and tested the final version, the conversation again turned to dashboards.

“We discussed what we wanted to see in the long-term forecast dashboards and how the data should be presented,” notes D’Ambros. “Once again, the user training had a parallel run of roughly six months getting the users up to speed. We have now been live since January 1, 2022, so now everything is in Salmon – the short-term forecast, the long-term forecast and treasury payments.”

The benefits of automation, visibility and control

Having now implemented Salmon Treasurer, Zurich has been able to achieve its goal of reducing the amount of manual intervention in its cash flow data to an absolute minimum. All the data that was previously being painstakingly keyed in manually is now being automatically populated in the system via various interfaces.

“Out of our 15 interfaces, 13 to 14 interfaces deliver the data so all the manual queueing data has been drastically reduced,” D’Ambros says. “Around 95% of the emails we used to receive have gone and we’ve reduced the amount of duplicate information being received. We now are not only importing outflows but we are also importing expected inflows so we also know what should come in. This, of course, helps us with the daily cash management.”

The new TMS also provides daily visibility of some hundred bank accounts. This enables the team to run risk analysis, such as monitoring counterparty exposures, for example. We have introduced around 20 controls that automatically check, for example, the various interfaces or bank balances on a daily basis.

“We have certain regulatory requirements where, in the past, the control of a potential breach was time-consuming and done manually. With Salmon Software, we have introduced an automated pre-warning system to alert us that there might be a chance of a breach if something unexpected happened on a specific bank account,” explains D’Ambros. “With the interfaces and controls we have in place, we will get an alert, for example, if bank account A has a critical balance, which enables us to act.”

This visibility marks a huge change for Zurich, which has a vast database where some hundred thousand bank transactions are imported annually and up to several thousand transactions daily depending on the situation at any hour of the day or night.

“We now have an amazing data hub where we can run comparisons,” says D’Ambros. “For example, December and January are the months when the ”big money” comes in for insurance companies. We can now compare December 2021 with December 2020, for example, much more easily and efficiently and also run comparisons between specific days. This helps us to spot patterns and have a much better understanding of when the money really comes in. It is a good tool to use in the future for forecasts and, importantly, it’s not only the liquidity management team using this. Various other departments are also using Salmon to run their reports for management.”

Treasury payments have also greatly benefitted from the new TMS. In the past, it was a highly manual process involving communication with some of our service centres via email and capturing the payments by them in a 3^rd party software. The manual nature of this process meant that errors could occur along the way. Now all treasury payments are managed directly in the TMS.

“We now do our treasury payments in Salmon as well as short-term forecasting and long-term forecasting,” says D’Ambros. “This is all thanks to the capabilities of the dashboards. We now have more than 30 users actively using Salmon. They can access the dashboards and use the information to explore what they have forecast and how this matches up against the actual cash flows and positions. This helps them improve their processes, which is a huge step forward for us.”

Reporting has also changed drastically for the better since the implementation. Where analyzing counterparty exposure used to involve opening numerous spreadsheets and manually adding data to another one, that is now all consolidated in Salmon. “For that, we have our dashboards, we have the graphs, we can use the various filters and quickly see the results onscreen,” states D’Ambros. “Then we can export it to a PDF, we can drill down or we can export the underlying data to Excel if anybody wants to see some of the data in a different way. That is a great step forward.”

Thinking outside the box

Having disposed of the manual processes the dependencies, and the wrong information that used to hamper the liquidity management processes of Zurich, the team is happy with the massive gains in efficiency that have been achieved. However, the journey doesn’t stop there. The enhancements have sparked new ideas as to how the company could approach certain tasks in a different way. Zurich is, D’Ambros admits, constantly tinkering with dashboards to bring about greater improvements as well as add new ones.

“Treasury management systems have so much potential to enhance your work,” D’Ambros concludes. “Don’t keep doing what you did in the past. Think about your perfect world and start from there. Involve the system supplier, let them also give you input on how they can see it because they have worked on many more implementations than you have.”

^[1] https://www.zurich.com/reports/2021/annual-report

^[2] https://www.zurich.com/media/news-releases/2022/2022-0210-01

  Mauro D’Ambros

    Head of Liquidity Management at Zurich

Mauro D’Ambros joined Zurich Insurance Company in 2019. Initially as Head of Liquidity Management for the Business Unit Switzerland & CI EMEA. In his new function as Head of Project and Process Management, he is now focusing on the automation and efficiency enhancement of processes.

Together with his team, he was responsible for the evaluation and implementation of Salmon Software including several interfaces. Previously, he worked in the treasury department at various companies including SIX Group and Bucher Industries. During his 20-year treasury career, he was responsible for several selections and implementations of various treasury management systems. He holds a Master of Advanced Studies Corporate Finance and a Certificate of Advanced Studies Swiss Certified Treasurer, from the Lucerne University of Applied Sciences and Arts.

Investment into R&D has always been important, but perhaps never more so than at the moment, with a global economy that has now withstood the best part of two years of covid-related battering. That must have been a consideration in the mind of the Chancellor of the Exchequer when he stood up to deliver his 2021 Budget, not least as it contained a raft of measures that will enable companies to reduce the cost of R&D. Foremost among them were a new schedule indicating that 130 per cent of the cost of plant and machinery can be tax-deductible, a measure that will last until March 2023, and a clear attempt to stimulate investment and its concomitant economic benefits.

“This is one of the key takeaways from the Budget, as it lowers the net cost of installing financial risk management systems,” says Ritchie Fisher, Treasury Consultant at Salmon Software. “These can be such a significant cost that they often have to be approved at a senior level: they can range from a few hundred a month to several thousands of pounds per user per month, which can amount to a great deal.”

This so-called super-deduction has ramifications all across the board. Although the super-deduction applies to plants and machinery, financial risk management products are classed with R&D, thus acting as a qualifying expense. “It’s these financial management systems that allow financial decisions to be made on powerful analysis encompassing forex risk management, payments on a global level and debt management, along with most other things in the treasury 3.0 space,” says Fisher. “The system frees employees from manual processing, which cuts the operating time required. As an example of how this will affect business, a global airline has major costs attributed to jet fuel. If they are given the tools to analyse costs, and thus implied financial risk on a daily basis, they are in a better position to manage their mark to market risk or the likelihood of margin calls if their hedging strategy on jet fuel were adversely impacted on transactions with wholesalers. The real-time information and powerful reporting dynamics make these exact positions clear.

Fisher sees these changes to capital allowances as a clear move on the part of the government to stimulate growth. “Where there are challenges in providing further fiscal incentives in the Budget to encourage future stability, they have instead created an incentive to invest in further technology,” he says. “And this also applies to personnel contributions to costs. Part of the same super-deduction claims include project personnel costs. This is helpful because as matters stand, even if a company procures the funding and board agreement for a project, they may not have the labour resource to proceed to completion. However, now if they take on further staff for the related implementation, they can deduct these costs also.”

This will have a direct impact on stimulating business development, allowing businesses to become more streamlined and internal processes to become more robust. It will amplify a business’s assets, lower costs and have a knock-on effect of future developments. There will also be an effect on writing down allowances (WDAs.) “There will be a positive contribution to contingent global liabilities,” says Fisher. “There will be cost considerations in which companies will be able to offset their tax liabilities.”

All of this serves to highlight the importance of Treasury Management Systems (TMSs.) Currently, too many businesses remain reliant on manual processing, which increases the potential margin of error. It is also reliant on the incumbent to make a contribution, which has the dual effect of more potential for error and relying on the individual in question to be in situ, while at the same time tying down that individual when he or she could be freed to more strategic activities that put greater value into the business. “A treasury management system frees labour resource to create value, as appose to merely adding it,” says Fisher. “Employees are free to think about the actual processes, rather than just going through the motions,. There are now objectives for group treasuries, who can see beyond their initial remit.”

Although the lineage is not immediately clear, using a TMS can turn a cost-saving process into a profit maximising one. “It can give a  treasury team, labour resource and time to think about profit maximising,” says Fisher. “It creates a higher level of transparency and allows people to prepare more strategic recommendations, that have a more significant impact.”

Above all, this type of software, such as that provided by Salmon Software’s, Salmon Treasurer, can allow businesses to become increasingly flexible, which will be increasingly important as the economy begins to recover and businesses adapt. But investment in the software can still be held back as risk-averse companies cling on to their cash. “Exponentially people need to advance their businesses, but they are still using their cash reserves to offset instability post-covid, in some cases, this inhibits the ability to invest in your own products and or infrastructure.” This, of course, will begin to change and the measures announced in the Budget will encourage businesses to invest in themselves. So too will the time limit imposed – take advantage by March 2023 or lose the chance to do so.

Find out more about super-deduction in the link below.

Source: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/967202/Super_deduction_factsheet.pdf