Treasury Outlook with Insurance Australia Group´s Mark Gold

Mark Gold, Treasurer at Insurance Australia Group shares views and visions in an interview with Reval.

1) What has been the most challenging project in your treasury department in 2013?

We found ourselves with an unexpected need to replace our Treasury system at short notice. Fortunately we identified an able provider quite soon. However, we were quite surprised how far systems had developed in the past 6 years. Perhaps the progress in compliance functionality and processing onerous accounting requirements could have been expected, but the capacity to automate so many more of our daily processes is a very welcome development to automate so many more of our daily processes.

2) What is the biggest risk treasury is facing today? How are you mitigating this risk?

Our biggest challenge is hedging the balance sheet risk of our insurance company investments in the Asian region. Asian currencies are generally heavily controlled and regulated, which makes it rather difficult to attain the level of market and currency information needed. Consequently, the overall management of the exposure becomes particularly challenging. Further, high interest rates make FX hedging an expensive proposition; for example Vietnam’s base rate is 14%. The challenge for us is to maintain a strategy, balancing the liquidity, cost and effectiveness of our Asian currency portfolio.

3) What will be the biggest drivers for change in treasury in 2014?

Changes in the local financial regulators’ capital eligibility and capital adequacy standards have driven significant change in our organisation in 2013 and will continue to do so in 2014. In 2014, our focus will be on new capital charges for currency hedging which could trigger significant changes in our FX hedging policy and capital raising jurisdictions.

4) Which strategic initiatives will you focus on in 2014? How will technology support you to reach your goals?

We obviously need to deal with the issues mentioned previously such as Asian FX, regulator capital charges etc., but we also have ongoing funding requirements. We are hoping our new technology will support our broader remit and automate the administrative functions that are currently outsourced to external parties.

5) What technological innovations would help you to evolve your treasury function in the next 3 years?

Aside from the general objective to automate routine tasks and reporting, we are looking into automating transaction confirmation matching and connecting the treasury system with the bank payments platform. A significant benefit for our foreign currency Accounts Payable function is the increasing availability of local Automated Clearing Houses (ACHs) for certain transactions types, and we look forward to implementing a rules- based “Least Cost Routing” functionality for our foreign currency payments.