Navigating Capital Markets with Jeffrey Zomback

Foreign.

So welcome to this week's Treasury Career Corner podcast where I interview treasury professionals about their treasury careers. I talk to them about how they got started, where they are now and where they see both themselves and the treasury profession. Going to next this week's show. Delighted to be joined by Jeff Zombach. Jeff is a treasurer and cfo. So he's worked right the way across finance. Great career throughout, number of treasury areas. So aig, WP Carey, Paramount, and we'll talk through about Jeff's career up to now. As always, I'll get Jeff to do the talking rather than me. We're following along. Jeff, I'm going to go straight back to you. You originally started with EY or I was Young at the time, back in the 80s. Give us a sort of whistle stop tour of the early part of your career and then let's walk through, if you will, and then talk about treasury and you know, your love of it as it were. Over to you, sir.

Sure. Thanks, Mike. Well, I started my career at Arthur Young. It was the big eight at the time. Now it's the Big four. I was an accounting major at Binghamton University in Western New York. And I was actually recruited on campus during my senior year for an accounting position. I think one of the first steps in my career that early on was actually getting my CPA license. I think that even though I ended up in the treasury field, getting started in accounting was a great stepping stone for me. And a lot of people ask me an accountant could change their career path down the road. And as we go into my career, you'll see that the answer is definitely yes. So I started at Arthur Young, now Ernst and Young. I spent about two and a half years there, got my CPA license, but just public accounting just wasn't for me. That's when I moved over to AIG and spent the next 20 years of my career at AIG.

For those listeners that don't know AIG, I do and a number of people will. But what is aig?

AIG is one of the largest insurance companies in the world. It started in Asia and is a global company. Most people know AIG because of the financial crisis in 2008, 2009, and the company was eventually taken over by the government. And AIG was the subject of Too Big to Fail, but it employed thousands and thousands of people across the country. So most people have heard of AIG even though it's now a scaled downsized company because it had to sell a lot of its companies to pay back the Governments, which it did in full. So I spent the first five years of my career at AIG in internal audit. So actually continued the path of, you know, in the accounting related field of auditing before I started my treasury career, because I really felt that I still liked. I wanted to understand operations better and internal controls. So I was in the financial Services division of the internal audit department for five years and I really got to sit down with the presidents of various subsidiaries of the company and, you know, from real estate to investments and all the different, you know, credit financing and learn about their operations and, you know, write reports about, you know, what were their internal controls regarding, you know, their operations in general. And it was, it was a very good experience. I liked it a lot more, really getting a chance to understand the operational side of the business. And that was the time, Mike, when I decided that, that I really wanted to continue my education and I pursued an mba. I got an MBA at Fordham University in New York City in corporate finance. And that was really the springboard to my career in Treasury. It opened up the door for me to apply for an internal promotion at AIG into the Treasury Department. And so after my fifth year at internal audit, I became the manager of, of the treasury operations group at AIG and spent the next 15 years at AIG working my way up to becoming the Director of Treasury Operations.

What was it like culturally wise? Because a lot of people back in. That was 05 to 2009 from earlier, from there. What was it like as a leading treasury area within New York and everyone looking to you guys.

Yeah, I mean, it was. The interesting thing about AIG was that even though it had tens of thousands of employees, the departments were actually quite small. So it felt like you were working for a separate company within an enormous company. So you got great benefits from working there, but you still felt you were in a small setting because, you know, you could be in a department with only 15 people, for example. So the culture was very good. It was definitely a quality of life type of job. I wouldn't say 9 to 5, but the expectations for most of the corporate departments was a quality of life job. You know, go home, see your kids, you know, go to your, you know, kids after school activities, et cetera. So I think that the biggest break for me in the Treasury Department was when we needed to put in a Treasury workstation or I'm sure most of your listeners know tms, Treasury Management System. But we needed something. This is a company with subsidiaries all over the world, all over Europe, all over Asia. All over the United States. And the company was acquiring various companies left and right and that were unrelated to the insurance industry. So when I got there, we had acquired an aircraft leasing company, financial products, trading companies, other life companies. So we needed a system. We had no idea in corporate treasury how to manage our cash without having a system in place. And as some of your listeners may not know, an insurance company is regulated so you can't commingle cash between the life insurance companies, the property and casualty insurance companies or the non insurance related companies. So there is a concept we use called pooling. And we would almost be like an internal bank. We would have one bank account and then we would have 100 sub accounts for each. Let's say life insurance company would have its own sub accounts. The bank only knew there was one account. But we had to manage 100 different balances for 100 different subsidiaries. And that's why we needed a Treasury workstation. So I led a team that was a pretty large team. It had about four or five consultants. We used a company system called Wall Street Systems. Wall Street Suite was their Cadillac system. And it was a two year implementation design implementation. It was extremely successful and I ended up traveling to Europe and to Asia and to actually train and implement the system so that we could decentralize a little bit but have control in New York of the corporate cash, we could forecast the cash, etc. It was a great experience for me at that time, my career, I was in Singapore, Taipei and Hong Kong. I was in the UK and across different parts of the United States. So that was a really interesting part for me.

And you're in that role 05 to 09 and as a lot of listeners will know, and certainly older listeners like us, like you and I, oh wait, the financial crisis was hitting. How was that? And you know, you put in place this workstation. Obviously great timing, you know. How did you guys cope with that?

It was very difficult because the company was under, you know, the, the scrutiny of the government. We were led by our CFO at the time. We formed a project to implement SAP, which is an accounting system, an erp. And I was actually pulled, that was the point. I was pulled off of the treasury function in corporate treasury to be joined onto this team that would implement this SAP system. So you had the leaders from all the different groups in different accounting receivables, treasury. And we formed sort of like a working team to implement SAP. But at that point in time, as we are closer to 2008, 2009, we had no job security anymore. So it was crazy because people were told that there were going to be massive layoffs and there was really. I was there for almost 20 years and I had no more job security than somebody that was there for six months. So I actually, that's when I actually started looking around. You know, during the height of the financial crisis, I was recruited by a headhunter to, to go to WP Carry. So it was really, it was, I was very lucky, to be honest, at that time. But because of my background, I was a great fit there.

And you say that to W.P. carey, real estate investment trust or. Right. You know, pressing it again for the. Some listeners know very well, but many won't. So explain for them, you know, what the role was and what they did.

Yeah, so one of the things I would say is that, I guess a point that's worth saying over and over is that a treasurer is a corporate finance professional. So I feel that a treasurer could go to any industry, any sector and be successful. So here I am, someone that was in the insurance business for 20 years, but I would not consider myself an insurance expert. I didn't sell insurance. And as I spent the next 10 plus years in the real estate sector, I certainly know real estate very, very well. But I'm not on the acquisition side. I'm still in the corporate finance function.

But I think with all treasurers, your corporate financiers, risk managers, directors, cash managers, your treasury management system experts. And that's the thing I find amazing, the breadth of the work you guys do. We had our zoom call yesterday with a load of people. So just to explain and just again for listeners, and I think someone like Jeff embodies real treasury, that treasury is all those different things. And there are a lot of just straight banking guys who are banking treasury guys and they are cash management experts to the top of that t. And they're amazing. Whereas Jeff will know cash management, will know capital markets, no derivatives. And that's why I find it incredible the way you guys do.

Yeah, good point. At aig, for example, the treasury function was so large that it was split in half. So there were people that worked only on the credit side, the banking side, and there were other people like myself who worked strictly on the cash management and operations side, executing wires, focusing on the cash positions. When I went to WP Carry, and to answer your question, WP Carry is Triple Net Leasing reit. So it's a real estate investment trust. And a real estate investment trust, think of it as individuals or institutions that can't afford to buy or don't want to buy real estate themselves, can buy shares of a company if it's publicly traded and they'll have a share and all those funds are accumulated and the cash is managed. And then when an investment opportunity comes along, the REIT will actually buy the property and then either manage it themselves or outsource the management of the property. So there is, there could be thousands of shareholders that, you know, own shares of the reit. So in a sense you own little pieces of each of the buildings. But the company has the right to, to manage, you know, buy or sell whatever properties they want as long as it's listed in the prospectus. So I needed the WP Carry. When I got there, it was the treasury function was run by a senior accountant. And I find that in my experience now that that seems to be the case in a lot of companies. One of the insights that I have where I think it's a little bit of a problem, to be honest, where accountants are huge important function in any company. But a lot of people that have accounting backgrounds that don't have treasury experience are missing a lot of the skill that are needed to properly manage the liquidity of the company to working with all the different aspects. And I'll go through a number of examples with you. So when I got to WP Carry, the company had, I think 40% of its revenue, still probably has in that range, 40% of its revenue in euro, but pays a dividend in US dollars. So there was a currency risk because if the euro weakens significantly, it wouldn't have enough cash when it converted the euro into dollars to pay its dividend. I recognized that and I went to my boss who was a CFO and explained that there was some risk exposure there. I proposed a hedging policy which was approved by the board and it was immediately approved and we started putting forward contracts onto the executing forward contract. So for your listeners that don't know forward contract is a derivative and we would call a bank like, you know, Wells Fargo, bank of America, JP Morgan, just to name a few, and we would agree to sell our euro on the forward market three months out, six months out, nine months out, whatever we wanted and we would get, we would lock in a rate to get the dollars. So at the time that I was doing that, Greece was actually threatening to leave the Eurozone. This is in the early 2000s and people didn't know if there, what was going to happen to the euro. So there was a big risk. So I was locking in selling the euro at about 145, 147, 148. And we had contracts going out over five years with the banks. And it was a good thing because the euro weekend, it went down to almost par. So it went down to like, you know, under 110. And WP Carry ended up with significant unrealized gains on its books from the foreign currency. Now, it wasn't an action taken by the treasurer to make money, it was to manage risk. So the way I view it is if I hadn't executed those forward contracts, the company would have lost a significant amount of money if it was just selling its euro on the spot market when it needed to. So there's a lot of functions that I started to learn at WP Carry, because now I was responsible for the credit side of the business and the operations side of the business and I started developing banking relationships and lending. So I got involved with the company's credit facility and putting a facility together. You want me to go into detail about what a credit facility is for some of your listeners that may not know?

No, I think it's more that, you know, again, a lot of the guys. I was going to ask a bit more about you sort of relatively small team or team two direct reports, six indirect around it. You know, it was more the sort of what you're like when you're managing those guys in a very highly complex function, which it was, you know, you know, big numbers and, you know, big complexity of Treasury. You know, what are you like as a boss? You know, what are you, you know, how are you mentoring those guys?

Yeah, I'm very. I consider myself a teacher. When I'm working, I like to explain things. I like to a very relaxed personality. And I feel that if you spend the time up front with the staff, that they understand why they're doing what they're doing, not just executing and doing something. So there's a lot less errors and a lot more productivity when you explain things up front to your staff. So that's the way I kind of manage people. I'm very hands off when I feel confident that my staff knows exactly what they're doing and I can back off.

From them, leave them alone, because you did that role. And then I was keen to sort of. And we'll come back to the people aspect because Jeff mentioned before we spoke today that he lectures and he sort of coaches people, which I think is a good thing for people to sort of tap into. And I want to come back to that point. Then you were there for sort of six or so years and then she'd had AIG great. WB carry Paramount Group.

Paramount Group Inc. Is another real estate investment trust that only acquires Trophy A office towers in three markets, primarily New York City, San Francisco and Washington D.C. oh wow.

Okay. So this was continuation really?

Yeah, it was an opportunity for me to go in and build a Treasury function that didn't exist there. When I got there there was a cash manager that was there for believe close to 30 years and everything was done with Excel spreadsheets. So it was a challenge when I first got there to automate everything and put a Treasury system in place because it was hard to follow everything that someone had done manually for that period of time. But we put a system in place there as well and manage the cash. The other thing that is important at wpcarry and also at Paramount Group was to make better use of the idle cash and the liquidity. A lot of the bankers are giving the company a certain rate or maybe it's not a preferred rate of interest on their deposits but if you ask for a higher rate and you'll get at least to market or higher, especially if you're giving that bank a lot of fee based business and that makes the bankers happy. So at WP Carry, for example, the Treasury Department that I led, we increased the interest income by close to $2 million a year and at WP carry it was a couple hundred, I'm sorry, at Paramount Group it was a couple hundred thousand dollars a year which is kind of low hanging fruit for a treasurer type of function to do that.

And then you stayed within real estate and then another role so thing or just give us a quick sort of run through from WB Carrier to now because then I sort of. Obviously the world of real estate has changed certainly in the. I mean this current market, you know, I'm just talking to people, they say the world of offices and everything else will never go back to being the same. So perhaps give us a quick overview if you would of that.

Yeah, I think that that's a good point. I think that a lot of people have figured out how to work from home, work remotely or maybe aren't going to go into the office five days a week anymore, maybe three days or two days or zero. I think a lot of companies may downsize their office space in big cities as a result. It's going to be a challenge to real estate companies as to how to handle their vacancies. Or do they convert from office space to maybe residential? I don't Know, it's hard to say what's going to happen, but I think that a lot of real estate companies are going to be hurting, at least for the short term because of COVID But I believe that in the long term, I think real estate is, you know, always a great investment. And I think that the good real estate companies are going to figure out maybe there will be, you know, more mergers or acquisitions between companies as a result. You know, a lot of companies that don't think they can make it may sell some of their strongest assets for cash to get them through a certain period. So you're going to see a lot of properties potentially being sold to larger real estate firms and without this being.

A complete advert fest for Jeff, but we can make it a little bit like that. So you then moved on from Paramount. You had a more recent role. What I wanted to do was perhaps get you to describe with you and what you're looking for with your background, Jeff, because you got aig, so you got your insurance and stuff, but it's not that. It's more you've got your treasury background, you're a global treasurer. What would you say you're looking for in your career now? And if people are listening in and we've had this before with people have been, people have heard the podcast HR directors go, oh, actually, can we speak to that guy? Talk us about what you love about treasury and what you're looking for in the next sort of moves, as it were.

Thank you. I consider myself a builder. I love the treasury function. I'm passionate about it. I'm looking for a really dynamic challenge. A company that in any sector really, that's looking to grow, but realizes that it really needs a good treasurer and an infrastructure in order to allow for that growth. Someone that is going to be the head of the corporate finance function, that's going to understand the need to manage risk and the liquidity of the company, but be part of the senior team. And that's really what I'm looking for, is that kind of a strategic role at a company that's looking to grow.

And with yourself, you manage teams. And we go back to AIG, you had a team of 20 and right the way through to managing yourself and a couple of guys. I wanted to bounce back into that, the way that you are as a coach. And can you perhaps describe again, you said that you do some coaching or teaching, perhaps explain that to some of the listeners.

I spent a number of taking a number of trips to my alma mater, Binghamton University, I worked with the business students. I worked with the dean of the business school. I joined a networking event every year where we work with students on the concept of networking, building out their network. It's a lot of career education. You know, there's accounting majors who want to go into a different field. I usually go up there and spend an extra day on my own, and I work with students on their resumes, on interviewing skills, and just talk to them about, you know, what to expect in the professional environment. A lot of them don't really have that experience. They've only been in a classroom. So that sort of leads to how I work with people that I supervise and try to really patiently explain to them what their job is, what their responsibilities are, and to be a really good communicator. I think that most good managers at any level are good communicators and you have to set expectations so they can be met. And the expectation is that the person that works for you should also become a good communicator and be able to explain to you if we're running into delays, not just missed deadlines, for that matter.

And if you drill that down into the treasury teams you've coached, managed, supervised and everything else, and look at those guys, what would you say? You're in your next role, you're sort of assessing the team, if you like, what are you looking for from them? What's your checklist?

I think the first thing I'm looking for is integrity. I think it's one of the critical things for any treasury professional. I like someone that thinks on their feet, that doesn't just want to come in every day and just have the same exact routine day after day. In the treasury field, you have to be able to analyze things and just be on your toes and not just be a. A person that processes things. It's a little bit about relationships. I try to grow my team professionally by giving them exposure to the bankers and to establish banking relationships, which is critical in the treasury function. The bankers, you need a banker that's going to be there for you when times are tough, when there's a depression, you need a banker that's going to say, we're still here for you. Trust me, I've had experiences where bankers were there for us at any time when we needed them, and then there's times when company doesn't have that relationship and the bankers won't be there for them.

Again, we've talked about tms, as we talked about different things, automation, everything else. So it's not Sort of moving down that route. But more, where do you see treasury going? What are the key things that you see coming at you down the road? We talk sometimes when we go to conferences and stuff and we get CFOs and it seems that they're getting all these different blockchain, all these different things and they grab you as the treasurer and they sort of hold you out as like their shield and go, Jeff, you sort out will you? Or can you assess it for us? How do you feel about that sort of stuff? Is that the main things coming you or what are the main things that you think treasurers having to deal with?

I think that more and more that the treasurers have to deal with more of the finance functions. It's not so much where it used to be just cash management. People associated the word treasury with cash management. I think where treasury has evolved is that it's now more important to have strong banking relationships, to be able to have experience raising capital, to understand the capital markets. That type of responsibility is much more critical now for a treasurer or someone that's a Treasury manager who aspires to become an assistant treasurer or treasurer is to really get focused on the banking relationships, lending function and really understanding cash forecasting, for example. It's critical especially as companies are growing. But the trend I'm starting to see in the treasury field is that a lot of companies, the CFO is the entitled, the treasurer doesn't always understand the treasury function. So you may be called the Head of Treasury or the Director of Treasury, but the functions still exist. You're still being relied upon to manage all the treasury functions. I think that there are companies that are outsourcing the treasury function and there's companies that are using accountants for the treasury function. But I see it as a big mistake in both cases because even if you outsource the treasury function, there's no learning curve there. Your company is going to be reliant upon people that work for a different company and there's going to be turnover there. So they don't really understand completely your business and your operations. And one of the things, I'll give you an example. At WP Carry, when I put a Treasury workstation in and I was able to forecast the cash, I invited the heads of investments, asset management, accounting, legal, tax into a meeting weekly to discuss cash forecasting and how I can help them with the information. They like those meetings so much, they invited two or three people on their staff to come and next thing I KNEW There were 25 people every week. Coming into a meeting to talk about cash forecasting because the data is only as good coming out as it is that you get coming into the system. So we were able to close deals. The head of investments was closing deals and winning deals because he knew that we had the cash to close the deal because of the forecasting. So I think that having the function internal is critical and I think that it's a mistake. A lot of companies make it.

And as we approach the end of today's show, Jeff, as we do each week, we sort of ask our guests to. Again, we said before the show, we get different people listening. Everyone from a Treasury analyst, early stages of career, perhaps studying FP or, you know, ACT in the UK and things like that, through to treasurers, thinking about maybe those groups or throughout them. What are the three, you know, two or three tips you would give those people when they're thinking about it? We touched on integrity bouncing around, relationship building. But what are the ones that just sort of immediately jump out at you? And that's how that last, that sort of teaching and relationship building within treasury, out within the company, that's definitely worked for you. But what other things would you say to people?

I think the first thing, for more younger treasury associates that's really starting their career, the advice I would give would be to attend as many treasury conferences and seminars as they could, whether it's the afp, the New York Cash Exchange is a big one in New York City, I'm sure other cities as well, and to learn about as much as they can about the. All the different aspects of treasury from OFAC or EBAM or just the general concepts of cash liquidity and forecasting. And then to always ask a lot of questions of their senior supervisors and not just process transactions, but understand why they're doing what they're doing. As far as other treasurers or other assistant treasurers, the advice I would give to them would be to strive to become a treasurer, to establish really good banking relationships, to continuously ask for more responsibility on the job and to work hard and to understand that if the Fed closes at, let's say, 6:00pm Eastern time, that's when you walk out the door. And to communicate, I think to communicate with the heads of other, the other leads of other departments is a really critical to the success. You have to understand what's going on with the head of the tax department, what's going on with the chief Accounting officer and even the head of Legal or risk and compliance. And just being a full member of.

That team, Bridget I think it's great. I think, as you say, and it also crosses over with some of the things you said about even the earlier stage guys in their career. I think throughout their. There's go to the conference and Network, network, network, which gives you a greater understanding across the breadth of treasury, which then leads on to great relationships. And then it means that you've got that sort of internal network that's going to help your own success as well.

Yeah. The one other example I'll give you is I had a person that worked for me at W.P. carey. She had about five years of experience already when I hired her, and she was fantastic. I mean, she was a top treasury analyst, senior treasury analyst. She worked closely with the investment team. She was extremely reliable. She understood why the investment officer needed what she needed and she worked really hard. And then one day that investment officer came into my office and said, I'd like to hire this person from you, transfer her to work for me. And it became a great opportunity. And she's very successful now working in the investment side. So she moved from back office, middle office to now front office. I think there's opportunities there as well if you really listen and help the people that need to understand the cash, look after them.

Amazing, Jeff, amazing. Today, what we'll do is we'll put your LinkedIn profile in our show notes so people can connect to you and if it's worth connecting, vice versa. Thanks for your time today. You know, again, connect to Jeff if it's a good thing to do, and we'll definitely. And again, we'll. We'll talk. You know, Jeff will be showing up in an amazing treasury team very soon or leading it very soon. Thank you very much, sir.

Great. Thanks, Mac. Appreciate your time as well.