This episode, Tom is joined by James Kelly, SVP of Treasury, Risk Management, and Insurance at Pearson, and Declan Ware, Group Treasurer at EMR Group, to discuss the evolution of treasury.
In this episode, Tom is joined by James Kelly, SVP of Treasury, Risk Management, and Insurance at Pearson, and Declan Ware, Group Treasurer at EMR Group, from Kyriba Live Exchange in London. They discuss the evolving challenges in treasury management, the impact of AI in finance, and strategic planning amidst economic uncertainties.
Guest Quotes:
James:
“There's a hygiene gateway which is, make sure that there's enough liquidity for the next five years or whatever that you need for getting concerned. As soon as you're past that, it's about free cash conversion. Because it gives credibility to the profit number, it ensures that you've got the liquidity going forward, and it provides that kind of, that lifeblood to propel future investment. And if that's looking good, you end up with happy investors.”
Declan:
“To pick up on your point there on culture, I think that is key. The business I'm involved in, as the name suggests, is involved in metal recycling. Now, outside looking in, maybe 10 years ago, that was seen as a very basic industry, a bit dirty, a bit underhand. Whereas, if you look at the technological advances within that industry, there's a lot of science, there's a lot of technology, and there's a real culture within the organization of continuous improvement…When I look at my team specifically, I try and encourage that. So I'll encourage the opportunities to go and self learn. I won't tell them to do it. I won't say you've got to come back and tell me everything you know about AI by the end of the week. I'll encourage and certainly promote opportunities.”
Links & Resources:
[00:00:00] Intro: Cash is king. Smart. Very smart. Good business. Now, show me the money.
[00:00:09] Tom Gavaghan: Welcome to Liquid: How CFOs Outperform. I'm your host, Tom Gavaghan. Today, we're joined by special guest, James Kelly, SVP of Treasury, Risk Management and Insurance at Pearson, and Declan Ware, who is Group Treasurer at EMR Group. Gentlemen, thank you so much for joining us.
We're doing this today live from our Kyriba live event in London. It's been an exciting day, a lot of topics on the main stage and the breakout. So I appreciate you gentlemen taking a few minutes of the time here to sit down and talk about current activities and backgrounds and experiences and viewpoints on the market.
I guess probably to get things started. I'd love to get a little bit more of an understanding of your background, um, how you've evolved into your current role. So James, if you don't mind, I'll start with you.
[00:00:53] James Kelly: So I work for a small firm called Moore Stevens. Um, I got to do some quite fun things. So, um, audited an F1 team. So I had to go and do their stock takes, which was quite good fun. Cause like you'd be there with a tire and a, uh, uh, you know, F1 chair and stuff like that. We had. auction houses, all sorts of fun stuff. So I learned a lot through that. Um, then I moved to a company called Kingfisher, who owned the B& Q, um, DIY chain amongst other things.
And I joined as a group accountant, got involved in some treasury projects and became the treasury accountant. Um, and through that, um, was, uh, got a taste for treasury. Then I moved to Sky where I had a kind of middle office type role, so I did a bit of front office and a bit of back office. And then finally I moved to Rentokil Initial where I, uh, became deputy treasurer and then ultimately, uh, head of treasury.
So that was my journey and since then I've done two or three other treasury roles, but it's
[00:01:59] Tom Gavaghan: Quite an ease I think, it's like a soft landing from accounting into treasury, a nice evolution actually, not too abrupt.
[00:02:05] James Kelly: Yeah. Yeah. And I, I find that the accounting gets used more than I'd like it to probably you can
[00:02:11] Tom Gavaghan: shake that part of your brain.
[00:02:11] James Kelly: Yeah.
[00:02:12] Tom Gavaghan: Declan, your background.
[00:02:14] Declan Ware: Um, I suppose as a, as a five year old, I was destined to be in finance. Uh, my, my parents continuously remind me, I used to walk around with one of those, uh, plastic tubs that hold mint balls, collecting coppers and whatever shrapnel I could find behind the sofa should pay for this toy.
Right. Fast forward a few years, uh, studied finance and economics, university, and then got the opportunity to join graduate recruitment scheme, uh, British nuclear fuels, which at the time was the main government body, which looked after the UK's, uh, nuclear power legacy contracts. Um, it was in a group finance function.
Um, so bit of a rotation, spent a bit of time in management accounts, tax, financial reporting, uh, some of the regional accounts. Um, studied, um, qualified as an accountant and the last turn, if you will, was in treasury. Uh, the nuclear sector at the time was, um, going through a big change. It had a significant, um, cash management and liability portfolio, which, you know, I managed, ran with and opened my eyes to the, to the world of treasury.
Um, studied, cut my teeth in that respect, um, spent some time, uh, EY, uh, more in a consultancy role for public. And then I took the opportunity in my current role, um, and I joined the week, uh, the layman's issue hit. So the onset of the financial crisis, right? So a very interesting time to be part of a business, which.
Um, so I joined there as a, as a treasury analyst reporting to, to the financial controller, and I suppose it was quite fortunate as that business was growing, it was going through a lot of acquisitions in Europe, in the U S. And as we know, everything that you buy as a treasury consequence, be it financing or indeed integrating the operational banking.
So I learned a lot in a short space of time. Uh, my career grew the FC left and rather than me reporting to the new one, it's like, well, you need to step up as well, direct reporting to the CFO and grew with the business, um, some of my highlights recently while I was seconded over to our us business, so I spent just shy of three years.
Working in the East Coast. Where abouts? So, our main headquarters were Philly, Philadelphia. Where I'm from. Oh yeah? Yeah. Wow, okay. Small world. Yeah. Um, we, um, had a lot of operations in Camden, New Jersey. Sure. Which is not like Camden, London. No, it's not. Um, You talk about that too. But it, but it was great. It was a real good opportunity to help develop the local presence of the business.
In a market, which was unfamiliar to me, um, set up a treasury function, uh, on a financing for, for that business. And kind of here I am just about to reach 16 years. It's great.
[00:05:09] Tom Gavaghan: Really, really awesome. One of the questions that I always sometimes like to ask is what would five year old think of you? I think we got your take because you nailed it.
What about you, James? What would five year old James think about what you do today?
[00:05:22] James Kelly: So I think I wouldn't be surprised that it involves numbers. That was the thing that I really loved. And I remember being at my grandparents and one of my grandparents friends came along and was driving a Mercedes SL. I remember thinking, that's impressive.
I like that. Um, you know, and I said, what, what's his job? And he said, he works in finance. He does like accounting and financing the company. So I was like, that sounds like a good thing to do. So I think, you know, the, the younger me would, would be looking at it going, okay, well, you're doing the right job.
Where's, where's the swanky car though. So, uh, I need to do some work on that.
[00:06:07] Tom Gavaghan: I think all three of us are the same. I'm kind of the same way. I, I, I. New. I wanted to work in finance very young age and I stuck with it through university and such didn't divert or anything like that. I don't know. I would say one of the things about our world though, and especially when you're studying it in undergraduate studies, right?
Um, it's so streamlined in terms of like just basic financial analysis or accounting and so on. I think there's so many more jobs and opportunities within finance that aren't actually Okay. That you don't know about when you're 18, 19, 20 years old treasury, maybe even being one of them. It lives within finance, but you just think of finances.
Analyzing companies, or you're going to either go into investment banking or you're going to become a financial advisor or something, it's my, my take. And whether it's treasury or even technology, you just didn't know about it. You kind of sometimes just stumble into these, these worlds that we, uh, we end up holding as an education based.
Company, what's your, what's your take on as Pierce as Pearson adapting perhaps to that world, just where there's such a growing list of unique niche jobs, even in finance.
[00:07:09] James Kelly: So the, the area that we're working hardest to grow and that we're seeing really good prospects is in enterprise sales, um, because of the need to continuously upskill people and continuously retrain people, um, because, you know, Jobs are permanently being created that didn't exist 234 years ago.
Um, and so, you know, we've had a really good footprint in like K 12 and the school sector and then through university. We've helped people get professional qualifications, but there's. You know, there is a growing need for kind of continuous learning that isn't just a couple of hours here and there, but actually a whole kind of like, okay, I'm a Python programmer.
I want to become like a full stack engineer or whatever it happens to be. Like, how do, how do you develop these extra skills?
[00:08:09] Tom Gavaghan: I want to come back to that in a bit because we're gonna talk about AI because I think that has such an impact on, on that, uh, perhaps, but one of the things we actually see as a common theme and people we talked to on this podcast is about continuous learning.
So, and that's like a key aspect. I would ask you, Declan, what do you do to keep up with things and stay ahead of the curve in today's market?
[00:08:28] Declan Ware: I think, um, you know, you go back to basics of, um, being agile in, in your learning things move so quickly. Uh, sometimes you've got to, you know, de learn, re learn and re learn again.
Um, needs to be proactive. Um. Don't wait for something to happen to learn about it, you know, anticipate the market, anticipate the field you're in, um, lend on your peers, whether it's your colleague, external, in treasury, you have access to relationship banks,
[00:08:59] Tom Gavaghan: networks, you have the ACTs or the AFPs and these other forums as well.
[00:09:04] Declan Ware: I think the profession, yeah, the profession has a responsibility to, to keep up to speed. It can be hard because there's a lot of content out there, right. And it's sifting through and what's relevant to you and. And being able to focus on that, and it can be a little bit overwhelming at times. Um, Well, I suppose you, you trust your instincts.
Um, You learn from things that have happened in the past to scope the future and what potentially could be around the corner. You just need to prepare for those eventualities.
[00:09:29] Tom Gavaghan: Yeah, I think, obviously, learning is key and, and, and, uh, and kind of being, uh, being curious was what somebody had said earlier, actually, is you have to continuously Be curious as people, as people managers, uh, yourselves having people within your organization, how do you convey that down?
Perhaps through perhaps the people that are going to think that way, but maybe others that that don't want to get stuck in their ways,
[00:09:55] James Kelly: I think is about respecting both viewpoints. To an extent, you end up moving a little bit at the pace of the slowest person. Um, and so it means that quite a lot of focus has to be on how do we innovate in a way that is supportive for everybody.
At the same time, you need to make sure that there's give and take there.
You know, so it's one of these things that, um, if you're trying to help everybody move along and making the case for it, you kind of need people to come with you. Um, but what you normally find is that if you've got You've normally got a couple of keen beans who once they get a taste for something, come back to you and they run faster than you can.
They're like, that was a really great idea. By the way, I went off last night and I tried these three things and here's what we've got. Um, then you find that there's a couple of people who are enthusiastic, particularly once they start to see benefits and who become kind of cheerleaders. And in a sense, they're more powerful cheerleaders because they're, they're the converts.
They were sitting on the fence. Now they're kind of going, Oh yeah, actually, I can see why this, this makes sense. And hopefully you get enough of a critical mass that the group think, uh, principle kicks in where. The kind of one or two people who are holding out start to go, Oh, do you know what, actually, I'm, I'm a bit on the outside here.
Um, and, and so that allows you to kind of make a bit of progress moving forward. But again, you know, it's important to really listen to people because often the people who are resistant to change, you've got really good reasons for doing so. And so it's about making sure that their concerns are heard.
And that if you are going to make changes. that you really integrate the learnings from the things that they're worried about.
[00:11:54] Tom Gavaghan: Empathy is key, uh, in our things. Uh, I also agree with what you said. It's inside out, right? It is cultural that you have to evolve. If I look internally at Kyriba, we have in the company's made investments to learning platforms so we can go and learn autonomously on any topic that we might want to evolve into.
What about you, Declan? Is there a cultural aspect in terms of that in your organization or from your CFO, uh, to the broader organization to continuously evolve, learn, grow? Is there. Um, is, is that exist within EMR today?
[00:12:29] Declan Ware: Absolutely. And to pick up on your point there on culture, I think that is key. Um, the business I'm involved in, as the name suggests is, is involved in metal recycling now, outside locking in.
Maybe 10 years ago, that was seen as a very basic industry, a bit dirty, a bit underhand. Whereas if you look at the, the technological advances within that industry, um, there's a lot of science, there's a lot of technology, and there's a real culture within the organization of continuous improvement. Uh, and our CEO has always used the analogy of the 1 percent every day, right?
Like compounds and snowballs. And I think it's like 1 percent every day equates to being 37, 38 times better in a year's time. Right. And having that culture within the organization helps because it sets the framework. When I, when I look at my team specifically, I try and encourage that. So. I'll encourage the opportunities to go and self learn.
Um, I won't tell them to do it. I won't say you've got to come back and tell me everything you know about AI by the end of the week. I'll encourage and certainly promote their opportunities. And I feel my team will be well rounded if there's people in, in my team, you know, more significant, more about the topic than I do, because that means we've got the knowledge and then we can share that internally.
[00:13:41] Tom Gavaghan: Yeah. It's, uh, you guys are saying very much some of the, some of the, the, uh, some of the same things there. I guess I want to probably shift now to a little bit more of the finance speak since we're all, we all shared our affinity from that, uh, for that from an early age metrics are key. And it's interesting sometimes having these conversations because.
Um, it depends, you're guiding light, your key metric, right? The top of list one that you target is different sometimes by each organization, depending upon your own financial status and the industry you're in and the economy you're facing. So I guess I'll ask you how your favorite metric is, James, but like, what is the, the one that gets your most attention or your CFO, the most of your CFOs attention that they're looking at day in and day out.
[00:14:23] James Kelly: Free cash conversion. I mean, there's, there's a, there's a hygiene gateway, which is make sure that there's enough liquidity for the next. Five years or whatever that you need for gain concern. And just, you know, as soon as you're past that, it's about free cash conversion because it gives credibility to the profit number.
It ensures that you've got the liquidity going forward and it provides that kind of that lifeblood to, to propel future investment. And if that was looking good, you end up with happy investors.
[00:14:54] Tom Gavaghan: It's still from an investor perspective. It's still such a, um, value. I mean, it's still like the, the, the, the, the thing that you're looking at the most as a shareholder.
Um, what about for EMR? What about for you guys?
[00:15:06] Declan Ware: Link, link to cash, uh, more media in terms of access to committed headroom on facilities. We, the majority of our funding is driven by working capital. Uh, we're sourcing scrap material and I'm paying for it today, tomorrow, but our processing and outsourcing receivables could be two, three months down the line.
So, uh, a commodity business, which is so sensitive to the movement in, in, in base prices. Has a huge impact. So, you know, almost on a daily basis, it'll be communicated. Okay. What's our committed headroom and what if we see a 10, 20, 30 dollar increase in the price of commodity, what that means for us. And I guess an awful lot of attention, both in terms of now.
But also forward looking, okay, what have we got to refinance in the next 12, 24 months?
[00:15:50] Tom Gavaghan: So tell me a little bit more about how you ultimately do the planning and then optimization there in longer term. What's that process look like for EMR?
[00:15:57] Declan Ware: So starting with the fundamentals of the daily positioning, you know, you want that real time visibility on where your cash is and what's your short term tactical forecast.
Um, because they are driving commercial decisions, you know, you never want to be in a situation where the, the finance team is saying, Hey, we're going to run out of money. You need to sell, but you're, you're arming management and commercial with information, which is real time because the information is coming in overnight on your bank balances.
Um, but also it's got an element of scenario mapping into it. So you can sensitize any changes for the various scenarios. I think one thing we're working on and I want to get better is that longer term focus. So we're in what, Q4 of 2024, so we're year planning into 25. So we need to understand what the business is going to fund, where its objectives are, and treasury needs to be strategically aligned with the strategy of the business.
And to that, the CFO will come to me and go, okay, there's an opportunity. How are we going to finance it? Have we got the headroom? What's the forecast looking like?
[00:16:59] Tom Gavaghan: What about Pearson? Talk, how do you, it's a completely different company, right? Different, different industry. How do you plan and then optimize in the long term?
[00:17:09] James Kelly: So a lot of it is, is relatively straightforward because Effectively, our costs are relatively simple. It's largely people.
[00:17:19] Tom Gavaghan: It's not paper and book covers anymore, like it used to be.
[00:17:21] James Kelly: It's not paper and book covers, you know. The biggest non people suppliers are Microsoft and AWS, so it's cloud. Um, which, you know, tells you, you know, we're getting on for 90%.
Uh, digital now it's it's over 85 percent digital. So, um, things have really moved a long way into the digital space, but it means that effectively a lot of your cost base is relatively fixed, so. When things are going well, it's a great model because, you know, you add sales, it adds profit and cash flow, and it's, it's a lovely generator.
Um, I've had the experience earlier in my career where that model went into reverse as a result. This was in a previous company, but as a result of some legislation changes, um, suddenly 20 percent of their sales disappeared. almost overnight, um, and, and kind of seeing the impact on EBITDA. So we do. a bit like you, we, we do, you know, some fairly robust, uh, scenario plans just to kind of go, you know, cause again, a big part of our business is government related.
It's sort of 20, 25%. Now it's different government. So it's unlikely that it would all go away as one, but you want to make sure that you've looked at what happens if X, Y, and Z.
[00:18:46] Tom Gavaghan: Because the government. Procures the, the Pearson for the, for the education systems in the local
[00:18:52] James Kelly: Either directly or indirectly.
So, for example, if we're doing SAT tests in the US, although it's state by state, ultimately there's, there is a kind of a government mandate for what does good look like on that test, if that makes sense. So if, if the federal government turned around and said, no states have to do tests anymore, the states could still decide that they were going to do it.
But you'd probably find that quite a few switched off. So you've got a, a bit of dependency there. Generally speaking, we've got kind of individual contracts, but there's normally a decision maker who could kind of pull the rug from under you a little bit.
[00:19:30] Tom Gavaghan: Any signs that that's going to happen? Because an 18 year old me would be very happy about a lack of uh, As far as I know, no.
What about, um, yeah, so again, two different models, because like you're very sensitive to the commodity pricing, Pearson. Obviously, not not so much any working capital programs that you have in place in terms of impacting cash conversions, whether it's delaying supplier payments, accelerating receivables.
Is that anything you guys are doing? Because we see, we do see a bigger movement in that space across the spectrum.
[00:20:03] James Kelly: Um, we haven't needed to really, because as the business moves more digital, it tends to be that we get more payments up front. So actually, we've got quite a nice working capital dynamic there anyway.
Um, but it's something I've done debtors programs in previous roles that have been quite successful. Um, again, in that scenario where I had the downside scenario, it was, it was a nice way of cushioning the blow a little bit on cashflow.
[00:20:29] Tom Gavaghan: What about at EMR?
[00:20:29] Declan Ware: I think we've, um, definitely become a lot more diverse in our funding and access to liquidity in recent years.
You know, shortly after I started, it was, and we were going through acquisition. It was, it was one central facility and we drew on that as we needed. If you look at where we are now, um, we have, um, no ABL borrowing based type facilities, which are linked to the collateral based on now, the price now, uh, and as a collateral for EMR, the collateral, essentially imagery, yeah, imagery, which is to be processed and accounts receivable.
But we also have some leavers that we can pull in the interim because it all becomes a number of factors. It's like, okay. Um, how would you smooth out that cycle from buying material and paying for it now versus the AR collection in two, three months time. Um, so we overlaid it with some, some receivables financing.
Um, we look at some supplier programs as well, all of which we can pull and react as of when the need arises. You know, then it becomes a overall functionality of how big you set your facility, you know, just set it to 10, 20, 30 percent of what it is now, or just set it at a sensible level and overlay it with some of these transactional type facilities where you can pull when you need the liquidity.
[00:21:45] Tom Gavaghan: Sure. One thing I think you guys both have in common since you shared it is, is. Um, the, the power, the impact of government and, and, and bigger, you know, entities and organizations in that way, what are you guys seeing from a macro perspective and its impact on, on your organizations, whether it's, you know, central bank implications or, uh, potential legal changes because of, uh, elections that might be forthcoming, are you guys planning for that?
Or is that a part of your regular conversations you're having with your CFO?
[00:22:14] Declan Ware: Yeah, yeah, it is. I mean, If you look at some specific examples in, uh, in, in the global space that the Red Sea and the Suez Canal issue has been disruptive for our logistics. We ship a lot through that canal and you're adding two, three weeks to shipments in some cases, which has a big working capital knock on, um, legislation, um, you know, closer to home and, um, the, the pledge to the steel industry in the UK and the creation of more green ways of making steel is going to have a huge.
Shift in the demand profile. And what that means is we've gone, we'll probably move from a big exporter to selling domestically. Now that has considerations in a number of factors as well. You arguably reduce your currency exposure if you're selling domestically. Uh, and on your last point politically, um, yeah, so it's, you know, this year was crazy in terms of.
Uh, the majority of, of democratic, um, countries were going to the polls, um, the last us election actually coincided with quite a significant rally in, in commodity prices, given some of the agendas, which the incumbent had, um, but it's one of them, we really never know how it's going to be. It's more, how do you plan for those eventualities and make sure you can react to them in a timely manner.
What about a Pearson?
[00:23:34] James Kelly: So I think we are reasonably well diversified. But we also have lots of things that we have to look out for. Um, and that's in terms of where the rules change. Different incentives. So, you know, the level of education funding, that kind of thing. And then also, there's a kind of tight editorial line that we have to tread.
You know, it's one of those things that in one state, if you say one thing, that might be very popular, and in another state, that might not be quite so popular. And so, you know, finding that, uh, that perfect, uh, Goldilocks position. Um, that also, you know, you've got multiple stakeholders who you have to try and balance.
So
[00:24:21] Tom Gavaghan: that's got to be challenging.
That is, uh, yeah, I think it leads into, I think the next layer of the conversation, which I wanted to delay a bit from our prior conversation or prior questions we were talking about is AI. Um, and it's a topic that we talk about a lot on this podcast, obviously a topic that we talked a lot about today and in the in the crib alive.
I would ask, I guess, James, from your perspective, AI, um, where do you see its evolution in what we do in treasury and finance?
[00:24:54] James Kelly: Um, I think it has massive potential to help. Um, I don't know whether it's going to, we're going to end up in a situation of like fully automated treasury departments with no people.
I don't think that's on the horizon anytime soon. But I think there's. There's a lot of potential to help in the short term with everything from, you know, compliance work back office things like data cleansing, um, through to some of the more advanced areas and machine learning and other pieces that I think, you know, there's a, there's a lot of potential.
I think we're just scratching the surface. I think what's also really interesting is just seeing the pace of evolution, both of the, the foundational large language model tools. So the, the GPT four rows, et cetera, but, but then also the app environment that's building around that. And I think what's really exciting is that we're seeing that.
The kind of enterprise security concerns that were effectively huge barriers to adoption two years ago. I think people know how to solve for those generally. And Kareva are a great example, you know, embedding it into your tools. So we are getting to a point where it's not the majority of companies you've got access to a large language model.
But I think if we roll forward six to twelve months, I think that will be the case. And I think it's, you know, it will be a little bit of a case of which one are you using because there are different levels of capabilities, but I think, you know, if you look at the direction of travel, you've got. The big computing companies, the Microsofts, the apples, the Googles, et cetera, are all very heavily embedding AI tools in.
So the barrier to adoption is really low now, so I think it's here to stay.
[00:26:54] Tom Gavaghan: You're, with, with Pearson, I have to imagine as a company, you guys are looking at AI in terms of your offering, and one of the things I think that We're all going, we're all seeing now from the government level down to the corporate level is the the formation of compliance around AI, right?
And the start of that putting in place chief AI officers and such. Is that something that you see within your organization in terms of responsibly using this, this, this really powerful tool?
[00:27:23] James Kelly: Yeah, so our chief legal officer has that responsibility and is, is very clued up. But it's something that, you know, our chief exec is ex Microsoft.
Um, he's very knowledgeable in this area and, and our executive leadership team every week meet at least a quarter of that meeting, I think, is generally covering off ideas, innovations, new practices, etc. And it's, it's idea sharing. It's dealing with, with challenges. I think the way that Pearson is thinking about things.
is largely in terms of how can AI help you learn? So rather than giving you the answer, how can it help you think through a problem? Um, and that seems, you know, that's being really successful, both in terms of the kind of the student feedback. And then if you look at the academic research as well, like that's where they're seeing an uptick.
I saw a really nice described AI as And Augmentor is like that, you know, if you've got nothing, if you're just using a saying, then then it, it doesn't do anything. But if you.
[00:28:38] Tom Gavaghan: I use
Amplify, Amplify Accelerator because it is, that's actually what it is.
[00:28:42] Declan Ware: Jim Collins, wasn't it? He said the technology was the enabler, everything else has to be in place in order for that entity to work.
Agreed. Um, in terms of EMR, um, we're certainly as a group, looking at AI, if you look at, you know, one of the best examples I could think of in the industry as a whole is. Uh, stock take that one of our physical yards, um, you know, you're looking at a significant dockside location. Historically, a stock take would mean somebody going in there and spending a couple of days going in and making an assessment.
You've now got a drone that can fly over, take a snapshot of the heat and it will estimate, um, based on what the value is, what the quantity is based on the data that it has across.
[00:29:22] Tom Gavaghan: And that was before somebody walking through that to do it. Fascinating.
[00:29:27] Declan Ware: So these are all the disruptors, which. Which really push you and that that comment disruptor Historically has always seen negative if you're disruptive in class.
It's a bad thing, right? Whereas now it's challenging the norm And I think I made the point earlier about in a culture of innovation Whilst we're probably not as far down the line as James are we definitely looking at it Um your point earlier in your your pipeline presentation was about The important thing is the data and being able to access that data before you can actually think about how I was going to help you.
You need to make sure that you've got access to that data and you can bring it in a consistent way.
[00:30:06] Tom Gavaghan: It's, I think it's something that we are making sure the market is aware of because it is. An investment that has to be made because if the data isn't good, if it's not structured, then your AI is dumb, right?
You don't, you, you're just training and your artificial intelligence is becoming, um, stupid as opposed to intelligent because it's reading or learning the wrong data. Yeah. So, um, it's why there's a big emphasis on that, the scale as we need to in, in AI, um, I'd be interested as people going back to the people leader conversation.
I was sharing with somebody at lunch earlier, how. If I was in university, I'd rather be somebody coming in today as opposed to somebody who's leaving today because think about the person who's graduating university, they started their journey without this technology. Right. So they're, they're completely different than the person who's coming into school.
And then these are the people who are going to be working in our organizations in only a few, few, few, you know, years time coming into finance and treasury that are going to be equipped with the, the, the, the, you know, with this technology and part of their almost upbringing, you know, from your perspective, James and Pearson, is that how you guys are seeing the, the, the world you support and, and, you know, education system.
[00:31:25] James Kelly: I think it's a really important point. And I think, I think it's interesting because one of the things that we're seeing is that adoption amongst young people isn't necessarily at the level that you, like it's, it's a good level, but it's not like, do you have an iPhone? It's kind of, you know, we, we might use chat GPT from time to time.
And I think part of that is coming from the kind of institutional, like, we don't really want you using these tools, et cetera, et cetera. I'm not sure that that's a, and this is a personal opinion, but I'm not sure that that's a sustainable position. Three or four years time. I think it will be part of the tool.
[00:32:07] Tom Gavaghan: It's funny that you say that though, because a few months ago, we were at one of our smaller user group meetings and it was about like 40 people or so in there. And I had asked how many are using AI on the regular basis, just in general. And like. For people raise their hand and I think part of it, especially in what we do in finance and treasury because we are governed so much by policy and audit and so on.
We're not sure if we're allowed to like sometimes right and we're not sure if we should do it and I think that we're trained to do that and I think that's the barrier will slowly start crossing, but I think it is part of that growth journey.
[00:32:40] James Kelly: It's one of the reasons so in the I've set up a small business to train people in using AI and look at cash flow in treasury.
Um, and the first thing that we do is to try and break the shackles a bit. So we do a creative exercise and, and it's one of those things to kind of go, okay, right. We're not going to deal with treasury data. We're just going to do, let's, let's build a logo. Let's. Build a theme song. Let's do a little video.
Let's just get creative and start learning about like safe spaces that you can use AI. And then as you get more familiar with it, it then becomes easier to bring in the, and here are the use cases where you're able to do it with sensitive data, for example. But if you start out with. Like, these are the narrow use cases that you're allowed to do things, then, you know, a lot of the benefit that you get from AI is about being creative and being open and experimenting.
You know, again, it's one of those things that was a great quote earlier on to say that, like, actually, most of the kind of big advances that we've seen in large language models have been accidental, you know, they, they started out as. You know, captioning for, um, for TV programs and stuff like that, but then developed a broader application.
And then someone went, Oh, but hang on, I could, now that I've been experimenting with this, I've thought of another problem that I could solve with that, rather than being problem first, solution next. Um, so it requires a slightly different mindset to the way that we're used to thinking.
[00:34:21] Tom Gavaghan: I like the way you're approaching it. I think, again, Working in finance and treasury. We are so mathematical and analytical and so much of what we do or are exposed to. We can prove mathematically. I can. We were trained that way from schooling and finance. You were taught how to run valuation models and how to do certain calculations. I know how to bootstrap a yield curve and things like that.
But as we evolve in a I, that is where We have to look at more macro level data because oftentimes in conversations, say, when we're talking about predictive cashflow modeling through AI, which we can do, the question might be like, can you show me the spreadsheet that it's like, no, this isn't an algebraic formula that can be easily quantified in that way, like valuing an interest rate swap, for example.
[00:35:04] James Kelly: Part of the thing is that you're able to make a massive step change. And so if you start with your existing process and go, I'm going to automate my existing process. You're only going to go a little bit faster than you currently go. Whereas if you think about, you know, the models that you can build and, uh, if let's say a sales model, for example, at the moment.
Like a manual sales model, you'll probably have like five or six key drivers, and that's probably as much as you can do in a kind of quasi manual approach. If you stick something that's got access to any data out there, including sentiment analysis, including any news flow or whatever, you can quite comfortably chuck 250 data points at it.
[00:35:51] Tom Gavaghan: Whether did your sports team win the day before and things like that, right, that can all go incorporate can be able to be part of those variables.
[00:35:57] James Kelly: Yeah, and you'd never get there if you kind of went, well, we'll start with six and then we'll add, you know, because. You'd never think of a 250 apart from anything else.
[00:36:06] Tom Gavaghan: Yeah, we could talk, I think, probably a lot about, about these topics, but we'll, we'll let you guys get back into the sessions here. I do, I do appreciate you guys joining us. I would ask, I guess, as we leave here, uh, Declan. You, you, you're not group treasurer all the time, right? Tell us a little bit more about what you do in your What do you do during your off time?
[00:36:26] Declan Ware: So my family and I moved to, moved to North Wales, uh, around 12 months ago. Um, so From Philadelphia? I moved back from Philadelphia in 2018. Okay. Our head office is Warrington, which is kind of equidistant between Liverpool and Manchester, so it's a good hour, hour time commute. Obviously we've had a bit of work and I spend Some of the time at home, some in the office.
So that commutes a nice time to decompress. Um, I live five minutes from the, from the sea, 10 minutes from the mountains. So I can get out, I can decompress and, uh, two young children. Uh, and it's quite funny, uh, on the, on the AI point.
Um, I was watching a cartoon with my four year old and, um, there was a robot and the robot was there automating all the tasks and then the robot went mad and started causing chaos and the conclusion was, daddy, robots are bad. Aren't they? Oh boy. So yeah, if they're teaching four year olds about how, uh, they're tempering the expectation, maybe putting it in a summary.
Yeah, so it's like, my role as a dad to kind of teach her that, you know, let's trust the robots, let's touch our artificial intelligence.
[00:37:31] Tom Gavaghan: That's hilarious. How about yourself, James? Yeah. Um, so besides your A. I. Uh, advisor.
[00:37:37] James Kelly: Yeah. So, so we set up your treasury at the start of the year. So that's taken quite a lot of my, my focus.
Um, but it's been great fun. Um, and as a result, I'm learning about all sorts of things because my co founder is based in Dubai and things like that. Um, But outside of that, I really enjoy kayaking, running, heading to the gym, things like that. So I, I'm either like on the way to a heart attack or like going to be fairly fit.
[00:38:05] Tom Gavaghan: No, uh, no, that's good. And appreciate you guys genuinely taking, taking the time. I think it's been such, such a great conversation. Any parting words, how they're going to keep up with you, James, the audience that's listening, LinkedIn or other apps.
[00:38:18] James Kelly: Yeah. So, uh, James Kelly treasury on on LinkedIn or your treasury. ai. Um, either of those you can follow. Um, So yeah,
[00:38:28] Tom Gavaghan: LinkedIn Declan.
[00:38:30] Declan Ware: Yes, Declan Ware on LinkedIn. I'm getting better at using that It's a great way to share ideas and I'll definitely be there Speaking with James after this, I think
[00:38:40] Tom Gavaghan: That's, yeah, that's great. And that's why we're at these events.
Well, thank you to all those that were listening and for tuning in folks. Never miss an episode, please link or subscribe wherever you do listen. I'm Tom Gavaghan, and this is Liquid: How CFOs Outperform.