Why Treasurers Are in a Unique Position to Add Value with Michael Fox

Foreign welcome to this week's Treasury Career Corner podcast where I interview treasury professionals about their treasury careers. Each and every week I talk to them about how they've built their careers, where they are now, where they see both themselves and the treasury profession going to next. Let's get on with the show. This week's show delight to be joined by Michael Fox, the group treasurer at Quinity Group plc. Liquidity Group is a British based outsourcing business focused on providing administration and payment services for supported by technology platforms Share registration number of investor services. That's how I've known the group based in the uk. I'll get Michael to go through that, but we were just talking before the show. He's got this in depth experience of all these different industries which I think a lot of people can sort of relate to and learn from and that's what I want to explore with him as we go through the show. So we're gonna have a rattle through his career history, dig into some areas and then we'll, we'll talk about some of the areas that he likes as well later on in the show. So. So Michael, take us back with your career today, how you got started in treasury. Because one of the things I was gonna say you did European business degree and then discovered, you know, the world of treasury and stuff. So talk us through how it all started for you, sir.

Good morning Mike, and thanks very much for having me as a guest.

Pleasure.

Not every day that you get to talk about treasury career on a podcast and I actually think it's one of the most varied and interesting jobs in corporate life. So I'm very excited to be able to talk about it today. I think it's fair to say that there probably aren't many people that start out their career and say I'm going to go for a job in the corporate treasury world. I think that's quite unusual. Most people seem to, to fall into it by accident. And if we go back to where I started my career, it was with Tate and Lyle and I started on the graduate training program and that would have been initially a three year rotation around different departments. And my first rotation was in the treasury function, which was all very new and exciting for me and I instantly had an affinity for the types of activities that we were doing. May recall this, that the Tate and Lyle treasury function was for a very long time a proprietary trading function which was a profit center that had just about finished when I started. So there had been a, there'd been a number of corporate blow ups and it was soon realized by boards that writing naked options just. Just to attract the premium as an income wasn't such a great idea. And all of that was stopped. But. But that, but the, but the legacy of how the Tate and Lyell treasury function was set up was still there and they had a very advanced front office function. I managed to get through the first year of the rotation and just as we were talking about where to go for the second, second year, a Treasury dealing job became available and they asked me. Clearly I'd had a bit of practice covering for the traders while they were on holiday or not available. I had that experience and so I was, I was asked if I wanted to take that job. So I only through one year of the rotation and I immediately straight onto it, took on a permanent, permanent job in the, in the treasury as a front office dealer.

And you know, again, you and I both know T N for some of our foreigners, they'll go, Tayton who. What was the sort of business of Treasury? Because again, that's a theme throughout your career that you then went from there. We'll come on to in a minute, Time Warner. But you've been in different industries, but treasury is treasury and has some commonalities, obviously some differences, but, you know, describe that if you would, for the listeners.

So at the time, I think Tatana was FTSE 250, FTSE 350 maybe. So it was quite a large PLC. It was predominantly around refined cane sugar. There's a big factory down in Silvertown. They had also operations in Europe and also in the US and in Australia through various different related products, so sweeteners and things like that. It was primarily a commodity business, but also manufacturing as well. I think the main aspect of that role was around managing foreign exchange. There was debt, there were a lot of moving parts in terms of liquidity management as well, with cash going in and out of various different bank accounts across Europe, the us, Canada, the uk. And so it was primarily the front office desk was primarily around foreign exchange hedging management and liquidity management as well.

And then that was your sort of grounding foundation, if you like, for sort of seven years or so before then time for a move and you went into media, so, you know, talk us through that.

So I, I, yes, I did, I did. I sort of advanced from the treasury dealer to, to, to through some treasury analysts, treasury analyst roles as well while I was at Tate and I got to a position where that it would be quite difficult to advance any further within the organization. Unless I was prepared to be very patient. And at the same time I had when I started the graduate training program I enrolled for the SEMA qualification. So I did. Whilst I was doing the deaning role I did complete the SEMA studies and qualification and then I moved straight onto AMCT and also qualified as a member of the Corporate treasurers. So I did pretty much all of my exams while I was at Tate of Low and I just felt that I was ready to take that skill set forward.

Yeah.

And again as we. You've alluded to in terms of looking at my career path to date, it's a very standard corporate treasury evolution as in you're going from analyst to treasury data to Senior Treasury Analyst and then my role at Time Warner in, in the media industry was Treasury Manager. So I had a couple of direct reports for the first time and Time Time Warner was the. The European treasury function for the global business.

And how was that different? You know again we know sort of 10 line. It was an instrument. Just reflecting back on what you said there. I remember when I first I think back 20 odd years ago I used to have that question in our salary survey. We've just done our current one and it's got the working from home question at the end and I used to have. And I quickly retired it. It was just at the end of that time and it was like is your Treasury a profit center or service center? And and in the first one I ever did it went yeah or some profit center and there was this. And it sort of rapidly went. I think it was about. Probably about 20% had a sort of element of profit. Within a year it went to 5% and within a year it was gone. It was like, you know, it was a non question you would moving from that sort of environment to this, you know more of a service based treasury environment. Exactly as it is helping the business. What was, what's, you know, how was that different for you?

There was that aspect to it and also it was a. It was the first time where I wasn't in the effectively the head office decision making unit either. It was a change and the sort of. While I was there the two main projects for me were European cash management and putting in a new treasury management system. So immediately we'd moved away from the financial risk management piece, we'd moved away from the capital structure, the debt funding piece and it was those other areas which are maybe less exciting but nevertheless still essential tools in the treasurer's armory. Treasurer's armory in terms of what they will need as they sort of move through their career and having the sort of the detailed experience of how these things work because they're all. They're all clearly very important activities.

And then you made them, you know, you were. You were there for a period of time, started do that and then made the joined Reuters. And again, you know, most people in treasury might understand this, but, you know, again, some of our others, you know, what was the move to Reuters, you know that. And as you started, you were then starting to progress with your career. Talk us through that, if you would.

Yeah. So the Reuters opportunity came up quite quickly, actually. I think I was at Time Warner for about 12 months and then I was made aware that there was a role. It was an assistant treasurer at Reuters. And it was just something I had to go for, really. It was FTSE 100 company at the time, based in Canary Wharf. And again, it was a step up from treasury manager to assistant treasurer. It was a larger team. It was back into the world of the corporate center. And the activities that that treasury function were involved in were again back into the area that I was most interested in really. So again, it was more, and I would say from if we're thinking about picking up skills and moving from industry to industry, but also each treasury function within that company had a slightly different focus on what it needed to do. And this is certainly one of the things that I would come on to in terms of the tips for people that are thinking about career and treasury or already in that career and would like to progress. One of the things that is vitally important is really understanding the value drivers of that business and how the treasury function can support the business to realize as much value as possible and how the areas in which it should focus. Going back to the Reuters role, again, that was. I suppose it was still media to a degree, but it was very much focused on. There were a lot of acquisitions, divestments. So the emphasis there was. Was very much on capital market activities, rating agencies, commercial paper. There was. There was a bit of foreign exchange as well, but not, not as much as there was a Tate and Lyle. So it was managing interest rate risks, managing currency profile of debt, managing cash balances as well, while we were doing between divestments and acquisitions. And there were a lot of. It was 2005-2008, so it was just before the financial crash. There was a lot of loose credit. There were a lot of funky structures going on, very much less governance than there would be today. I mean, we did have Sarbanes, Oxley coming in as well. But in terms of what boards were prepared to do, there were still quite a few structures that the banks were pushing and the corporates were signing up to.

And again, because I don't want to run out of time today because I think it's interesting when we reflect on a couple of those points, then made this move and big role group, treasury exchanging. Can you describe that company for us? Because you were there nearly eight years that really one of the key things you and I talked about as part of that was that. And I was saying to Michael before the show that you, and looking at this, you became the sort of advisor to the cfo and we'll explain what that means, but can you then talk us through that? So you've been the assistant, then got the number one job, you know, so go through that.

That was the big step up for me. That was the first number one role as treasurer where you are when you're in the driving seat, but also the buck stops with you. And so exchanging doesn't. Doesn't. Well, I guess the products and services still exist in some form, but it was a business process outsourcing company that was IPO'd in probably around 2007. I would, I would think I joined shortly after that and it was a very exciting business to be in at the time. There was a lot of. It was. It was a B2B business, not very well known other than the fact that they sponsored the boat race at the time. So that is why some people still. Still remember. Oh yeah, I do, yeah. It was a very exciting time but it quickly got very challenging. So not only was there the step up to the number one role and all of that accountability and responsibility, they didn't, they didn't really have a. Because they're just IPO'd. It would have been one of those classic cases of, you know, who's going to do the. All this treasury stuff? Oh, we haven't really got anyone. Sometimes the FPA guy does a little bit on the side and, and sometimes some of the accountants do a bit, but they didn't have a Treasury professional in there, so I was the first person, so there wasn't very much. When I got there, they had just done a large acquisition of an Indian listed business with operations in the us. It came with quite a lot of debt. There was a revolving credit facility in the UK as well and within probably 12 months of me starting, they had issued a huge profit warning about to breach all their covenants. The, the founder and CFO had Left. And quite frankly, for, for a novice treasurer, it was a bit of a roller coaster. Challenging position to be in. Exactly. So. And you know, looking back, I mean, that's where I would have got the most experience in my career in the shortest period of time because everything was one. You'll be familiar with this. Once one thing goes wrong, it's just like a pack of cards. Everything then just triggers and goes wrong. So you do lurch downs quite quickly. And at one point we were definitely facing, we were doing liquidity forecasts and saying, we've got, we've got months of, of cash to go before we have to say that we, we've run out of money.

Yeah. And then with that sort of, you were starting. So you're in this firefighting situation. You, you're getting through it and you're then bringing. Actually, yeah, that's a good point. You're bringing people on board and said, hey, come join me. We've just issued a profit warning. It's great here. And people are like, right, okay, how did you, you know, convince them? Because I've sometimes, you know, I've presented roles to people and they've said, what's it like? I mean, it's horrible. And I'm not saying it was a horrible role, but what I'm saying is people go, oh, okay. I said, no. The first, you know, three to six months is going to be tough, but then at six months, you're going to start to move, you know, to a more stable state and you're going to actually be the person that led that change. And then by 12 months, this is where you're looking to be. And inevitably, a lot of the time it happens sooner. A couple of times it has taken that time. You know, were you in that situation when you're bringing people on board or how did you sort of instill that throughout the team sort of thing?

You're right. That's, that's the point where you need, you need the most resources to help you get out of that position. And it's not really the most attractive offering in the world to get people to sign up to. I mean, without, without getting into all the details. The key thing really was to, was to get a plan to avoid the insolvency situation. So it was, it was very difficult in terms of the, you know, going through a distressed credit refinancing with our banks. We went through a full workout process with an independent auditor and we got to a position where, where we, we could keep the business going and were able and actually went through quite a good phase of stability and then. And then growth, which is why I stayed there for as long as I did, actually, because it was. There was never anything that was routine about life exchanging. But in terms of recruitment, I was quite lucky in the sense that we had a very. As part of being a business process outsourcer, where exchanging were. Deriving most of their value was by doing the outsourcing work in Delhi and Bangalore. So we had a big pool of very experienced, talented resources in India. And so I was able to recruit through that and have people that were already involved in the business, rather than bringing people in from outside and actually.

Help you and things like that, that knew the group and things like that. So you then also talked. And I said to Michael before this that some CVs resume aren't the best, but I loved the briefing notes that you'd sent across to me. And one of the key things you talked about was by rising, you know, helping raise the profile of the treasurer position, you then became more involved with the board and you became, you know, an advisor to the cfo. How did you instigate that? Because I think a lot of treasurers listing today, you know, particularly, you know, we sometimes give the advice for the treasury managers how to improve their careers and everything else, and we've touched on that a bit. But for those treasures, you know, war stories and things like that, how did you go about that? You know, was it by saying, let's have a, you know, a daily chat or, you know, what. What was the sort of the process of getting to know, you know, helping the cfo, that you then became his finance advisor on a regular basis for exchanging?

I mean, remember, I was. I was still a very novice treasurer at that stage, so I hadn't, I didn't, I didn't go in there with, with that as a. An idea. It wasn't a design by me when I went in there to achieve that, but essentially by doing what I did with the refinancing and, you know, clearly there was, you know, a lot of involvement with the board and the CFO and the CEO at that stage, that just by doing a very diligent job as a treasurer, you sort of built up that credibility initially and delivering what you said you were going to deliver, ultimately supporting the CEO and the CFO in terms of what they had said to the market. So credibility is the first building block. I think, reflecting back the other thing that I did, and this was over. This is probably over a number of years. I mean, it doesn't, it's not something that happens instantly. But my approach to the role of Treasurer is always very much outward looking and rather than just focusing on what people might think are the very specific treasury functions and activities, I would always be looking to get involved in other aspects of the business, of the business. And I think having, having the accounting qualification was very helpful in that respect because it meant that I could get involved in things like understanding a bit more around what we were doing in our financial statements and how that was being perceived by the market and giving, giving the CFO some advice in terms of how to maybe message cash flow, cash generation and how to bridge that to the, to the actual statutory financial statements. Getting involved in lots of different, other activities which sometimes fall within the Treasurer's remit, sometimes they don't like insurance, pensions, contracts, renegotiations, to make sure that where there is an opportunity to create economic value, we, we can as much as possible and use our skill sets to, to, to support that activity. And then generally, and then I guess it sort of, it just moves on from there. And with that approach and that attitude, and in most corporate functions and finance functions these days, there's lots of historical issues that keep resurfacing that I think the Treasurer has the skill set to start to unpick some of the complexities of these problems and sort them out, knowing about, on the legal side, around legal entity structures, on the accounting side, on the tax side. And I think the Treasurer is unique in his ability to be able to pull all of those different disciplines together, to come up with the right answer and to explain it in terms that the CFO can understand.

And you then, you know, you were there till 2016. And then very interestingly, you know, in today's market with everything about renewables, everything about esg, you know, it's, you know, you probably get an email a day. I do come to this ESG thing, come and do this, come do this, you know, and it's the, the catchphrase. But you then made a move into that industry, maybe talk us through that, you know, transition, if you would.

That did put me out of my comfort zone a little bit. It was something that, so, so I, I was able to, to take a bit of a risk with that one because of the way that things ended with exchanging. So they were, they were ultimately acquired by, removed the corporate function. So I didn't really have a choice in terms of having to move. And this was something that came up, which at the time was a very exciting opportunity but as I say, it was a little bit out of my comfort zone because I was moving then into a renewable energy company that was effectively a platform for two large Canadian shareholders to two large pension funds. And it was a portfolio, portfolio of renewable energy assets that they had acquired from Santander with a view to growing and operating the assets within, within that portfolio. And that would be growth either through constructing new assets or acquiring portfolios of assets. And project finance for infrastructure assets obviously wasn't something that I had come across previously in those, in those other roles. So that was, that was all, all very new for me.

And you know, what was it like? I touched on it earlier. You know, you've gone from media through outsourcing to renewables, you know, and you and I, we joked before that, you know, treasurers have the same toolkit if you like, but all very different jobs. And the people listening today will, might all have the title treasurer, each doing in a different way. What were the commonalities or you know, what was your checklist sometimes when you started in the, you know, the role at Cubico and things.

Well, well again it was another startup treasury function for me. So, so that, that was, that was another thing that appealed to me in, in the sense that I, I, you know, there was a clean slate for me to, to, to put my, my mark on. And so, so for me the sort of, the first things are let's get a Treasury policy established, let's get some governance around that policy. I will always instigate a Treasury committee. So that would be the treasurer, the cfo, sometimes the CEO, usually the head of finance, whoever that is, maybe other roles as well. And that would be the forum for monitoring compliance against the treasury policy, going through the treasury performance metrics, whatever they are for that particular business and industry and also just generally a forum for decision making and discussion on various things. So they're the first things that I get in place. Making sure that we had a good forecasting process, established cash forecasting process. That's probably where the similarities ended to most of the other, other roles that I had because funding was never really an issue because we would always get equity from our investors for new projects and they would always be levered to about 75, 80%. So going from the exchanging we could run out of cash here. That was the opposite end of the spectrum in that you've got two Canadian shareholders with multi billion Canadian dollar pockets that would always, and wanted to grow the business. They were looking to deploy capital at that point. So it was a shift of Emphasis in terms of getting the right project financing in place using the right banks. And then what we did do is we did put in a revolving credit facility which that was pretty difficult in itself because there were no cash flows to support it. So move away from, from normal investment get grade corporate banking to say, look, you know, this isn't, this isn't the credit story here isn't that you're going to have cash flows to repay. The RCF credit story for Cubico was very different because rather than being based on cash flows coming up from the assets to service the rcf, it was very much based on the fact that the investors would not to default on an RCF would not give up the 3 or 4 billion of equity interest that they had in the portfolio. It was a very different story. It was quite difficult to get some of the banks to get on board with that. But essentially what I ended up doing was bringing in the project finance banks into the corporate RCF so they could see both sides of the the story. And they were obviously very interested in, in getting new project finance transactions put their way. So it made perfect sense to get them into the, into the rcf. So by doing that we were able to bridge capital calls which was great for our investors because it meant that rather than just every single bit of equity that we needed, we asked them for, we were able to bridge that and do less frequent but slightly larger capital calls which worked really well for them.

And then again we spoke before that. You then made a move more recently. Bring us up to date with you and then we'll dig into a couple of other questions.

Okay. Well, I was at Cubico for about three and a half years in the end and it was a fantastic company to work for. It really was quite a, quite a small team. I saw it grow From I think 50 people to just over 200. And it was one of those companies where you, you knew absolutely everyone there and it was fantastic. And they were based in Madrid, New York, Rome, Mexico City. So a really international group and was just a fantastic role and a great part of my career. I eventually decided to leave because of the fact that I thought that in terms of learning new things, a little bit of inertia was, was setting in. And what I wanted to do was to move back into a PLC international group that had some debt. And that's when I moved to Equinity in June 2020.

And who are Equinity for the international list is going before they start typing it into Google.

I think a few people would probably recognize Equinity. They're probably most well known for the fact that they are the, they act as a share registrar for a lot of the FTSE 100 also as a corporate sponsor nominee for a lot of them as well. They also do some pension administration and credit and remediation services as well.

And you know, as treasurer there, what, what's it been like again? You've got this history of going in, setting things up and sorting stuff out and you know, that's a bit of, you know. Right, let's get the, let's get the notebook out. Right, where do I start here? You know, what's it been like?

It was definitely a much more established treasury function than certainly I had at Cubico exchanging there obviously. So Quinity has, has had a very past. Came out of Lloyds bank originally was acquired by Advent IPO'd and some of the legacy processes and procedures should we say, have not been really focused on and there was a lot of things to do to modernize the way that the treasury function operated. So one of the things that we did do was we put in a new treasury management system. So that's FIS integrity which we are using to manage the balances on our, on our client cash. So there's always something different, isn't there Mike, in the treasury job? So the thing that was slightly different for Equinity was the fact that they have about £3 billion of client cash which they manage and can earn the interest from. So interest rates going from 75 basis points down to 10. And in the U.S. i think we're, they were over 2% at one point and the Fed Funds target rate is 0 to 25 basis points. So that's had a massive impact in terms of the business and the earnings for Equinity. So there's a lot of emphasis in terms of driving value from interest rate hedging on the asset side rather than managing the interest rate risk on the liability side and also sort of trying to optimize how that portfolio of client cash is held to maximize interest income from. It's kind of the footnote I suppose to this, which is where my story today is going to end is that the board agreed earlier this year to. Well, the shareholders ultimately agreed that the board recommended an offer by Cirrus Capital. And so that's the transaction that's in.

Progress at the moment you gently touched on, which obviously is sensitive. So we, we, we will look forward to seeing what comes through that, sir. So you know, reflecting back, we, we spoke before the show Some people, you know, I talked to and they've got a passion about blockchain or you know, different passion areas. One of the things that you and I talked about was this evolution of your career and you know, the accidental treasury route as we always talk about with lots of people. But if you reflect back before we, you know, come to your top tips, if you like, for the end of the show, as you always do, you know, looking back over it, you know, what are the areas that you know, say you're a Treasury manager today and you're listening, you know, what are the things you think that people should try and think about? They're listening to this on their way into work. Some people just back to commuting and you know, a couple of the things they should be thinking about doing or other treasurers out there, something. What do you, what are your thoughts?

What I would say is you definitely, definitely take ownership for your treasury career. It certainly isn't. Some people get lucky and they can run their entire career through a single employer. But in most cases I would say you really do need to take ownership for it and plot your way through the evolution to group treasurer if that's ultimately what your target is. It isn't easy to do. You really need to be proactive. You need to make sure that within the team you're in at the moment, you do ask for exposure to various different things. I've been in corporate treasury for over 20 years now and there are still things that I'm learning. There's so many things that the treasurer can get involved in within the organization and it's just the limit is self imposed really. As I said before, being outward looking is definitely a benefit to being a successful treasurer and getting involved as many different things as you can. There are so many things that you can add value to as a treasurer and ultimately that's what your function is going to be judged on these days.

We could use those as our closing notes actually. We will put Michael's LinkedIn details in the show notes. So if it's worth having him in your circuit and network and everything else, that's definitely just, just with. Those are quite a good wrap up. But is there anything else you would just give to people today? You know, you reflect back maybe on your personal journey if you like. What have you thought that, you know, what you got into this a few years ago now as we talk about 20 odd years ago and, and it's coming up for our 19th anniversary as a business, which is quite a weird one, but you Know, as you look back over that, you know anything else that you think that people should be thinking about on those, say we're putting your LinkedIn detail in the show notes but recommendation, someone comes to you and says can we have a coffee and just talk about anything I'm, I'm not doing right or whatever. I thought there were some good tips there, but anything else we've missed?

Ultimately, I'd say that the role of the treasurer is quite, quite unique in the organization. It was, it was one of the things that dawned on me a little bit when I think it was probably the first time when I was exchanging that no one else in the organization understood liquidity management, understood the impact that things like cash flows would have on debt covenants. No one is looking at this. And so you have to realize as a treasurer that if you don't do it, no one else will do it. And it's ultimately a forward thinking role. You have to be doing the catastrophizing, you have to be doing the what if scenarios. I mean a very quick, very quick story Mike, on this. I mean I remember when I was at Reuters and we did, when we had one of these, I was talking about the funky structures that we, that we were, that were quite prevalent around that time and we did one with the bank and ultimately it was a tax arbitrage structure where we would put cash with this bank and ultimately it was way above any of our counterparty credit limits that we had set ourselves. And the treasurer said to me at the time, he said well look, this is, this is great, but there's no way I can take this to the board because we're over our limits. And I said well look, why don't we, why don't we do a credit default swap then? And bit of an explanation as to what that was, whether or not we could actually execute one. But we did. And for what ultimately was quite a small premium at the time we had the counterparty credit exposure. Now that was, I think, I think the structure unwound is maybe 2007. But you know, look, if we were carrying that over the next year or a year and a half, I mean that, that's one of those scenarios where everyone was saying banks don't go bankrupt. What are you talking about? So you've got to be thinking about these things. Like I say, no one else, no one else does. And it's, it's, it's ultimately down to the treasurer to, to be that, to be that kind of voice of doom as it were. To sort of stress test scenario, test things and say, look, we just need to be as protected as we can in all the different circumstances. And then what is plan B? If anything does happen that will start to sort of stress the business.

Yeah. Amazing advice there today, Michael. And I think people will get a lot from it, as they always do. I mean, and it's great your sort of journey over those different industries and different checklists if you like as well. So we'll put your LinkedIn details and the show notes. People can connect to you and, you know, can't wait to see you in the real world one day when we're, when we're allowed out of our houses. But we're slowly getting there. So thanks very much for your time today. It's been great. Thank you, Michael.

Thanks very much, Mike. It's been great chatting to you this morning. Thank you.

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