How Brexit will Impact Treasury with Dan Ferguson

Hello, it's Mike Richards here from the treasury recruitment company. I hope you're enjoying the Treasury Career Corner. If you are great news, perhaps you give us a rating on itunes or wherever you consume your podcast content. This means that even more treasury professionals can benefit from finding out, or by finding out about how treasurers have achieved their career goals. The link to rate our show will list at the bottom of our show notes. And please remember as well, the show itself is as much about you as it is about us. There are specific questions you want us to ask or there's feedback you want to give. Please drop me an email. My direct email is mikeresuryrecruitment.com inventibly enough, but anyway, that's enough from me. Let's get on with the show.

Welcome to this week's Treasury Career Corner podcast, where I interview treasury professionals about their treasury careers. Each week I talk to treasurers about how they built their careers, where they are now, and where they see both themselves and the treasury profession going next. In this week's show, I'm delighted to be joined by Dan Ferguson, group treasurer at Royal Sun Alliance. Royal Sun Alliance Group, or RSA as it's more known, is a British international general insurance company headquartered in London in the UK. Got major operations across the UK and Ireland, Scandinavia, Canada and provides insurance products over 140 countries. So right the way across 9 million customers and listed on the FTSE 100 stock exchange. There was a quick overview into Dan. Dan's the group treasurer at Royal Sun alliance or RSA. He started in Treasury 22 years ago, way back in 97, so talk through his first start in Treasury. But then in 2002 we got to know each other and I placed Dan way back when as a Treasury analyst at Rawson Alliance. Now he's been there since 2002. We spoke about this before. He's been there a number of years and gone from treasury analyst to group treasurer. And I know that a lot of people listening will go, hang on, I want to do that. How does he do it? We'll dig into why he's managed to spend that long at one company, but the progression is gone and everything else. So, Dan, as always, enough from me, just go through your career to date, if you would, and maybe perhaps your early start in Treasury.

My original start, partly I wasn't sure exactly what I wanted to do when I completed A levels and my father worked in treasury for BP at the time, so no particular insight other than I thought, well, he's got a reasonable job and Seems to enjoy it. So I should have a look in a little more detail at that. And now I got my first job. I guess this is going to really show my age and sound remarkably old school. My dad got me a swift code directory of all of the banks in London and I wrote a letter to maybe a couple of hundred of them asking for a job. And one of them responded and that was bank of New York to work in their Treasury Department.

You obviously had a bit of an insight then. I didn't realize your dad was in treasury. So he had a bit of insight to Treasury. What was he doing at bp? What was his role?

He was the treasury manager, looking after cash management. So he'd spend a lot of time sort of traveling around BP's operations conducting RFIs and RFPs for banking services. So to some extent, I guess I saw him traveling around a little bit. He goes to Australia fairly regularly across Europe, North America and thought, well, you know, that sounds, that sounds interesting. It looks pretty interesting.

I've never heard of treasury being a family business till now and that was a new one to me.

That's fantastic.

So you got the role. Banking, the evil that is banking. Sorry, guys, listening, but good start. So you started there. Talk us through what happened then.

I mean, in all honesty, I was 18 years old. I didn't have a clue what I was doing. My role was to run in and out of the front office periodically and check what trades the treasury dealers had executed, pick up the sort of three bits of paper, run back to the back office and input it into a confirmation system and a swift system. I kind of thought that was quite exciting, really. I was kind of scared of the, of the front office at that time. It was a good introduction to what I was doing.

Okay, and then you made some moves before you actually really got into the treasury roles. You know, you then went to Lloyds and then ey. So just give us a quick run through those.

As is quite typical for that stage in your career, every sort of 18 months to two years, just you're sort of thinking, well, what's the next move? How can I, how can I get some advancement? How can I gain some more skills, gain some more experience? Really nothing more to it than that in terms of those additional roles I took on at the time. I guess the real catalyst for me was joining Thomas Cook in their treasury team there. So we had a sort of small central team of five people in London. Essentially I was the treasury dealer, so I got a lot more involved in foreign exchange and hedging programs, a lot more sort of active cash management because there would be real sort of seasonality to the cash flow and peaks and troughs there to get to grips with, you know, really, really enjoyed my time there. Really interesting company to work for and like I say, it was a bit of a springboard on better things really.

You work for a holiday travel company, everything else a natural move into insurance, you know. Why the move?

Long time ago. Yeah. Let's be honest to the outside looking in, insurance isn't necessarily the most interesting industry. Certainly compared to, you know, a company that runs a fleet of airplanes and sells holidays. The attraction was really, it was a bigger company, it was a regulated entity. So you sort of learn more around that side of things. There was a greater scope in the role and a bigger team. And I think that one of the key differences, I guess, coming to an insurance company is you've got a big asset portfolio to look at, look after and sort of understand the interactions with the asset portfolio as well. So there are a number of reasons for wanting to make that switch. In practical terms, Thomas Cook actually got taken over at the time, it was just after 911 and the UK travel industry was doing pretty badly, so I actually got made redundant.

You took that redundancy and we got you the role. I mean, talk us through. So you started as a Treasury analyst. What were you doing then? Back in the day?

Certainly there were a couple of things that were top of my responsibilities. I was essentially a Treasury dealer again. So I was bringing that experience I'd got from Thomas Cook into a slightly more in depth environment, if you like. The sort of range of products and strategies that we were employing were much broader at RSA than they were at Thomas Cook. RSA itself was going through a bit of a change at the time. They used to have an in house asset manager to run all of their sort of treasury and fixed income and derivatives, et cetera. They just sold that asset manager and were looking to bring treasury in house. So my boss at the time, the treasurer, was looking for someone to come in and sort of run the treasury dealing desk, if you like, at that time. So it was a good opportunity to do all sorts of things really. We implemented a system, we took on board a lot of processes and sort of set it up from scratch and looked after the split from the investment company, if you like.

You know, in those days, what was technology like? You know, we'll come on to technology, you know, was it, was it still very manual or what was it like?

Yeah, it was Pretty manual. I mean we weren't quite at the sort of green screen level which we were at bank of New York a few years before. But I mean to call the system we had, a Treasury management system was kind of insulting to treasury management systems these days, to be honest. It was very rudimentary, very basic. In essence it did the important bit, which was maintain segregation of duty and sort of keep the key controls there. But in terms of integration to other processes, there wasn't any, you know, there was an awful lot of manual workarounds and a huge amount of work done on spreadsheets.

You've stayed with the group for 17 years. Talk us through gradually your progression, how it came about and things like that. Because then you stepped up to treasury manager role, deputy treasurer, group treasurer again. A lot of guys will go three years in a row. I've got to move companies. But you've been with one company all the way through. How has it gone from there?

There's been a number of factors to that, I guess. I mean one, the company's changed an awful lot around me and so there's always been some really interesting projects to get involved with. Whether that's been debt, capital raising, IPOs, rights issues, various mergers and acquisitions and restructures through the years. So there's always something sort of meaty to get stuck. I guess throughout that time as well, I managed to qualify through AMCT and mct. So that takes a reasonable amount of time and you know, to some extent it's nice to have a bit of stability in your job whilst you're undertaking those studies. That was another factor.

What did they give you? And this is not, you know, just a flag raising for the exams per se, but it's more, why bother? You know, it's a lot of hassle, you know, you're not going to walk into, oh, I've got these exams, can I have a pay rise? Which a lot of people do actually ask and a lot of them when they're, they're disappointed, they suddenly reach out to us, oh, I've just made all this effort. But you know, so why did you bother?

The experience and the breadth that you get from the exams, the self sort of achievement, the ability to sort of benchmark yourself with others as well is quite important. And I appreciate that's on a sort of personal level rather than on a, on a company level. I think like anything evidencing that you've attained a certain level of skill within the profession that you operate within that's, you know, that's kind of important over my career. I guess that's really changed to the extent that when I started, sort of 97, not many people had treasury qualifications. Everyone was kind of qualified by experience, if you like. But now, if I was recruiting, I'd insist on a Treasury qualification because you want to categorically know someone's attained a certain level of experience and understanding. In terms of the exams themselves, it's probably the MCT I found the most beneficial because it's really not so much around learning stuff off by heart, which there's always an element of in some exams, but it's the practical application, it's the case studies, it's the, you know, okay, you've learned all of these skills, here's a scenario. What would you do or how would you do it? There's much, much more sort of practical relevance for that, I guess, from our day jobs, because, you know, the great thing about being in treasury is you never really know what's going to come up from day to day. And you have to be. You have to be agile, you have to respond to that, you have to respond to it in the right way. So, you know, getting the skills to do that is hugely important and talk.

Us through the progression. So you started treasury analyst. What then, you know, gave you the opportunity to be, you know, maybe someone moved on or various other. Then he became treasury manager. You know what, you know, were there competitive processes around that or was it just, hang on, you're the. You're the select, you're the guy that. Well, actually, here you go. Is the job, you know, I'm sure it's not like that. Talk us through.

I wish it was. Wish it was that easy. Exactly. You know yourself, Mike, right? A lot of treasury teams are pretty small, so there's an element of biding your time and waiting for the opportunity and a little bit of luck involved in all of these moves. To be honest, the qualifications helped. I think I jumped up Treasury Manager after I achieved the amct, and the role had changed a little bit by then as well. So, you know, there was a catalyst of qualifications, plus the role changing and the opportunity being available. As you'd expect, really, the biggest jump was for to group treasurer and again, I'd been lucky there because my boss at the time was planning on retiring. So I had three or four years to take that on board and make sure I was positioned in the right way to take advantage of that when it came. So there's an element of luck, but there's also an Element of taking the opportunities when they come and actually going out and getting those opportunities yourself rather than, you know, rather than waiting for them to come to you.

And whilst you were preparing yourself for that promotion or that move, what did you do? Bar just sitting there and learning from Steve, Steve Fenn, who was great and, you know, then retired and things. But, you know, what did you do in your job that was preparing you for that? Was that about going and meeting the businesses or was it about trying to get systems right or, you know, what was the ethos?

The people side of things is hugely important. So there's an element of building your network at the right level and making sure people understand who you are, what you're about, what's important to you, why you can sort of drive treasury forward and why treasury is important. So there's an element of sort of managing upwards and across your connections, really, to make sure people are aware of who you are. There's an element of shadowing as well. Clearly, make sure you understand every minutiae of the day job to make sure you sort of got enough experience and there's no sort of practical gap, silly things, if you like, that can fall between the cracks. There's an element of sort of personal development as well, in terms of leading people and being more of a figurehead for the business and for Treasury. So that was important to me as well. We probably spent a couple of years running through various sort of HR courses, sort of make sure I was as prepared as I could be.

I've got a list before today's interview with some of your achievements, things like that, and one of the things that stood out to me, you got 800 bank accounts. Hang on. You know, everyone says, hang on, you don't need 800, quick, make it six.

You know, I'm embarrassed about that, Mike.

Well, you know, but there's reasons behind it and that's what I was going to dig into, that you got all these banking partners and, yeah, you do slim things down, but explain maybe to the audience why you need that sort of thing and why it's not just, oh, we've got one global partner, that's it, and one major bank, that's it. But because I know that you and I have talked about this, you know, talk about how you've got that sort of cash visibility and what you've done to achieve that sort of thing, and the process you've gone through, I guess.

I'll start with a bit of context as to why we've got so many. And then Talk about. Whilst I'm disappointed that there's so many, it's perhaps not as big a problem as it might sound. If you think those 800 bank accounts would be split across maybe 40 or 50 different legal entities, probably 30 or 40 different currencies as well. There's a practical component that if we're receiving premiums and paying claims in a certain currency, we'll maintain liquidity pools and bank accounts in those currencies as well, just to maintain afloat, if you like. That's kind of on the normal side of things, I guess. The disappointing side of things is to do with the line of business systems and the legacy platforms that sit underneath the sort of things that make our company tick, if you like. And quite simply, there's too many old systems within the company and some systems can only connect to certain bank accounts in certain ways. When we look across the group, there's quite a lot of examples of that issue, I guess. So whilst the business itself is always trying to drive forwards and rationalise systems and streamline processes, there's always a bit of a lag, if you like, while some of the old systems are decommissioned and therefore there's bank accounts that are connected to that.

You still need to have them and things. And then you talked about this sort of global treasury management system without being a big advertising blitz, you know, for them, but, you know, talk us through that, what they are and stuff.

So we use a platform called Citi Financials, which is part of the Ion Group. There's two key components of what we do, really. There's Citi Financials, which is deal booking system, front end, if you like, the dashboard. The way we keep track of everything. Probably the more important bit, the less sexy bit, if you like, is the Swift Bureau that sits underneath and that allows us to scoop up all of that balance and transaction data every day and present it into Citi Financials. So it's the Swift Bureau that gives us the daily visibility of everything that we need to be sort of comfortable. To be honest, If I had 800 bank accounts and I couldn't see any of them, I'd be much more concerned as to what was going on there.

You got that visibility, why bother? I think it's an obvious question, but people said, oh, well, what does it give you? What power? What does it give you as a treasurer, would you say?

There's a credit exposure angle, so we need to know on a daily basis how much money we've got with every counterparty, I think sort of scrabbling around during the financial crisis, there were various rumors about various banks and the CFO would say, what's our exposure to X Bank? And you'd have to say, give me some time and five days later you may come up with a number. I think that's just unacceptable these days, to be honest. So there's a risk management angle to that, there's a liquidity management angle to that, I. E. There's a frictional cost for us for holding cash. We'd much rather get it invested into the investment portfolio and earning a higher yield. But we don't want to send everything to the investment portfolio without understanding what we've got, where it's at, when we need it, why we need it, et cetera. You can't make those kind of decisions without having visibility. That liquidity point is linked to the cash flow point as well as in how much have I got, what's coming in, what's going out, how do we keep track of that? In a sort of ideal world really.

In terms of management, the team, what's the size of the team and how do you put it out? Now this is again, some of the people out there will be in teams of three, some will be in teams of 33. How do you split it out and manage those people on a daily basis?

We're a team of three, so I think we're pretty lean for what we do. That does mean we've got some pretty good systems that are pretty well integrated, which takes some of the legwork out of the process, if you like. We have a separate cash management team that operates at the our back office and does the sort of daily position keeping and settlements activity. So there's another three people in that team to keep the processes segregated and controlled. But yeah, it's pretty lean and it means we tend to do a bit of everything across the entire team. The team's structured as one analyst, deputy and myself. That's really so that I've got someone who can cover me for all the various fund committees and stuff that we have to attend as a matter of course and as a regulated entity. But quite honestly, there's so many projects and activities going through any one time, we have to split that up amongst us and almost try and choose the best person for the job.

You're managing a really small team and a lot of, you know, a lot of pressure, as it were. You know, how do you do that? What's your management style sort of thing?

I'm naturally pretty informal, to be honest. I much prefer to operate Close and continuous communications if you like, rather than having these sort of big set piece meetings and one to ones on monthly basis. So we try and catch up multiple times every day. We have a few slightly more formal processes in place as part of the sort of performance review and appraisal. But yeah, I just like to keep in touch with everything and that extends across the other teams that we work with here at Head Office as well. I'd much rather have short, quick catch ups with multiple teams than have these sort of big set piece committees. Really anything more than half an hour, unless you're doing something really big, tends to be overkill, to be honest. There's something in there that's wasting time somewhere along the way.

And the aim for your role, know you've been in there, you've been, you know, a trusted treasurer for a number of years, looking after it and stuff like that, you know, does that extend, you know, is your CFO a bit like this as well? What's the sort of the driving, you know, mission for treasury going forward?

We're always sort of seeking perfection, I guess, and we're never quite there. The nature of the role and of the environment we operate in, whether it's new regulations or new products or new technology, means it's always changing as well. So I think as a starting position, I only ever wanted to be a group treasurer. So I'm quite happy with where I'm at from a role perspective. But from what's next for Treasury, I mean, yeah, we've got loads of little bits of optimization that we could continue doing. And what I really want to focus on the next couple of years is just how we best use the new technology that's coming out, whether that's virtual accounts, new payment channels, things like that. Trying to support our business in their drive to be more digital and tell.

Us about the business a bit more. I mean, we talked, you know, you're an insurance group, people sort of say, oh, you know, and there are different kinds of insurance. You know, we've got, you know, we have Friends, Life, we've got rsa, we got jlt, just recently bought by Marsh. What sort of sectors of insurance do you guys particularly focus on? And what does that then? How does that then impact into Treasury?

We're a general insurer rather than a life insurer or a composite, if you like. And all that really means is we don't insure people, we insure things. Yes. So we'll insure cars, houses, boats, cargo, wind farms, that sort of stuff. The business is split pretty much 50, 50 personal and commercial. So personal would be you insuring your house or your car, commercial would be marine cargo, things like that. And the commercial side tends to be sort of pretty lumpy cash flows multi currency across jurisdictions. We might have a insurer client who wants to insure all of his factories across Europe for example. So to got an international component to that. The personal line stuff tends to be very domestic and to a large extent you could think of it a bit like a utility or a telecoms company in terms of high volume, low value cash management. So lots of backs, payments and direct debits, etc. There's sort of a retail side to it as well as a sort of large corporate side to the business, which makes things interesting and challenges for the business.

You know, what do you see within the insurance market? What's the biggest thing facing the business? IT competition from other groups or is it events happening outside or what are the things that you think about? Think right, this is what we've got to plan for guys.

There's a lot of complexity and there's a lot of regulation that sits over the top as well. So I guess it's trying to get that balance right between optimization but staying within the rules as well. There's a lot of stuff that we just can't do, whether it's for practical constraints or for regulatory constraints, if you like. Insurance industry is to some extent no different to banking, that there's a lot of talk about sort of Digital Disruption and FinTech and other players, whether Amazon or Google will come in and start an insurance company. But similar to banks as well, there's a lot of embedded expertise within insurance companies in terms of how you manage and model those risks. And insurance companies, again like a bank, have a balance sheet that they need to support the risks that they're writing, which is maybe not different to Google and Amazon, but certainly different to some sor of smaller disruptors that they may be out there. So I think the industry again is trying to work out how best to sort of integrate and play with other potential partners or competitors or vendors.

And in terms of coming back to the human element, which is obviously you're on a podcast hosted by the treasury recruitment company and looking back at your career, what would you say has been key to your success? We've got some study in there, we've got taking your time, biding your time, what other things, what do you, your treasury analyst, your deputy treasurer, they come to you and say to have what should I be doing next? Or what advice are you giving them? And what advice, looking back, would you give yourself 10 years ago and stuff?

You've got to get involved in as wide a breadth of experience as you can, I think. And I appreciate that's difficult when you're in your first one or two roles, but it's still possible to sort of volunteer or to get involved in some of the broader projects. Really. I think the breadth of experience in treasury is hugely important because of the huge range of issues that you come up against on a daily basis. If I was going to say anything, I think it's that. And the important thing is translating that breadth of experience into, okay, so how did you make something better? What did you achieve? What did that save in money? What did that earn in money? You know, sort of translating something from just, well, I'd sat in on a meeting a few times to actually some practical implementation that made things better, that improved things.

Now, we were going to talk recently, Dan and I, and we rescheduled because suddenly got pulled into the dreaded. Yeah, Brexit. And we tried to avoid a bit on such an overused phrase, but.

But, you know, I'm gonna have to hang up now, Mike.

Before you do hang up, you know, thinking. Thinking about stuff like that. One of the things that I've talked to people, people said, oh, do you think it's gonna affect us? And I said, look, treasurers for, you know, in particular for their profession, you sort of exist above it, if you like. It's, you know, I've talked to a couple of guys, maybe off the air, you know, in general, conversations have. Mike, it's nothing. So. Well, hang on. It's quite a big thing. No, no, like it's a manageable risk. It's something we can predict. It's going to maybe be pushed back a year. And then there's this and stuff, and it's an orderly thing. I was like, all right. And they said, the thing that we can't cope with is the other stuff. What do you mean? Well, disorderly stuff, you know, disaster happens there or something like that. That's the stuff that we have to plan for as treasurers. So for you, number one, how do you manage Brexit or what's your planning cycle for that? Is it the other stuff for you, or what's the situation?

As an insurance company, we're kind of. We're sort of purpose built to deal with disasters and catastrophes to some ext of in the blood, if you like, in terms of how we assess the impact and how we go about sort of fixing it, really. And to some extent, Brexit has been no different. You look at the range of potential outcomes, you look at what the worst outcome is or what would impact the business the greatest, and then you sort of plan for that and put your mitigation around what the worst outcome. And for us as a business, we've actually set up a new subsidiary in Luxembourg and transferred all of our European business into that subsidiary so that we would be insulated in the event of a hard breakfast. Brexit. So it has had a big impact on us and we have had to take proactive action, as you'd expect from a company like ours.

Yeah. When you say you've got those other risks, Brexit is one thing, but is it the other stuff that's spending more? Where's the percentage of your time being spent?

Brexit's been a heavy resource drain for the last sort of 18 months to two years, to be honest. It's been a big project and a lot of effort to get that set up, authorized by the regulator and the rating agencies, et cetera. We're just kind of coming out the other side of that to some extent now. It's got to bed down, I think. Am I worried about Brexit from a business perspective anymore? Not so much. Am I worried about the impact on financial markets and liquidity? Again, we try and predict what might happen there and look to manage any downside. I'm probably less concerned about that. We spend a lot of time with our capital management colleagues who'll be modeling our capital position. Our risk management colleagues will be looking at the sort of impacts and probability of various things. And so it's not really a sort of. This is going to sound like I'm being complacent and I'm not at all. There's not really a killer risk for rsa. We spend a lot of time trying to keep in the middle of the range, if you like, across everything we do, whether that's the investment strategy, the liquidity strategy, whatever it happens to be, and sort of tweaking things as we go through. So I wouldn't say there's one thing that's taken up a lot of my time at the moment.

No. Fair enough. Okay, so let's wrap up today's show with the usual question. As we said before, we'll put a link to Dan's LinkedIn profile on the show notes, so he can connect with you if he wants to to and if it's useful to you. And your career, and his career as well. But looking back over your career, you've got this great blue chip background. The guys that are looking at it today, they go, right, I want to do that. What's your sort of summary advice to someone sitting there now going, I want to do the same. What would you say?

There's a few things. I think that the qualifications are really important, so just sort of get it done, really, and get it out of the way. Someone once said to me, which is absolutely true, that the qualifications only matter when you haven't got them. So as soon as you've got them, you kind of forget about them and move on. They provide that baseline of experience, if you like, which is really important. The rest of it is a common theme, really. It's about talking to people, staying connected, throwing yourself into the opportunities. The people side of things should not be underestimated for treasury, because most of what we do in the whole negotiating, communicating with other teams and external parties like our bankers. So keep involved, keep talking, keep learning, keep throwing yourself into the opportunities, as I say, and to some extent, if not, nothing's coming your way. You've got to make it yourself.

Make it yourself. We'll use that as the catchphrase for the show, I think. Do your exams, communicate, talk to everyone, be really good at Treasury. Thanks very much. That's it. And we'll wrap it up and take it. So, Dan, thank you for your time today. It's been really great show. I mean, quite an easy one in some ways, some of you. Sometimes we bounce around stuff, but Dan, as I say, he's a good mate. I'm really pleased we were able to get on the show. Just give some guys some straightforward advice which I think is sometimes hard to find. Simple advice. Do the basics right, get your exams, do this and away you go.

That's exactly it.

Mike, Dan, thanks for your time today. Great to chat and as I say, we'll put the show notes in there with the LinkedIn profile. Thanks for your time today, Dan.

Okay, pleasure, thanks, Mike.