Over an eight-month period Schmidt constructed an automated, data driven process to optimally deploy cash across liquidity layers.

Step one involved establishing treasury’s liquidity management priorities. This included satisfying the business cash requirements across legal entities, reducing entity-level excess liquidity, creating a dynamic environment adaptable to changing interest rates, mitigating counterparty risk and automating manual decision-making processes.

It also included a substantial amount of discovery and solutioning work to address the needs of various internal stakeholders and build consensus across the organisation.

Step two involved defining the organisation’s layers of liquidity to support short and long-term funding needs in addition to providing a robust structure enabling access to supplemental working capital in the event of disruptions to the business.

The liquidity layers included operating cash, reserve cash, external working capital, and a long-term portfolio segmented into various vehicles to generate additional yield and diversify risk – all working together for maximum value. Sizing of these layers had to be done at the individual legal entity level and required an analytical and dynamic model.

Once the vision was established, the team constructed an automated platform supporting 12 distinctive cash forecasts run according to logic-based decisioning models that produced cash sizing recommendations for various time horizons and under configurable business scenarios. The data is summarised in an executive dashboard where the team can execute on proposed shifts in liquidity positions. The model also creates a historical variance report to track the accuracy of their cash forecast and to help improve future decision making.

A model is only as good as the foundation around it, and AmeriHealth took a thoughtful approach in rolling out policies and procedures to manage the daily operations of the Liquidity Model and instil accountability. The net financial benefit is well into the eight figures and will provide reliable value for years to come. This initiative is one of many projects on the AmeriHealth treasury roadmap as the team tackles challenging problems with innovative solutions.

Kaufman Hall acted as consultant on the project.