Why the Future of Treasury is More Integration in the Business with Cristian Iosio

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. In this week's show, joined by Christian Iossio, the head of treasury and M and A at Electrolux Professional. Now, Electrolux Professional are one of the world's leading global providers of food service, beverage and laundry solutions serving customers globally. Christian and I spoke about it a little while ago or just before the show and he said, look, can he describe it? I said, do you know what? Yeah, you're going to describe it much better than me, Christian. But as I say every week we're going to jump straight into it. What I want to do is get go back to the beginning of Christian's career because he's got a wealth of different things. We've got some great ideas to share with you guys today. Christian, take us back to the beginning of your career and how you first discovered finance and then treasury at a later stage and everything else. So give us a walkthrough, if you would. Over to you, sir.

Hello, Mike. Thank you for the opportunity. My career started a long time ago, over 20 years ago, as an investment banker in London. I spent over 10 years mostly doing private equity at the beginning and then taking care of company, going public and covering corporate finance. I then moved into sort of a more an advisory role. I had my little shop where I was advising on special projects with targets always publicly listed company. And then about nine years ago I joined Electrolux Professional. I started my experience within Electrolux Professional, within the strategic division. So taking care of strategy and taking care of special projects and the role has evolved through time, focused more and more on M and A going forward as M and A has always been a strategic priority. And then in 2019 we separated from group during the separations we had to start building new functions and new areas and one of those functions was Treasury. So we decided to dedicate resources and focus on Treasury. I was offered the opportunity to embark in that adventure. I became responsible for the area and it's been a very interesting experience for me. We built treasury from scratch, we started to work from there and now I think we set up a pretty effective and efficient team. It's not very large, but very much focus on the key and core activities of our function.

I mentioned there at the beginning of the show. I mean, we'll dig back into some of your previous history, if you like, and about how Nomura helped you, maybe added to you and your career now. But as you said, Electrolux isn't perhaps what I thought it might be and we were careful about to say it. Can you describe how Electrolux, you've been there for a number of years, how you've seen it change, what did you join, how did it then evolve and what is it now? Because you're more in Electrolux Professional, which is slightly different to the main brand of the family brand. So can you, you know, again for listeners today, so they understand the difference, if you would.

Electrolux Professional used to be the business to business division of the Electrolux Group. So I joined Electrolux Professional since the beginning and clearly as a division of a group, the major focus and core of the business was the operations and the development of the business per se. So most of the functions that were covered were actually covered by at group level. We didn't have specific functions and we didn't have control of certain areas as it normally is in divisions. For example, treasury is one of those, capital structuring is the other. So back in 2019 was a decision taken by the board to separate the division out and making it independent and list the division on the stock exchange? We did. So we achieved that the end of 2019. Back in March 2020 we became a publicly listed company on the NASDAQ Stockholm.

Stock Exchange with the functions before. Because you started. Can you just give us a quick run through of you joined the group strategic planning and then you've moved into eventually running treasury and things like that. What's been that evolution for you in your career path? And I saw a great quote I've got to say from I say to people, get testimon running LinkedIn. It really helps. One of your colleagues said you're a state of the arts finance manager. Really looking at design thinking. That's something you've done a number of sessions for conferences stuff. Has that come through originally your background within banking and that was the way you thought about it? Or is this a way you've always thought about stuff? How's that developed for you while thinking.

About finance in general? I've always thought about finance as part of the key ingredients and components to develop strategy. Corporate strategy. I see corporate strategy very much as a combination of business strategy and financial strategy. And they go very much hand in hand. By taking care of special projects strategy and M and A activity, it was exposed to not only strategy, but also was exposed to the area of Finance that think about the merits of investing in something and also the implications of thinking about investing and growing the business not only organically, but also extra so. Once you have defined that your vision and your mission and the direction and the path you want to take, what is important is once that path is clear, it's important to realize how you're going to achieve that. Walk through the path and clearly funding is one of the core components. So on the one hand you put together the investment path that you want to take. On the other side, you need to take the funding path. And in the middle, not because it sits in the middle, but all around it, you need to assess the risks associated with both activities. That gives you, I think in my case, gave me the intimate knowledge of the business. So I do believe that as a finance manager, the really value added that a finance manager could give, besides the technical knowledge and technicalities that are involved in growing in this career, very much related to the understanding of the business, the understanding of the business cycle, the understanding of the profitability and how the business can evolve and how the business can protect itself from risks. I'm saying this also in light of what happened right last year, we were right in the middle of the pandemic. We didn't only go public as a company, which was already a great achievement, but a great challenge. But we're also rating and focusing on hospitality, on the hospitality business, we were probably hit by the hardest time ever for our industry. I do believe that the understanding of the business knowledge, the understanding of the customer requirements, the understanding certain cycles within the business, we're working when it comes to investment cycle, when it comes to management of the working capital helped us a lot. Plan in advance, Plan in advance and find the right solutions to weather the storm that was actually coming ahead of us, by which nobody really knew much back in February, March last year.

And you were recently on a panel, I know, with a number of actually past guests. I mean, I'm just looking. There was Felix Luber, who's on two weeks ago, Marcus Keady from earlier in the year, and there was yourself, talking about resilient treasury strategy. I didn't actually get to listen to that session because unfortunately I was on another stage, virtual stage. That was that day. With that session and with yourself, what was your treasury strategy? This is for the listeners. A lot of the time I'd sort of do these checklists, if you like, with people. You went in as treasurer, you had a vision. Talk to people about startup treasuries and things like that. What was your these. Okay, these are my fundamentals, my non negotiables. This is the cash. Is this, is that how you set up the treasury and how did you then apply that through that incredibly challenging period?

Fundamentals for the strategy that I applied were very simple. One was let's build a capital structure that is solid but is also very coherent with the type of business and can provide and continue to provide the business in the medium to long term with funding. As a Treasury, we need to support the business in the long term and provide the business with the ingredients to be able to grow and eventually accelerate the growth. So these were the fundamental, if you like the title in the slide of the treasury on the treasury manual. What does it mean in practice? In practice we need to create, and I'm starting from the origin. So we need to create a Treasury group that is lean, very efficient, at the same time is very competent. We need to be able to get the support of all the new tools, digital tools that we can get our hands on to be able to manage a group that today is fairly wide in terms of presence around the world. We manage about 40 subsidiaries around the world, so we need to be able to understand the situation. So health check of each subsidiary, we need to understand also the cash dynamics of the group. So when pandemic hit, we kind of went to immediate shock from a business perspective because the hospitality grinded to a halt effectively. And part of the business we do is we deal with hotels, with bars, with pubs, with restaurants. Everything was in chaos on that side of the business. So we had to manage expectations, we had to anticipate venture issues we could find. In the banking world, some of our banks actually took a pretty rigid stance towards debt segments. So our customers actually had some trouble in getting funding from their banks rather than from us. So we had to basically prioritize activities, making sure we had enough resources to support our customers should their bank bail out or should their bank slow down. And we had to plan at the same time the activities so that the weak subsidiaries could be supported, the strong subsidiaries could, could continue to be strong and we could continue working in those part and segments of the market that were still active and have been still active. We also cover laundry systems and the laundry activity has been more resilient. And therefore that was a very important piece of the business that could support also food service and beverage that were hit a little bit harder in the.

Pandemic in comparison to some other treasury professionals. You've had this wider experience. You've had both often I joke with some treasurers, they might gone from literally intern or started as a Treasury assistant type thing, but in a bank and then they made the transition. You did that very differently. You were in investment bank, really got a great career there and you've then developed this great career, continued your great career, but you've come into treasury and you've got a different set of experiences than many other treasurers. When you sit with those other treasurers, do you find that you have a different way of thinking to them or the way that you see treasury fitting into the company? You talk there about the corporate strategy and looking at treasury very much, do you find yourself thinking, I care, I see the way they think, but I think of it differently. Do you see that at all? Oh, okay. I see it exactly the same way.

I do feel a little bit the odd one in the bunch simply because sometimes they, as you said correctly, they tend to be very technical. And I do see treasury as a natural extension of a financial professional skill. So within treasury, yes, you deal with cash, yes, you deal with cash infrastructure, yes, you deal with systems, with market operations, or you deal with trades. So very technical aspects of the business. But you still deal with corporate finance, you still with corporate valuation, you still with average cost of capital, you deal with capital budgeting. And this gets very intimately involved with all the reasoning around business strategy. When you define your course of action, you need to also include the resources you need to have to be able to walk that path in finance and let's say strategy, but also the vision of corporate growth go hand in hand. And I do see treasury as an intimate part of that process and thought process. So the technical knowledge, don't get me wrong, is absolutely fundamental. But the treasury is part of the integrated vision of corporations. And an integrated vision of corporations will become, in my view, more and more relevant going forward. Corporates are not a summary of silos. Corporate and corporate strategy should be all embracing and therefore treasury is very much part of that line of thoughts. If you think about a finance manager and the cfo which represents the top of that position should actually have quite a wide set of skills to be able to manage the finance area of the future.

So, Christian, you're relatively fresh to treasury yourself. A lot of the time when I recruit treasury professionals, I'll have a treasurer. They've been doing it 20 years or something. They say, oh my treasury analyst. And they must have two to three years experience in treasury and or treasury manager must have 5 to 7 and stuff. Obviously that's different for yourself. Because you don't come from that background, you've got this fresh look at Treasury. So when you are recruiting team members or what's your ethos around as you build your treasury team and how do you approach it?

When I look at people and when I look at resources that I would need to complete the puzzle that is within treasury for sure, I look at competence, I look at some level of technical skills for the area I need to cover. But what I really look for is people that are eager to learn and get their hands dirty within the business. I always talk to my people. I don't think I have a perfect situation at the moment and I will never have, but that's good because it gives me a chance to think about it and improve all the time. The point is, when you look at systems, when you look at infrastructure, when you look at applying technical support and technical infrastructure into, I don't know, the areas of cash, you can get the result done, you can get, we have to complete it on time. Doesn't necessarily mean that you understand actually the result of it. One of the challenges I always take with my cash manager is, okay, now that you have your infrastructure in place, now that you have your all the bank accounts linked and we have many of those, do you understand exactly what does the cash look like? Besides the number, you really understand the cash fluctuations, you understand why the cash is moving in certain directions, et cetera, et cetera. So always challenge my people to go into the business side of things so they understand that by looking at the business, they will be able to predict what certain scenarios are going to be look like. And this, I think, is what helped us a lot during this pandemic. Knowing, for example, what the working capital cycles was going to be and how this would have affected our cash evolutions. So absolutely. I always look for someone that really wants to understand the business. And this, for me, it goes beyond their technical skills right there at the moment. I recruit them.

You mentioned there. And I'm going to go back to this as well. You say you look for people that are eager to learn. Okay, but you're interviewing someone, you've brought them in, you maybe got their cv, resume in front of you. How do you measure this? And this is again, when you're interviewing someone, again, I will have people listening. They'll listen to a podcast and oh, actually I've got an interview later. Actually, I'd like someone, as Christian said, that's eager to learn. How do you measure it? Is it through? Okay, they've done this role and they've moved on or what sort of questioning do you ask or how do you explore that?

I try to see background is clearly something important to me. Try to see whether they cover different roles in the past, whether they went beyond the technicalities. Clearly there are functions which require very technical skill set accounting side as opposed to on other aspects on especially when you manage risk and you manage derivatives, you manage other sides of things. You really need to understand that. And clearly part of the comfort might be provided by the fact that there are people and profiles out there where professionals have done this for a very long time. And this has one benefit which is they probably know what they've been doing for a long time. Let's say the drawback is that a resource that is used to work within a confined space within a confined set of activities tend to be very comfortable within that space and sometimes it needs to be challenged to move out of that space. When looking at CVs and profiles of people, I like to look at people that are also they have demonstrated the ability to move outside of the comfort zone because I think the attitude what is really helping training and helping the improvement of a team. If my underlying assumption is that treasury should be progressively more integrated into the business and should move away from what you describe as ivory tower. But then treasury needs to comprise professionals that are not scared to take up.

New challenges and you very easily segue into the other passionate area. You've talked about being out in the business and things. And these may be junior members of staff that have pushed themselves out or taken on put the hand up said yeah, I want to take on new challenges, but you very much. And again, a big theme of today's show has been you believe treasury should be out in the business. Where do you see the development of treasury in the future? Where do you see it and what do you think treasury professionals should be doing now going forward?

I do see the development of the business in a direction that is away from what you would define and describe as commodity services. Certain areas of finance tend to be commoditized. Robotics is taking over certain activities. I would say that with the technology infrastructure that we have today, more and more activities even in treasury will become commodities. So the way I see treasury is very much a reflection of what I'm doing today. As you said at the beginning, I'm responsible for treasury and I'm responsible for M and A. These are very different activities, but they complement each other. Going forward, I would expect treasury to be progressively more integrated. Head of treasury to have even more responsibility but also cover different areas. Corporate finance is one of those. And corporate finance should be intimately related to strategic planning, strategic development, support of senior management and the board in taking strategic decisions that can be funded and within a reasonable amount of risk for the corporation. So very well rounded set of professionals going forward in a more integrated environment. When you look at a corporation.

Excellent. There's so many takeaways. I think today literally people should have their notepads as they've gone through the show. Yeah, that should be doing that and things. But as we do each week on the show, we'll put your LinkedIn details in the show notes and so people can connect to you if you feel it's right to have in your network. As we look about it and again we talked about this before the show but the junior professionals want to make their way up or mid level or senior treasurers want to hear some advice. What are the pieces of takeaway advice you would give to people that they're sitting there this morning, they listen to it, they've just got in the office, they've got their coffee and they're sitting there going well, let's listen to this. Right. What are the takeaways that you Christian would give from your perspective to the people out there listening today?

Don't get scared in exposing yourself. Learn the basics technical wise, but also get the exposure to the business. Understand intimately the business dynamics. Because business dynamics will reflect into financial dynamics. By understanding business dynamics and financial dynamics they'll be able to just grasp the basics of managing treasury, managing the finance of the company. Treasury will become and is a key function within corporation, sometimes is underrated. Every corporation deals with treasury, sometimes it's made more official, sometimes sits within the wider finance function. But I do believe that if you are a young and eager individual wants to learn this is definitely an area where the two world, the business and the financial dynamics marry very well together.

Awesome. To really get to understand the dynamics of your business and then it's going to take your career the places you want to go.

Really correct. And I'll give you an example. It is very interesting to assess cash evolution. When the business fluctuates and business can grow massively one year from the other. But at the same time cash can have a very different representation for it as opposed when the business declines. Cash might have a very different dynamics compared to the business because of the cash conversion cycle. So every time we look at this dynamics by understanding the cycles of the business, one will be able to predict the evolution of the cash. This seems to be very simple, simply said. But then when you go and intimately understand the knowledge of your business, you'll be able to add value to your reasoning and therefore by having a better knowledge of the dynamics, you'll be able to make better choices and eventually advise senior management on timing of certain investments or other dynamics because you're proving your.

Value up the value chain as well. So Christian, amazing. Thank you for your time today. We'll put your details in the show notes and look forward to seeing you not on a virtual stage. I just wanted real stages, real people. Have a beer with some of the guys like yourselves and it'd be lovely to see you very soon, sir. Thank you for your time today.

Thank you very much. Appreciate it and good luck.

Thank you sir. 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 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.

Sam.