This life assurance group has a presence in 18 markets across the APAC region and has harnessed technology to fundamentally change their approach to cash management. SWIFT and SAP are key components of this solution.
Photo of Dhatchayani Ramanathan and Gary Gray, AIA Group.
Head of Treasury Operations
AIA Group is the largest independent publicly listed pan-Asian life insurance group – with a presence in 18 markets across the Asia Pacific region.
Technology delivers step change for this life insurer
AIA was confronted with the daunting challenge of low visibility of cash balances, fragmented banking structures, inconsistent cash management procedures and manual processes to execute daily bank transactions. The result of these challenges were excessive cash being maintained, significant opportunity costs related to cash not being invested on a timely basis and a focus on non-value-adding manual processes.
AIA’s solution was to leverage existing SAP infrastructure and implement SAP Treasury and SWIFT in their core 14 markets. This allows AIA to gain visibility on cash levels, improve cash forecasting, reduce cash balances, automate bank communications through a secure industry standard and focus on applying consistent procedures for cash management across the group.
Gary Gray, Head of Treasury Operations explains, “We have now focused on standardising our cash management processes by forming a centre of excellence team to prepare high quality cash forecasts for all local business units every day.” This team – Treasury Solutions – drives best practice, enhances system development and applies consistent cash management methodology for each LBU, group-wide.
“Winning the Adam Smith Award provides external legitimacy, via a leading industry content source for treasury professionals, of our proactive approach to cash forecasting and management.”
The standard treasury infrastructure along with their Treasury Solutions team allows AIA to apply consistent processes and methodology, achieving greater cash balance reductions and improved secure straight through processing with all their banking partners. It also permits a group-wide view of cash balances and group consolidated daily cash forecasting.
Best practice and innovation
Deployment of SAP Cash and Liquidity Management as an industry leading toolset allowed AIA to quickly roll out the solution while not having been encumbered with complex system interfaces which many TMS implementations face. Adopting SAP Bank Communication Management allowed AIA to replace legacy paper based transactions and approvals with a modern system while improving the overall control environment.
SWIFT has given AIA the ability to deploy best practice security and bank connectivity standards throughout Asia Pacific while retaining multiple global and local banking partners. Due to the nature of AIA’s product distribution channels via bancassurance and agency, the treasury team cannot simply rationalise the number of banks; any solution needed to cater for a substantial number of banking partners, generally ten to 15 per market.
“It allows AIA to further engage with our peers both within the insurance industry and outside on best practice sharing, general treasury knowledge sharing and further establishes AIA as a leader in Asia.”
Gray recalls, “The SWIFT solution allowed us to standardise our bank communications while also maintaining key global and local bank relationships.”
The Treasury Solutions team is adopting best practice both internally and externally. Internally the team allows treasury to harness solutions across their core 14 markets applying solutions that work holistically across all markets. This is a powerful tool that creates consistency while continuing to empower their markets. Externally they are aligned with market practices to shift scalable work into a central team where economies of scale are readily achievable.
AIA has innovated on the traditional approach to cash management by centralising this activity in the Treasury Solutions team.
Gray concludes, “We have taken a proactive approach to harnessing the power of technology and have fundamentally altered our approach to cash management.”
Reduction in group-wide cash balances from approximately US$3bn to US$1bn.
US$2bn cash reduction invested into higher yielding assets contributing an additional US$25m investment income.
End-to-end transaction management.
Manual processes eliminated.
Treasury team now focused on more value-add functions.
Improved cash forecasting – each morning AIA is able to accurately forecast their cash flows on a rolling 14-day basis, further improving their ability to manage their cash assets.
Key learning points
Transparency and visibility to data, cash balances and cash flows are fundamental to successfully transforming cash management; before deciding on a technical solution how are you going to get transparency on the cash data you need.
Standards, good data and consistency of process enable step changes.