Managing the Evolving Challenges in Treasury with Claudio Demolli

Foreign.

Welcome to this week's Treasury Career Corner podcast where I interview treasury professionals about their treasury careers. Each and every week I talk to them about how they've built their careers, where they are now, where they see both themselves and the treasury profession. Going to next, let's get on with the show. This week's show, delighted to be joined by Claudio d' Amoli, the SVP and treasurer at IGT plc. Now, for those of you that don't know, IGT is the global leader in gaming listed on the new stock exchange holding company headquarters throughout the world with other headquarters around the world. So truly a global company. They carry out business in over 100 countries, more than 10,000 employees across the globe. I'm not going to talk more about igt. I'm going to let Claudio do that later in the show. As always, I want to hear from him. You don't want to hear from me. You've heard enough. Claudia, let's go back to the beginning of your career. Hello, sir. How did you first ever discover where you started Finance and then Treasury? We were just talking before the show, as always. Over to you, Shay, you can kick things off. Over to you.

Thank you, Mike. Yes, I did start in the financial sector in the early 90s. It was really top choice for graduates in Europe. The dream come true going to the city. So I did all that. I spent about eight years mostly in analytical and strategy roles and banks. I started UniCredit in Italy. I moved to London, complete my education with a MSc in Finance. @ the same time I started working for banks and worked for Bell lynch, worked for ABN Ambro. But after eight years in the financial sector, I thought I needed something that was more for the long haul, a career choice that could help me build something. And call from Italy came and by chance I landed my first treasury role.

And what appealed to you at that early stage because you got that time in banking so you'd get a breadth of experience, maybe met a number of different companies or been exposed to them. But why Treasury? You said the long haul. And I've got to say to actually listeners, I did say to Claudio before he gave me some amazing briefing notes. So I actually know most of his story and we're friends over many years. But it was just I sat there and he could have just done the script himself, but this is one thing he didn't actually touch on. But why then were you drawn into the world of treasury as it were?

Yes. So I must say I wasn't very good to sell and Banking roles I were and I expected them to be analytical and strategy, you know, sort of economy or market economist or strategy. I really liked crunching numbers. I always felt that the sales part was I was not very good at and wasn't giving me the right vibes. So I really was interested to apply the technical skills and the all I had learned in banking to the corporate. I thought I could bring good value. A corporate. And my area of focus was especially foreign exchange in interest rate risk. My master's was quantitative finance and so I thought I had all the toolbox to then land my first treasury role as person in charge of the FX management. And you know I had a corporate that had a lot of FX in the, in the 90s we're talking just as the Euro was being adopted by Cassell 1999.

What does that mean? You know again you and I have both existed in that world and that was the early stages of my treasury recruitment career and I had all these foreign exchange dealers coming to me and going can you get me a job? Euro, it's going to cancel a lot of the stuff I used to do day to day, you know. And I was like yeah it will. It needs to be much more high level thinking and things like that. It sounds like that was what intrigued you about treasury as well.

Not really because I really felt that I had a role in FX even in banking, even after the Euro. At the time I was involved in emerging markets currencies in central Eastern Europe and when I started at Fiat in their FX and interest rate risk management department, I was really looking at emerging markets. And in the early 2000 we had a devaluation in Brazil. So the experience that I had accumulated so far Starting from the 199293 European currency crisis, the devaluation of the pound of the lira and that troubled years that culminated in the euro in 1999, all of that was very helpful for the role that I landed.

Tell us about the group you joined, how do you say it? Stella Atlantis. And then they were formally Fiat and things. What was that starting for you like in treasury?

It was a completely different. Was mind blowing. There was a great team, a lot of people learned from. I must say the risk management guys were quite isolated. Seemed a little bit like the mad scientists inside the whole Treasury. We had Reuters stealing terminals, we had Bloomberg's when nobody else had. We had a lot of technology and we were number freaks.

That's not a bad thing. Come on.

No, it's not. Of counterparties, we were well respected. But Also we were riding multi billion dollars or Euros exposures in countries, as I said, Brazil, Latin America in the early 2000s was in great turmoil, so was a 247 job. Was very challenging. But I must say time progressed, I found that. But I still had a lot to learn about the corporates. When I left fiat in 2003, I had a limited exposure to what treasury as a whole means for an organization like that. And so it was decisive to then do a little bit of consulting, doing some projects in the areas of cash management, forecasting. That equipped me better to take my first corporate treasurer role, which was in 2004.

And you joined Autogril?

I joined Autogril Company because it was an Italian listed and an Italian majority owned company, but had made a few years before a transformational acquisition in the U.S. so when I joined, more than 50% of the company's business was deriving from the U.S. where the company is still very successful running food and beverage in highway plazas as well as the main airports in the U.S. big business.

Lots of, lots of flows and things like that. That's when I think we got to know each other around those days quite a while ago. But what was it like for you as a Treasury professional going in there? Was it sophisticated? Just sit back in your chair or what was it like?

Well, I would say it was quite sophisticated. The area where we then needed less sophistication, which was that of the currency management, because it was the years that yes 39 was being adopted, both IFRS and US GAAP or Derivatives were imposing new ways of managing risks for corporates. A lot less speculative, more long term conservative hedging approach, less transactions, very tight link to the underlying exposure. So the emphasis was put not on being good traders, but being good forecasters and good managers of exposures and doing the accounting properly and the disclosures that had never been done to that level of details before. So again, I had a very good toolbox, but maybe not exactly what I needed because I wasn't strong in the accounting. So I had to build all that. At the same time, the company was not very centralized in terms of cash management, liquidity management. So we had to do all that. And also as many corporates back in the day, the forecasting was not adequate to the challenges that the expansion that the company was having at the time. Also throughout acquisitions and fact that we were rapidly re leveraging the balance sheet meant that we needed to do a better job estimating where our debt will be in 3, 6, 12 months, where our covenants were going to go and end after an acquisition and taking on more debt and all of that. So it was a very dense and very interesting start of that seven year run.

And with yourself, that group, obviously you alluded to it earlier that you based in Italy, but you had a heck of a lot of stuff over, you know, over the Atlantic in the US as well. And that's something that then continued later on in your career. But if we go back to that, what was that like? You know, sort of dealing with both of the demands, you know, so you know, you've got the Italian thing, Europe and everything else, but then you're also having to do a heck of a lot in the US Just long days or what was it like for you as a Treasury professional?

It was really cultural change and the cultural challenge. I realized even since my days at Fiat where also had exposure to the US that it was a really different way of looking at Treasury. And so it was always a challenge to translate the corporate approach, the corporate policy and make sure that they worked for overseas as well as in other professions. It was about building personal relationships. Take a flight, go there, try to understand what I had been doing before me taking over and why and see if we could find a mutual way to continue to do business together and to be mutually beneficial. So as I was obviously coming from a different business with different priorities and I realized that my predecessors hadn't traveled and hadn't had that kind of open mindset. So I think that helped a lot in understanding that this was the way to manage global teams and to make sure that the treasury worked and functioned in an organization regardless of where it was managed. And you know, even putting the basis for a successful work remote and you know, being control of treasury operations so many countries as I'm now at IGT.

And that was 10 years before it all kicked off really. And the idea of remote working. So then talk us through because you then went through another role. But to then get into igt give us because I want to get into that because there's some great information to share with the listeners. And we talked before this about some of the experiences you've had at the group which have been brilliant. But talk us through then the next.

Couple of moves for you IGT happened by chance. So my former boss at IGT, the CFO, I've known him since my early days at UniCredit in the early 90s. The challenge that IGD was having at the time in 2012 was it had a European Treasurer and a US Treasurer. The US Treasurer was in theory the group treasurer, but a lot of the banking relationships were European and so a lot of the activity was actually based in Europe. So there was an issue of again integrating and uniform in policies and have a global, global bank relationship management, avoid miscommunication towards the external world, as well as servicing the business which was becoming more and more global, less territorial in the best way. So what the CFO chose at the time was to bring an Italian guy who could understand Italian business, which at the time was more than 50% of the global business and has some very particular peculiarities being a regulated business in Italy, but had also an exposure to the US So was culturally adapted to take on a global role. And he chose to sit this new role in the US where most of the finance headquarters was at the time. And it still is.

Yeah. So you made that move across. What was that like for you? Because, you know, we've talked before about how the role of the treasurer has changed, but also we'll talk about that maybe a little bit later, but the, the sort of transition from Europe to the US So you've seen it firsthand, you know, and I, we recruited both markets and there are some distinct, there are some similarities, but there are also some distinct differences. So what was it like when you got across there and your role as, you know, VP and treasurer, and that grew from there. But what was it like for you differently? What were the differences?

Well, I think in the US the treasurer has a status that is quite different, is more a spokesperson, a gatekeeper for the entire company, does have some official duties. It's basically seen as an entry point to the organization. So there is a lot of visual matters signing, especially in a regulated industry. I am licensed by more than 100 jurisdictions in the world. I am subject to scrutiny and all of that. But the pros are that a treasurer in the U.S. it seems to be, at least this is my experience, can gain a better perspective on the company's business, has less chances of being cut out from the actions, from the decision making. As I said before, the role has changed. My early days, my career, I felt more specialist, isolated. And certainly that has changed. But in the US I think it's. I found, at least this is my experience, I found it to be a lot more integrated into the broader company and have a better access to information and ultimately be in a position to better understand how I can add value to the, to the entire organization.

And as part of that, and sort of an extension of that because, you know, over the time that we've done the podcast over three years now, have talked to a lot of treasury professionals and about the evolution of the role of the treasurer. As you mentioned before, it was sort of some, in some ways previously it was slightly ivory towered. That's a. Treasury looks after the money and. But then over time it's sort of pushing yourself out there to the business and this is what we can do to help you guys. And selling the dream of treasury internally as well as the external involvement, but it's much more working with the internal counterparties. How are you doing that effectively? You know, what's your, you know, ethos when you, you know, you're working with those guys? Because again, sometimes I said, oh, are you going in with a big stick to these guys? Not to you, but to other treasurer. You're going in with a big, you know, must do this, must do this. No, no, actually much more. Look guys, you can carry on doing it like that, but give me, you know, if you work with us or reach out and I'll give you the advice and I'll support you. Oh yeah, okay. Yeah, you'll definitely help as a real support. How have you done that?

Yeah, that's exactly right. So I think there is no magic, right. So you have to start selling yourself as a trusted partner more than someone who dictates rules or applies handbooks. I think one crucial thing is having a CFO who has gone through treasury and that, you know, as is my experience with both my bosses at igt. So they do understand treasury and do understand how treasury is crucial and can add value. So they brokered that entry into projects, into information and make it easier to add value and act as a trusted partner to the organization. It is, I think it must have changed also the way that CFOs look at Treasury. I remember in my early days in this role, CFOs tended to be quite suspicious of the risk that dealing with derivatives, dealing with the markets and the volatility of those markets and maybe not the robustness of internal controls could cause to the organization. So the fact that internal controls have evolved, the treasurer's role is more understood. I think most CFOs now are a lot more relaxed about the risks that treasury could pose to the organization and are more inclined to see the advantages and to help treasury being integrated and part of that broader finance organization and as a whole to the overall company and have the treasury involved in many aspects of the company as much as possible. So key and the other is having the Resources and the experienced people. I don't know everybody in the organization that treasury deals with, but I'm fortunate enough to have very seasoned professionals who've been longer that I have and have those connections and you know, manage to be in the right place at the right moment. So we do capture projects, we do capture investments before they get really live and we're able to add value.

And do you, you talk there about the sort of internal relationships and working with those guys? Let's. I just want to bring it back to. Can you just explain IGT for the listeners just so that they understand what you do and what I mean by that is to explain the depth of the group and then bring that back to Treasury. You know what, how, how that's different to other treasurers out there.

When I joined TIGT was Stankhold, first Automatica and then gdac. It was a mainly a lottery company by which I mean that it was providing technology and services to state run lotteries around the world. First and foremost in Italy and the US it had significant presence internationally. We already have like close to the hundred countries over that we have now but you know, fairly small. So the bulk of the business was lotteries in Italy, one of the largest worldwide and more than 50% of the US state run lotteries. But then in 2015 IGT came by as an opportunity for an acquisition and then the entire group renamed IGT after the newly acquired company. And IGT was a gaming machine manufacturer, had some business in digital and interactive as well which and growed over time but mostly was gaming machines. So one of the largest providers of gaming machines to the casino market in the US as well as internationally. So the next few years were very interesting as we integrated the two companies that were quite different. Lottery is based on long term contracts so you have a certain predictability of cash flows which definitely makes running treasury as well as building a highly leveraged capital structure more appropriate, raise capital more easily in the market. You get a better rating from rating agencies while the gaming machines market is a lot more product sales dependent and has less predictability. So the two companies were very different.

But you as a treasurer, what's coming at you? What are the things not that keep you awake but you have to sort of keep an eye on your shoulder. You're talking to the team, you're doing a weekly review. We've been through recent Pandemic obviously and we've done that so many times on the show. Let's not even get into that too much. But that being said, we're coming through the other side. What's now in your mind, Is it the rise of technology? What is the CFO saying to you? Claudio, we need to be thinking about this.

I think continues on the strengthen our balance sheet and being stronger the credit markets and being recognized as leader and get more attention to our debt as well as to our stock. The classic goals more at a micro level. And you are definitely more aware than I am. Here in the States, we have a struggle to retain talent. Maybe the press exaggerates on the great resignation, but we can see some of this going on. And it's always crucial to try and grow talent and retain talent. And when someone leaves the team, it might be a little bit of a struggle to recruit and place talent with equally valuable team members. So that is something I am definitely focused on at the moment.

And he's obviously getting. Claudius, getting great advice from me and we, we always talk and whenever he needs it. But that aside, obviously from the recruitment advice you get, we don't actually make this a sales podcast for us, but if you're looking for a job, call us. Luna recruit, call us, but not Claudio. We'll do that separately. I'm interested more in that talent aspect. Exactly as you say. Funnily enough, we just recently put together the results of our salary survey and actually we're talking to people and this hybrid ways of working. It's all about the salaries. It's not about the salary. Salary comes about sixth or seventh down the line. And actually it's about a good boss and all these other things that make jobs worthwhile rather than just the salary. Yes, it's an element, but it's not the only element and it's not the key element. With you as a treasurer, what do you exactly? As you say, there's a lot of changes coming through, particularly with the US Market. What steps are you taking? What are you thinking about? How are you working with your team to try and minimize that people risk, if you like, what are you doing about that?

Mobility inside the team is key. To me, it's not always easy because people tend to develop specialized skills, done cash management for many years. It's difficult to move them to an effects role or more to an accounting role. And I don't tend to do that very often or very abroad. You know, always very careful to avoid people going out of the comfort zone. But definitely, you know, we've had some instances that people had opportunity to grow and I see that the go and get it attitude, as I call it is very important. So you know, have them swim in the big pool for, for some time. I'm always here for support but that works. And you know, trying to retain sometimes money is outside of the treasurer scope. You know you have in large companies like ours have HR policies and so and so it's really trying to keep the team cohese and by giving people opportunity to move around and grow. As I said, it's not always easy.

It is a challenge there as well. I mean we're talking about the people aspects there and you're a global company coming out of some challenging times. What are the other aspects of treasury that are coming at you? Give an example. I was asked the other day, someone said oh, would you run a session for us? So yeah, what do you think about the development of technology throughout the pandemic? And I was like, are you mad? They were like, what? Well I said no, it hasn't developed. Treasurers like yourself, Claudia, been under intense pressure and you spent more time working with people and hand holding and coaching and all these other skill sets you really had to bring to the fore. Now that's not going away, but it's like other priorities are coming along. What are the key things you're seeing as we go forward from here? What do you think is next sort of thing?

We do have a big technology project in the works here and certainly we've always been historically well before I joined, I think at the forefront of the automation and we continue to do that. I don't think this as complicated or innovative as it used to be 15 or 20 years ago. I mean now there is a lot of technologies available. Companies need to understand they have to put the resources to run a more efficient Treasury. For us it's always the internal controls is always to being so diversified and complex to keep an eye on the entire world. And it is continue to understand the priorities and demands of the business. We've recently reorganized and changed our organization from geographical one to a segment organization. So understanding how we can better serve those three different segments which are very diverse one to the other. And then if I look at the global macro environment, probably going through a phase of reinforcement inflationary expectations and rising interest rates. So some of the volatility and riding the cycles that I Learned in the 90s with currency volatility and interest rates that were very volatile maybe will come useful again.

Yeah, probably a bit more of your day job. That's what I was talking. I was talking to a treasurer the other day and he said, you know what It'll actually be quite nice to just focus on the practical skills he's developed as a Treasury. You know, there's been a lot of. Of stretch for a lot of treasurers like yourself, something over the past two, three, five years sort of thing.

But this is what makes treasury interesting and then fascinating. That is so diverse. And each company I've worked at was different priorities. Each stage of my career had different priorities and there were different themes that were important to focus on.

So as we approach the end of today's show, we always go to our top tips for the listeners. And maybe those themes are what you're going to finish with today. But. But if someone's listening in today and they come through the show and they say, do you know what? I want Claudio's job, or I want a job like that, developing their careers or maybe a bit later on in their careers. What takeaways would you give to people listening today?

I think it's in no particular order. I would focus on three things. First, understand priorities and demands for the business and adapt to the circumstances. I think I. I've talked about that long enough. Second, that's very important to me is speak up, take decisions and don't be shy voicing one's opinion and be transparent, be accountable and be consistent.

How do you encourage that as a treasurer? Because there might be some treasurers listening today saying, yeah, I'm trying that, but sort of a sub tip, if you like. How do you do that? Encourage your team to speak up.

It applies at all levels. So if you have a team that speaks up and is encouraged to open up, then you can build. Build a more robust position that you can bring up. So again, to that concept of spokesperson or your team, you might be a spokesperson for the rest of the organization. The most important thing is always to be transparent and accountable and consistent. So not change views too often. But if you have a good reason to change your views, don't be shy to do that and don't be shy to take responsibility for a mistake and change course. Again, to that concept of adaptability that I was mentioning before.

Is that all of your tips? Because I did jump in.

Well, I think.

What was your third?

I think an ethical approach and prioritize people management also work well for treasurer, as they do for any executive in any companies.

Amazing. Well, I knew it was going to be like this. It's very. What's the word? Pleasing to have you on the show. Well, an easy one, Claudio, because we're very good friends. We've known each other for many years. And you guys listening today, feel free to reach out and connect. He's a great guy to have in your network. Can't wait to see a real life one day. Yeah, another conference. We'll be back.

Thanks for having me.

Thank you. Hello, it's Mike here again. I hope you enjoyed this week's show. If you did, then maybe you want to follow the show or subscribe, depending on where you listen, whether that's itunes, Spotify or another great place to listen to the show show from. It's totally free and means that you'll be the first to see each and every week when we release a new show. And maybe whilst you're there, you could even leave a quick review. Reviews and ratings are among the most important metrics for a podcast to effectively rank. And as you can probably appreciate, the podcast is a lot of hard work to produce. Every week. It'd be amazing. Just take, say, 20 seconds, leave a quick review of my amazing guests and their great career stories. We'd really appreciate it. Thanks very much and I can't wait to see you soon.