The Benefits of Working in a Variety of Sectors Throughout Your Treasury Career with Stephen Darnley

Foreign.

Welcome to this week's Treasury Career Corner podcast, where I interview treasury professionals about their treasury careers. Each and every week I speak to treasurers about how they build their careers, where they are now and where they see both themselves and the treasury profession going to next this week's show. Delighted by, joined by Steve Darnley, the corporate treasurer at International Air Transport association, or as many people know, IATA. Originally founded in Cuba back in 1945, over 70 years ago, they're a group of airlines who form an international trade association, if you will. Steve can explain that a little bit more for us towards the end of the show. I mean, they've got 290 airlines in 120 countries, representing over 82% of total air traffic. So, you know, they lead and serve the airline industry in general. And Steve's the group treasurer there. But we'll also talk about that, what it's like to be the group treasurer of an association like that again later on in the show. But, Steve, originally, we've known each other for a number of years. You did your degree, you qualified and you made your first move into public services through the nhs. So, Steve, perhaps give us a, you know, a start or a flavor for you, if you will, about how you started in first finance and then progressed into Treasury.

Yeah, sure. Good morning, Mike, it's really good to talk to you. The move into public sector finance wasn't something I'd particularly planned. I did an economics degree at Cardiff, specialising in banking and finance. And when I left university back in those days, there was a lot less career planning available to people than there seems to be for young people today. There's also probably quite a lot less pressure as well, which is a good thing. And I left university and drifted off to work for a friend of mine in his garage as a. As a mechanic, much to my father's intense delight, having paid for my education through university. And after about 18 months, he coughed one day and said, when do you think you're going to get a real job? And I thought, okay, maybe I ought to. So I started looking around and I found an opportunity as to join the National Health Service as a district finance trainee, which I did in Epsom in Surrey. And I spent some few months working around the finance trainee scheme, initially in the general ledger section and the accounts payable, and eventually moved into the internal audit department for a three or four month secondment. And at the end of that time, the head internal auditor actually asked me if I would like to join his team on a permanent basis. And come off the trainee scheme and he offered me money. So I said yes. And that was really the start of it. I spent some time working for Surrey in the internal audit department. Then I moved to a different role in Sussex for a promotion. And after a short time down in Sussex, I saw an opportunity with American Express in Brighton to be effectively an internal control analyst, sort of one step closer to the business from internal audit. And I applied for that and got it, which was great. And spent a couple of years working for Amex, initially in the internal control department, UK based card business. Then transitioned into a more mainstream accounting role within, within that same division and then after a year or two doing that job, moved to British Rail in London. Not out of any terrific urge to get back into the public sector, but basically because one of the managers that I worked with at American Express knew a chap in BR who was looking for somebody to join his team and was offering quite a significant opportunity in terms of promotion and salary increase. And so it was an opportunity which I thought was too good to miss. And so I took that role within Bridge. Spent some time working as the divisional accountant for the Red Star Parcels division as it was. And after approximately two and a half years doing that, I was sitting on a train one day coming back from some BR meeting in some far flung part of the country, chatting to a colleague, guy called Mel Harris. He was telling me all about the British Rail Director of Funds department. And I was very interested in this because it sounded very much an area that would appeal to me with my economics background. And I must admit I wasn't finding accounting completely fitted my dream role. No disrespect to accountants, but I would say it's fine.

But it sounds like it was your first intro to sort of semi treasury, as it were.

Absolutely. So chatting with Mel, the director of funds department was the equivalent of BR's treasury. They were managing quite substantial financing positions for BR. There was a short term funding requirement of anywhere between 250 and 500 million pounds which was financed through the London money markets, focusing specifically initially in the local authorities area of the London money market, which was all negotiated through brokers like Tullets and pre bonds and people like that back in the day. I'm not sure how many of those brokers still exist. And so I was chatting with Mel and he was telling me all about this and he was saying, you know, they had a small amount of FX exposure to manage from overseas sales of British Rail passes and for tourists and stuff like that. And I thought that sounds really interesting. So Mel said they had a vacancy in the department and I should apply for it if I was interested, which I was, and I did and I got the role, which was great. And I spent the next two and a half years as the principal dealer for British Railways Board, which was great fun. It introduced me to the world of brokers and their role in the London markets, which was highly entertaining. It was also quite pressured because at that time BR was going through the preparation for privatization and there were some quite significant changes in the way that the railways were being funded. And as different divisions were prepared for privatization, there was a lot of work around managing that process. So be it. That when I started covering the financing position for BR, as I said, we had up to £500 million of short term borrowings. As various bits were sold off and cash flowed into the railways and the government put investment in to support other parts of the railways to privatisation, that actually turned around completely and we became lenders in the London money market of anywhere between 300 and 500 million pounds on a short term basis. So lending sort of typically in the 0 to 1 month space, but perhaps in the ones to threes, but not really much longer than that. And at the same time we had 2 or 3 billion pounds of financing from the European Investment bank and other long term structural infrastructural support bodies. So there was that. And as part of our operations, because of the size of what we were doing and because we were a state sector organization, we were dealing a lot with the bank of England and the National Loans Fund as well. It was great comparative between the, if you like, the very commercial and dynamic parties that we were dealing with in the brokers and the banks that were active in the money markets and at the same time dealing with perhaps the more regulated elements of the National Loans Fund in the bank of England. And it was great fun, it was very, very interesting. But of course it was all inevitably going to come to an end as the privatization process was completely.

Yeah.

And we got to a point where most of the senior members of the department had been quite a long time in the railways and they were all taking the opportunity of the redundancy packages that were on offer and, you know, retiring off to wherever they were going to live. And Bernard Dunn to our Director of Funds, took me aside one day and said, look, privatization's almost completed. Railtrack is taking over all the network and the train companies have taken over all the operations and the leasing companies have taken over all the Rolling stock. So our requirement, our operations are diminishing significantly. However, there will be an operation to be run for many years to come. Would you like to be in charge of it? And I said, bernard, that's really sweet and a great compliment, but you know, king of what, there'll be nothing left and you know, I don't really want to sit here for years as a caretaker. Thank you very much for the compliment, but no, I will look to find a job in the corporate sector. And I was fortunate to be able to find a role with First Choice Holidays in Crawley as basically the second most junior member of the Treasury Department there. There were only five of us at the time, including the treasurer, an accountant, a Treasury manager and basically two dealers. And I came in as the, as the senior dealer there. And that was probably, I would say, my big break into Corporate treasury because First Choice, whilst it wasn't a big company, it was a, I suppose a FTSE 250 or 350 size company at the time. But it's the range of its activities gave me a fantastic exposure to pretty much the whole gamut of things, everything from daily cash management through obviously a lot of foreign exchange exposure. And so I had great fun and a great learning experience in First Choice for five years. And I, I also had an opportunity. We had a break between treasurers. One left and it was six months or so before another one started. And during that period I was able to act as acting group treasurer so because by that stage I've kind of risen up through the, through the team to be the assistant treasurer anyway. And I had six months as the acting group treasurer which was great fun. During the time there we renegotiated our UK tour operators bonding requirements. People in the UK will be familiar with the Atoll and Abta bonding. These are the bonds that the tour operators are required to provide so that if the tour operator goes bankrupt in the middle of a holiday season, the Civil Aviation Authority, which is the regulator, can call the bond and use the money from the bond to repatriate the holiday makers or refund people for their untaken holidays. So we had a quite substantial at the time, I'm talking late 1990s, 50 million pound bonding facility then, and that was initially a bank backed syndicate, but we renegotiated it, leveraging off the insurance market and particularly a number of large American insurers, Chubb and Minneapolis and Paul and others, to lower the cost of the bonding facility for the organization. So effectively our bank debt if you like. So that was a good Experience and I had five years at First Choice. I was thoroughly enjoying it. It's a very, very intensely competitive marketplace, had the benefit of some very good Peter Long. It was very educational, very broad spectrum role. I loved it. We had changes of banks, we implemented a Treasury management system, we did all of the things that you'd have on your tick list that you'd like to.

Do and then after five years you went elsewhere or, you know, how come if you're in such an amazing place, why move?

Because I'd been an assistant treasurer by that stage for a couple of years. I had ambition, as everybody should, and I wanted to get broader experience to prepare me for a group treasurer's role somewhere. I knew that if I stayed at First Choice, we had a group treasurer in place who had only been there for a couple of years and I didn't expect that person to move anytime soon. And I felt like I was kind of marking time. Having been an assistant treasurer for a couple of years, I felt that I needed to move in order to a get broader experience, because I'd own. My corporate experience was effectively only First Choice. And I wanted to experience different companies and different industries. I didn't want to be sitting there waiting for dead men's shoes for the group treasurer's role, you know, I. I wanted to go and find and prepare myself for another role somewhere else. I started looking around and I left and then I went to Homebase, which I was very excited by the move to Homebase because they had. Not long prior to my move, they had been acquired. Pamira, the venture capital group who had bought them out of Sainsbury's, which had set the company up as an offshoot to its supermarket business. And the plan was that there would be an ipo. You know, all the VC people always look for an exit from their investment at some point. And Amira's plan was to invigorate Home Base, really gear it up and make it more dynamic, eventually to go for an initial public offering, a share offering to float the company on the stock market.

And Steve, just, just again, for the international guys, Home Base, Home at that stage as well, perhaps the range of goods, homewares or home goods sort of store and hardware, as they call it.

For a European market. If you think in terms of Leroy Merlin, the French bricolage company, if you're looking at it from an American point of view, think Home Depot. That's. That's the home improvements business, basically. So it was. I was very excited by the opportunity to go to Home Base. I went there as an assistant treasurer, but I was happy to do that because I wanted the IPO experience. I was very much hoping that when the company was floated and it would further expand. And I knew that the chap who was the acting treasurer was actually an accountant rather than a treasurer. And I knew that he had his eyes on the CFO's job when the VC CFO exited after the IPO. So I had a plan, but unfortunately the plan didn't work out because this was what, one year after 9, 11, and markets generally took a bit of a dive. The VC company decided that they were not going to be able to IPO the company and get the return that they wanted. The IPO was shelved and the word went around that they were looking for a trade sale. You don't have to be Einstein to figure out that if another company is going to buy your company, it's going to probably be a bigger company. And if it's a bigger company, it probably already has its own Treasury Department, in which case your opportunities are likely to be limited. And so I felt with the cancellation of the ipo, my main reason for being there was gone. I was finding that I was kind of tripping over the work that the treasurer was doing and I was wanting to do things differently to the way he wanted to do things. And I became very quickly frustrated with the situation and so I decided to cut my losses and to leave that one and look for something else. After what was only six months, I just thought, no, this is really not going to work out. I don't. I'm not enjoying it. I'm going to take a short break and then find something else. So I left. I had a nice long summer. I just moved house. So I spent a lot of time that summer doing nice things to my new house. Then I started working for a completely different company in a completely different industry, which was Bell Micro Products, which is a computer and computer software company. They specialized in the sort of high end of the computing market in terms of storage.

And as a large group, you were sort of the European treasurer. But where were they headquartered? Or, you know, how was your, how did your role fit in with the group in treasury terms?

Yeah, so the company was originally founded in the us. They were based in California. I'd like to say Silicon Valley to make it sound sexy, but I don't actually, it was. They had been a very successful distribution company in the US and they expanded into Europe through acquisitions of various small scale European distees. And Ideal Hardware was The name of the UK enterprise which they acquired, but it was all under the Bell Micro parent company. And so we had a treasurer based in California, but he was, I don't mean, I mean this with the greatest respect. He was very American, he understood the US market. So I was working for the UK branch of this group. We had a treasurer, California, but it's clearly not practical for him with the time difference to be managing things that are going on in Europe. So they appointed me as the European treasurer. The group was expanding rapidly into Europe, acquiring other small European distribution companies and consolidating them. And so I was able to join the company and become responsible for basically the European activities, reporting into Carl, the treasurer in the US and that was fine. But if I thought that being a tour operator was a cutthroat business, then computer distribution is just mind bogg. The margins are wafer thin. The product has an even shorter shelf life than a holiday season brochure. It's a real hand to mouth existence because the manufacturers, the likes of Hewlett Packard and Compaq and IBM and Dell and people like that, they require the distributor to take a certain amount of product and obviously they give that to the distributor at a discount from the retail price. The distributor has then to sell that product at the retail price in order to make his money before the next batch of product is released by the manufacturer manufacturer with upgrades and improvements and everything which render your initial batch obsolete. And if you haven't sold it at all, you then have to mark it down in order to shift it and your margin disappears. And given that the pace of computer development is so rapid that your product obsolescence is probably, you know, maximum three months, you've really got to shift your stock and make it work. So it's very, very difficult. We had, from a Treasury perspective, it was interesting for me because this was my first opportunity to work with a bank where we had a securitization process program in where our receivables were basically sold to the bank in order to give us the working capital to buy the next batch of stock, to sell the receivables to the bank in order to repeat the cycle. And managing that cash flow was very challenging, but it was great fun. So we had a. We had this asset backed securitization with bank of America. It was great working with them. I hadn't worked with B of A before the running the securitization program, making sure that we were able to claim as much as possible because there were all kinds of qualification Restrictions around which sales could or couldn't qualify for funding. And so working hard with other members of team to make sure that we captured everything possible so that we could get the maximum value from the securitization program so that we could fund the maximum purchases of new stock and grow the business was really challenging. And at the same time, at the end of every month there were always suppliers clamoring for payment and a great deal of juggling to be done as we got payment from our customers to meet the bills that we had to pay. And sometimes we did and sometimes we didn't. And there was a lot of time spent on the phone managing this. So from daily liquidity management and a more sort of long term liquidity management forecasting for the group, this was really good experience for me because it was absolutely cutthroat in terms of did we have enough money basically to keep the business running? It was, and it was very challenging. Extremely good experience. It really drummed into me the old mantra, cash is king, you got to have the cash. So keeping control of your cash is so important.

And then from Bell you made the sort of move to a very natural move from hardware PC company to Burberry, the sort of fashion brand. And then, you know, and then after that sort of the office services group. Talk us through those couple of roles.

You know, actually there was a plan with Bell. I'd been the European treasurer, so responsible for an area, not the whole company, but at least having like independent authority for a significant part of the company's operations, which was good training for me. However, after two years at Bell and having realized just what a cutthroat business it was, realizing that it was struggling to grow, I felt that long term I wasn't convinced that the company was going to make it. Despite everyone there working really hard, I felt that my long term career prospects were not going to be served by staying there. Carl, the treasurer in the US was never going to move. You know, that was clear to me. There wasn't going to be a group treasury role with that company. But I didn't actually, I wasn't completely convinced that company had a great long term future which just by way of an aside was borne out because they were taken over some years after I left them. So I started looking around again, again with this plan of finding myself a group treasurer's role. And I was made aware of the vacancy at Burberry and I applied for it and met with the deputy cfo, a gentleman called Emilio Faux, who had come to Burberry From Gucci. Wonderful chap. Hit it off with him straight away. Absolutely in tune in terms of what he wanted me to do as well, what he wanted his treasurer to do. I was very lucky to be given the opportunity to join Burberry and I found it again, a great learning experience because again, it was a completely different area to where I'd been before because now I was in a manufacturing company. Effectively, yes, it's very ritzy, glitzy, high end fashion. It's actually a manufacturer with manufacturing factories in the UK and in other parts of the world, sourcing its raw materials from all over the world. Again with quite sort of tight timelines in terms of product production and shelf life because it's fashion and fashion comes and goes with every season. So there was a lot of focus there in terms of supporting the product of the product, which is what you would expect. But that meant that I was able to work with some of our suppliers on putting into place supplier financing arrangements. One of the things that people who are followers of fashion and the ladies in the audience particularly will relate to. Burberry used to produce some very high quality, very high end handbags. These were all handmade in Italy by small local suppliers, ateliers, they call them, sort of craft workshops, if you like. And these small businesses didn't have the financial wherewithal to raise the capital to buy the stock that Burberry required them to buy. Because we were very specific about where you source the leather, where you source the metalwork, where you source the zips, whatever, whatever. Anything that goes in, where you source the silk lining for the handbag, whatever. We controlled everything because quality control was absolutely paramount.

So you were moving down the supply chain, as it were.

So, yeah, I flew out to Italy a couple of times to meet with suppliers who basically were saying to us, look, you want us to produce more bags? Because these bags are selling like mad. But we haven't got the financial resources to buy in the stock from the suppliers that you nominate in the quantity that you want us to buy in order to manufacture the bags for you. We just don't have that kind of credit. So we said, well, that's okay. And you know, to put it into context, at this time we're talking 2006. These ateliers were having financing from their local banks where they were paying ballpark 15 to 20% for their financing. And we were able to go along and by talking to our bankers at that stage, RBs were the key providers of the supplier financing facility that we put in place we were able to offer these suppliers early payment on their invoices or prepayment of their invoices to give them the cash flow and at a cost that was less than half, possibly even less than a third of what they were paying otherwise. So Burberry didn't need to make money off this supplier financing. Our margins on the product were more than good enough for us to be comfortable. We simply wanted to ensure that the supply was guaranteed. So we made these arrangements in order to make life easier for us suppliers, to make sure that we had the supplier bags on the shelves in the shops. It was, again, it was a great experience for me. It was wonderful going out and talking to these suppliers. It was horrifying to know just how bad some of them were in terms of financial planning. But to be fair to them, they were, they were expert handbag makers, they were not financiers. So it was great because we were able to do good things and to support the business in terms of making sure that we had continuity of supply. And that's, you know, I think a recurrent theme in everywhere I've been, you know, treasury is an essential part of the organization in terms of its ability to advise, support and really add value to different parts of the business.

As I said earlier, and we joked about, you sort of, we talked about Burberry and then, you know, you, you said, ah, I know luxury fashion brand, let's go to a serviced office complex business.

Absolutely. Why wouldn't you.

Talk us through? And again, for the audience, they'll be sitting there going, right, you know, particularly in the us, I tend to find sometimes when I talk to my clients out there, they tend to say, oh, are they sector specific? And treasury, treasury, you know, transcends sectors. You know, you can work for an office services company, you can work for a luxury fashion brand, you can work for an airline company, you know, or holiday brands. It's more. Treasury is Treasury. Because there's a lot of commonality, there are some peculiar aspects to, you know, different bits of the business. But maybe perhaps talk then to that, if you know, how. How did you then choose, you know, to step across?

Well, I got the opportunity to move across to Regis and it was. Was another group treasurer's role because at Burberry, I had finally achieved my ambition of being a group treasurer for a listed company. So that was great. And I had a lovely time at Burberry and worked with a great guy called Pete Jones, who now at Fidelity. And yeah, I had the opportunity to move to Regis Basically it was more money and it was something different to do. I think probably the real catalyst for my move was the fact that Emilio, my boss, whom I got on so very well with, had been headhunted away from Burberry to be CFO of Benetton back in Italy. I felt that with him gone, we'd kind of lost a bit of direction. I didn't feel that I had quite such a good relationship with his successor. And so I was open to a move. And then when the opportunity came to move to Regis, I just thought, well, why not? It's another different role and it will open my eyes and help me acquire some skills in a completely different area. So I was, I was up for that. Picking up your point about the fact that treasury is transportable, I totally, totally agree with this. I look at it a bit like this, probably going right back to my roots as a mechanic. Treasury is a toolkit in my head. You learn different tools to do different jobs. You understand, you learn about how to manage a foreign exchange exposure, you learn to manage cash flows, you learn to manage interest rate exposures, you learn to understand companies long term financing requirements and the importance of liquidity. You learn all of these different things and to me these are your different skills. And wherever you go, you use the different tools that the job requires. So in first choice, to take an example, I needed to understand interest rate exposure management for the aircraft fleet. So I was able to do that. When I went to Bell Micro, for example, interest rate exposure management on airframes or jet fuel hedging were of no relevance to me whatsoever. But cash flow management was critical and understanding and managing an asset backed securitization program was a critical element of that. So you put all of your cash management and cash flow forecasting tools to work in that environment and you do the job that the company needs there. When I went to Burberry, there was a. You do all the usual things. I mean, cash flow management, FX management, all those things, they're all going on in the background. Yes, but you use different tools to solve a specific problem that's relevant to that business, namely the supplier continuity of supply issue and how to support your suppliers to the benefit of your company. So you apply different tools to that particular problem, but they're all within your toolkit that you carry around with you from role to roll. And this is how I see it. The point is that you are really in a profession which is truly mobile.

We got those transferable skills that you bring to bear. I mean, but tell US about the Regis business and how you know you were. What was treasury like there?

Very small. When I arrived at Regis I took over a department of work one namely the previous treasurer's role left and it was me. And Regis was an interesting environment because it was the first business I'd worked for where the original founder still owned a significant equity stake in the business and was actively involved in the management of the business. And he was a Mark Dixon. Everybody knows, you know, Mark Dixon owned was the founder of Regis, what is now known as iwg. And the fact that he was closely involved in the data day running of the business gave the business a very different dynamic. It was. I found it very invigorating. I thought it was real fun. Could be very challenging. I was regularly surprised by a phone call early in the morning. Any old morning didn't. There was no routine to it and it would be Mark on the phone with a question how much cash have we got? How much trapped cash have we got in India? That kind of thing I want to do X, Y or Z. So which bank do I need to speak to? You know, all that kind of stuff. And having that very direct contact, contact with the chief executive was fun, challenging, kept you on your toes. I enjoyed it. We did quite a few things in terms of just enhancing the cash flow forecasting. That was probably one of my major initiatives there was improving cash flow forecasting and because it was such a global business, doing a lot of work on bringing cash back to the center, increasing the amount of cash that we had on hand in the centre and then maximizing the yield on that cash. So there's a big focus on that. But also because it's a real estate business, we rent offices on long term contracts and then we sublet them on short term leases and there are clearly long term cash flow commitments around that. And so cash flow forecasting and your cash planning is very critical. And I spent a lot of time working with the BP and FA guys, the business planning and forecasting and analysis guys within Regis around that and doing long term business planning from a cash and financing perspective because of the number of offices that we had at that time. We had a thousand offices in 500 cities in 150 countries if I if memory serves me correctly. And so we had an awful lot of landlords from whom we had leased property and we had many hundreds of bank guarantees. So I got quite good at negotiating bank guarantees and bank facilities for guarantees for property leases. So that was another acquired skill. Learning about this area and dealing with bank guarantees and letters of credit and all of those things. And it was, again, it's just acquiring another tool to put in the box to carry around as a treasurer. Yes, indeed. But it was, it was great. I spent four years with Regis and had a thoroughly good time with them. Very challenging.

And then a move to iata, you know, perhaps again, you know, this is the most recent role you've had, but iata, you know, again, within Europe, a few, quite a few people will know it, but people won't know. International Air Transport Association. Are you just a membership association or how does it work or what's the situation?

What is iata? As you said in the intro at the beginning, and you have it right, IATA is the trade association for the world's airlines. But we were not like the. Is it the Teamsters in the States? Is that the Truckers association or the Road Hauliers association in the uk? We're not just that. IATA has a really critical role to play in aviation. It represents all of the airline members who, as you rightly said, between them, account for more than 80% of the total global air traffic every year. So we speak with a meaningful voice in terms of representing industry opinion and regulators, the various civil aviation authorities in different countries and icao, the International Civil Aviation Organization, which is based in Montreal, and governments in different countries. They do listen when IATA speaks because we represent all of these airlines and we have real influence in that respect. So what do we do? The number one focus is all about running a safe industry. And there's a huge amount of work that goes on in terms of developing, getting airline consensus on safety standards and getting those standards accepted by governments and implemented globally. And in order for the industry to be efficient, the standards have to be consistent globally. One of the things that treasurers will know about is, you know, how frustrating it is that KYC regulations are different from one country to another. Well, it's frustrating, it's inefficient, and it creates a huge amount of work for us all. It's a bit like that in aviation. You know, aviation standards need to be the same. You can't have a plane flying from one country to another and have a different set of rules applying to the way that the plane is managed as soon as it crosses a border. That's just ridiculous, as I think everyone would accept. So we a lot of time and effort into consulting with all the necessary stakeholders and developing, with the support of our airline members, appropriate standards for everything, not just safety, but fuel. Biofuel is a hot topic. You know, how to Reduce carbon emissions. Everybody wants to be greener. So how to agree a standard for biofuel so that when your plane takes off from London and lands in New York and then flies on to Sydney. At each place the fuel that is put into the plane is going to be of a consistent and reliable quality so that the aircraft will function safely. You know, all of these things from my role as treasurer. It basically splits into two parts. There's the IATA corporate activity and I mentioned a few minutes ago, you know, would the organization be very commercial? Would it be very corporate? We are a not for profit organization, but we do run a lot of commercial activities. The purpose of our commercial activities is to generate revenue which we can then use to fund our activity on behalf of the airline members or to invest into programs that we are developing for our airline members. We don't make a profit. Any excess revenues that we make in one year are reinvested into programs to support the aviation industry. There's no distribution of profits to anybody. We're not actually owned by anybody, which is a really strange one. When you try and do your KYC stuff for banks when they send you, you know, who are your beneficial owners and you have to explain to. So there's IATA corporate activity. The enterprise itself has a relatively small turnover. I would put us as a kind of FTSE 350 size company in that kind of bracket. About $400 million turnover for the enterprise, about $200 million a year of FX exposure for the company because most of our revenues are US dollar but we have significant local currency costs because we've got various operating centers around the world. Canada, Singapore, Beijing, Madrid, Geneva, Oman in Jordan. These different locations obviously have a local staff cost, an office cost, et cetera. So we have significant non USD exposures, predominantly USD revenue. So we have some effects to manage. No interest rate exposures anymore, which is fine. But the corporate activity from a Treasury cash flow point of view is fairly straightforward. Nothing too complicated.

You know, you say it's not complicated, but what excites you about treasury then within that organization, as it were, supporting the industry?

Because the other side of my activity is that I am responsible for all of the banking facilities that we need, the banking service enhancements that we can offer to the aviation industry for the settlement of its business. So in simple terms, think of it like this traveler goes to travel agent purchases a ticket to fly on an airplane and as far as the traveler is concerned, that's it. They've got their ticket, they want to go, but the travel agent will need to account for that revenue to the airline on which the passenger is going to fly. IATA operates settlement systems for the industry so that the travel agents in each country can belong to a settlement program in that country where they can take all of their ticket sales from all of their customers, covering all the different airlines that they sell tickets for, and make a single payment into IATA at a regular frequency. And the frequencies vary depending on the market, depending on the size of market, it could be as infrequently as monthly. It can be as frequently as daily. Some travel agents have even have an opportunity to settle more frequently than daily if they choose to. It just depends on the market. But the agents will settle a single bill to iata, and we will provide them with all of the reconciliation information that they need to tell them how much they have to pay us and on what day we get that settlement from the agent within our own internal reconciliation system. We know all of the different tickets from all of the different airlines that make up that payment from that agent, and we then allocate that revenue out to each airline, and we do that for every agent in the country, and we give each airline one payment covering all of their receivables from all of the different agents in the country. So, as you can imagine, when you multiply that out over close on 200 different country settlement operations around the world, that's a hell of a lot of reconciliation work that has to get done. And a lot of payments and settlements that we have to receive from agents and settle to airlines do this every day all around the world, 24, 7, 300, and we settle to the industry close on $400 billion a year of settlements through the various settlement systems that IATA runs for the industry.

And how do you deal with that in a treasury? You know, what challenge does that place on you within treasury, do you find?

Okay, so because we are effectively acting as a clearinghouse for the industry, we collect from the agents we pay to the airlines, or we collect from other related companies like ground handling companies, fueling companies. We settle to from airline to air traffic control companies for the air traffic control service. We pay individual governments for the overflight charges, if you like, the toll that the airline pays for flying over a country, a bit like the toll you would pay on a motorway in France or wherever. So we do all of this collection and distribution of revenues for the industry. But in all cases, we are effectively a clearinghouse collecting other people's money and we're passing, passing it on to the ultimate beneficiary. So for Me, does it have a cash flow impact for me as iatas treasurer? No. Only insofar as our on time settlement to the ultimate beneficiary, whether it's an airline or anybody else. The on time settlement is our number one KPI. So we have to make sure that we pay people on time what we have. And this is where it does involve me. In order to support support those collections and settlements, what we try to do is to minimize the number of days between collecting from the payer and settling to the payee. So we will very often require our settlement systems to have intraday facilities and even overdraft facilities so that we can. We have two settlement models. One is a. What's called a funds received and the other is a reported sales. Funds received is fairly self explanatory. When we receive the fund from the payer, we reconcile everything, everything and we transfer the money to the payee. Inevitably we have to wait for the money to come in, then we have to do the reconciliation. Then we transfer the money so there's a time delay. What we try to do in many places where, well, in every place where it's possible is to run what's known as the reported sales model. So we know settlements we should be getting from the reported sales information that we have and we tell the payer how much they should pay us. We then assume that they are going to pay us 100% and we prepare and send off the settlement file to the bank to pay the payee on the same day as the money should be coming in from the payer. Okay, in order to do that you need an intraday facility and you also need an overdraft facility just in case some of the payers monies don't arrive on time, which you know, for whatever reason they may get held up. So I have facilities with basically 60 banks around the world to support all of these settlement systems. And I have several billion dollars of intraday facilities and approximate $700 million of overdraft facilities to support all of these settlement activities. My job and the job of the team of people who work both within my central treasury team in Geneva, but also regional banking teams in support of our settlement activities around the various offices around the world. Our job is to make sure banking system supports our daily settlement activities and that we make sure that 99.96% of our settlements are on time. That is our KPI 99.96% of on time settlement. I'm very proud to say that for the last two years we've Beaten that target. That's the big sort of operational challenge, is making sure that we have the banking relationships in all of the different locations in which we work, as is always the case. It's a kind of 80, 20 rule. You know, 20% or even less than 20%. There is a core group of banks. About 10 of our 60 banking relationships cover about 80% of our settlement volumes. The balance is made up of those more remote or less developed countries where the major global banks maybe don't have the local presence to support us and we have to use local banks in order to run the settlement systems. That's the biggest challenge. Then sort of next down the scale, I guess, is blocked and restricted cash. You know, we operate in so many countries. There are many, many locations where there are restrictions on expatriating cash to many of the airlines. If you're earning money in Malawi, for example, no disrespect to Malawi, but the airline probably doesn't want lots of local currency and it wants to convert that to dollars and repatriate those dollars to use in its more general aviation costs. So helping the airlines to address restrictions on currency repatriation is another big focus area for us.

But looking back over your career, and there's been a depth of career there obviously for 20 plus years, how have you seen treasury and perhaps your treasury team change? You know what, what's the sort of the evolution of it? Looking back over the time that you've.

Been doing it, technology's changed hugely. Of course. You know, when I first started out, there wasn't much around by way of treasury management systems. There used to be a Bank of America system. I can't remember the name of it, but that was, that was pretty much the only thing that was around back at the beginning. Then there was plethora of TMS companies that started, sprang up offering different solutions and then those have gradually been whittled down through a process of mergers and acquisitions and so forth. Yes, I think that the technology from the treasury management system side of things has changed radically. And I think there's still a way to go for a lot of companies. Certainly the bigger companies tend to have tmss, but a lot of smaller ones still don't. I think now though that there's a moving away from the treasury management model. You had to have a TMS that could do everything all within one tms, I think platform. That was the way it went. Now it seems to be drifting away from that and there's a tendency to address things more through the App approach and finding different solutions for different things because it's much easier now to access these different solutions and it's much easier to bolt them together than perhaps it used to be. So I do see there's a trend instead of having the One Stop Shop treasury management system that seems to be fading away and there seems to be a much more growth of different, more specific solutions. I think possibly because the One Stop Shop thing was trying to be jack of all trades. And the flip side of that of course is master of none. The utilization of specific apps for specific purposes seems to be a trend which I see more of in terms of the world in which we live. Obviously there's been huge steps forward in terms of payments efficiencies. You've had everything from sepa, for example, in Europe, helping to standardize and reduce costs. I still think there's a way to go international payments in terms of making that more efficient, even less costly. But I like very much the Swift GPI and the visibility that that's bringing in. And IATA's done a lot of work in that space and that's one of the other aspects of this job, is trying to be an industry thought leader and helping the industry in terms of recognizing and applying some of the technology. So we were at one stage the largest corporate user of SCORE when Swift first launched the SWIFT for Corporate corporate solution. And we were in the vanguard of companies adopting score. We've been at the forefront of companies adopting Swift gpi. We've done a lot of work with that. We're working now on the open banking opportunities with a project called iatapay which we're working on. That's a very exciting aspect of the role. Here is the opportunity to engage with all of these different airlines and look at ways that we can develop things in terms of treasury team. Coming back to your question, I haven't seen a vast increase in the numbers of people operating in treasury departments. I know some companies have very large treasury departments and there's doubtless justification for that. Most of the companies I've worked in have been very small treasury departments. I've never worked in a department of more than six people. I think that there has been a huge growth in the productivity though, over that time because of the ability to use technology. And, and this is, I think, something which will continue. I do read a lot and see a lot of effort being put into automation, whether it's through AI or rpa, trying to automate the more mundane processes to allow the team to spend more time focusing on how they can add value. And I think if I had a wish, if I had a dream, then that would be the dream is how can we take all the routines stuff and just make it automatic and then focus our time on adding value to the business?

And looking back, as we close today's interview, we, you know, you and I talked about this before the show that, you know, if you want to connect with Steve and I think it'd be good to have part of the network, we'll put his LinkedIn profile on the in the show notes and you can connect that way. But as you look back across your career, you know, people, you know are coming into the treasury professional, the treasury manager saying, do you know what? That's what I want to do. I want to make that next move to get deputy treasurer, then a group treasurership. So I want to be in charge of things. What's the sort of, you know, what are the few pieces of advice you might give to the listeners now that they, they're thinking, yeah, I want a career similar to Steve?

Well, getting qualified is obviously a good thing to do, but for me, I would say never be afraid of change. Change is, it's a cliche, I know, but change is always. Change is an opportunity. And you should, in my experience, I would always say take your opportunities when come along because you never know how long you might have to wait for the next one. So, and I said this to my own daughters when they were growing up, you know, be brave, try it. If it doesn't work, that's not a problem, you know, at least you tried it. Welcome change, grab your opportunities. And to that point as well, you know, don't be afraid to do something very different. I mean, you know, if you look back over the companies that I've worked for, they're all very different at the time. Same, same time. Don't just chop and change without a plan. Whenever I've moved, it's because I've got a plan, I know what I want from the move. There's a specific objective in mind and I'm always working towards that objective. So if the opportunity arises that is congruent with your goals, then go for it, definitely.

So to summarize there as well, we will do because there was a lot of stuff packed in, I was scribbling notes, have a plan, study to help you improve and go on, welcome change. I be open to maybe different industries and things, but at the end of the day, as Steve said, and he explained that he shared this with his family and things like that. But take a measured risk which might provide a learning experience. A good summary.

Yeah, very good summary. I think that's absolutely it.

I think they're great, great pieces of advice. I think people can have those. Had Kathy on a couple of weeks ago, she has some, some of these written down on a bit of a post it note on her desk. And I think, you know, if you had some of those and kept referring to them, that'd be really helpful for people as they develop their careers. Thinking, actually, I can take a measured, measured risk. Be something good for people.

Be brave, you know, don't be scared of failure. Too many people shy away from opportunity because this, because they worry about what happens if it doesn't work out.

Yeah.

If it doesn't work out, you make another plan. Yeah. But if you grab the opportunity and really commit to it, the chances are more likely that it will work out.

Steve, thank you for your time today. As I say, we'll put your details in the show notes, but it remains, you know, varied career and everything else. And if you want to connect with Steve, look in the show notes. But Steve, thanks very much for your time today.

Mike, an absolute pleasure as always and I look forward to catching up with you when I'm next in London.

Thanks very much.