Luckily, Matthew Adams has at least two decades worth of expertise guiding him with each new policy shift and market shakeup. His resume includes various senior roles at major firms like State Street, HSBC, Northern Trust and BNP Paribas.

By 2022, Adams arrived at First Abu Dhabi Bank (FAB) where he oversees the bank’s international client base of global custodians, broker dealers and private banks.

Adams provided Global Finance with some insight on sub-custody services, his approach to client management, and the complicated nature of modern securities services. The interview has been edited for length and clarity.

Global Finance: What are the latest trends in sub-custodianship?

Matthew Adams: Sub-custodians are experiencing different trends based on regional factors, local economies and regulatory environments. There is often a disparity in how individual markets can keep pace with infrastructure developments. In the GCCE [Gulf Cooperation Council and Egypt] markets where FAB provides sub-custody services, we see a range of models. Some operate on a broker clearing model, while others have transitioned to true delivery versus payment and central counterparty [CCP] clearing models. This diversity presents a significant challenge as global investors seek uniformity in trading venues. Intermediaries and global institutions are looking for regional consistency in partnerships which can drive substantial commercial opportunities. One notable development is the emergence of the General Clearing Member [GCM] initiative. This allows international broker dealers to become remote trading members of the local exchanges. 

GF: How does that help?

Adams: There are multiple benefits to this. It eliminates the need for a local presence and the requirement to transact via a locally licensed broker. Direct connectivity with the exchanges is established to enable trading on both proprietary and client accounts using a licensed custodian clearing member. However, for the global broker community to move away from using established local broker relationships in multiple markets, we will likely need to see a standardized GCM concept across markets, with CCPs in place. The Abu Dhabi Securities Exchange and Dubai Financial Market are expected to go live in 2024, with the Securities Depository Centre Company [EDAA] in Saudi Arabia [owned by Tadawul] following in the future, promising wider adoption thereafter. To achieve post-trade efficiencies and foster commonality in post-trade processes, regional custodians can harness developments in infrastructure to reduce costs and improve overall market efficiency.

GF: Any advice for investment managers when selecting a global custodian?

Adams: The ultimate benefits of appointing a global custodian are efficiency, risk mitigation and cost savings—all captured under one contract. When selecting a global custodian, it is essential to review their due diligence policies with respect to the appointment and maintenance of sub-custodians, as well as their contingent and dual-network operations. Corporates, pension fund trustees and boards of directors should consider these aspects.

GF: Do corporates ever have a say in selecting sub-custodians?

Adams: It’s ultimately up to the global custodian to select and manage sub-custodians. What we do see is that many global custodians, in addition to running dual and/or contingent networks, may appoint an additional sub-custodian at their clients’ request. This typically occurs if the client is of a size and relationship that warrants such a request and has due cause for concerns regarding a particular sub-custodian, whether those concerns are related to risk or competition.

GF: Why are more companies seeking opportunities in emerging markets?

Adams: Many companies are looking to expand into these markets and rightfully so, when you consider the number of untapped opportunities. Many of the more successful markets in the region have a few things in common, such as having a relatively wealthy population—both domestic and foreign—large reserves of capital and most importantly, strong leadership.

To provide some context on why there is more demand in emerging-market expansion, all GCCE markets are currently classified by various metrics as emerging markets. However, each is in a different stage of development. Some, such as the UAE and Saudi Arabia, achieved significant economic progress in recent years. For example, Saudi Arabia’s stock exchange, Tadawul, has risen to take its place among the top exchanges globally since its founding 17 years ago. The market continues to expand and diversify, with around 40 IPOs in the last 12 months alone. However, it remains heavily concentrated in traditional oil stocks, with Saudi Aramco being the only Fortune 500 company in the region.

GF: What are some of the growth drivers?

Adams: Some of the factors driving growth in emerging markets include engagement with the market, pension fund reforms and a growing domestic investment fund industry. 

Strong local or regional financial institutions and service providers can engage with the markets and push for solutions in line with international investor requirements. Many GCC markets have seen a surge in IPOs — the majority of which have been vastly oversubscribed.

Regarding pension fund and saving reforms: The UAE is changing the existing end-of-service benefit, which will divert capital investment into domestic mutual funds. This move will shift multiple billions of dollars from what is effectively an accounting liability into the capital markets in the first year.

A growing domestic Investment Fund industry supports further capital investment, employment, and greater efficiency in relation to capital markets. In the UAE, there is a move to mandate for onshore licensed funds to act as feeders to what is currently and largely a distribution market for offshore funds. 

Progressive regulatory reforms are also driving growth. We expect that Saudi Arabia, the largest domestic fund industry in the GCC, to require independent fund administrators to calculate NAVs—a market standard in the larger global fund markets. This will bring further comfort to investors and lead to additional investment in listed securities.

The ability for sub-custodians to keep up with and manage these regional changes to facilitate clients’ entry into these markets is paramount. This is where institutions like FAB can play a pivotal role in assisting across the spectrum of the regional markets which are our “home” markets, promoting interoperability and consistency to increase accessibility and ultimately boost investor confidence. 

GF: How do you see the status of the US economy in the next 12 months?

Bullard: I think the US economy is in good shape for a soft landing. To me, soft landing means that output grows at the potential growth rate, that the job market is in pretty good balance, and that inflation is moving back toward target and isn’t too far from target. All those things are happening. And you know, GDP growth looks to me like the run rate is maybe between 2 and 2.5 percent for 2024, that’s pretty close to the potential growth rate, or a little above the potential growth rate. Inflation has been coming down toward target, and that’s going to enable the Federal Reserve to get going on the interest rate cuts.

GF: Do you then expect a rate cut in September?

Bullard: The committee was pretty clear at the last meeting and in the chairman’s press conference, that they are ready to go at the September meeting, unless something really dramatic happens. I think, you know, they’re about as clear as you can be for a central bank. I do think they’ll start in September with 25 basis points, and then the question is how fast do they want to move to get back toward a more-or-less restrictive stance of monetary policy, and so even when they lower the policy rate a little bit, the policy rate will still be restrictive. They have to continue to lower from that point. And I think it’s probably 25 basis points per meeting for several meetings in a row, until you can get down to a lower level of the policy rate, and then at that point, you could decide whether inflation is continuing to go to 2% or not, and whether you want to continue to normalize the policy rate.

GF:  You see a cut of 75 basis points between now and December, right?

Bullard: Right.

GF: Do you expect big policy differences depending on who will win the US presidential elections in November?

Bullard: One thing I’ve said about this, is that this election does have a lot of uncertainty around it, because not just the White House is up for grabs in a close election, but also the House of Representatives and the Senate are very close. It’s not clear to me that either party will be able to win all three of those. I think divided government is a distinct possibility for the ultimate outcome. And in the US when there’s divided government, that usually means not too much gets done. And usually financial markets like that outcome. And so, I think that that’s been a factor that’s been driving financial markets during the summer here, but the election could change direction very quickly and either party, I would say, could still sweep. If one party sweeps, it will be able to do more, and probably wants to do more. And so that would be a little bit different.

GF: How do you explain the market crisis we had on August 5^th?

Bullard: I would say that the dramatic sell off in US equities and global equities was partly due to the jobs report in the US. But if you look at that report, it was weak, but it was not that weak. I think what really exacerbated the downturn was events in Japan over the weekend and into Monday morning.

I think the [Bank of Japan] is trying to pull back some on its policy. It’s a very dovish policy that’s been in place for many years and, you know, attitudes have changed in Japan some, where they now think that a too weak yen is maybe counterproductive.

And I think that upset some of the carry trade that has been based on the idea that Japan will never do this.  I think that’s what caused the big sell off, especially in Japan. I think the US jobs report was over interpreted, and then that was all exacerbated by the Bank of Japan.

GF: Why are financial markets so stressed?

Bullard: The geopolitical risk is very serious, and I do think we’re living with the [Gaza and Ukraine] wars going on, but they could easily metastasize into larger conflicts, either one of them, and markets do worry about that and that could be a big risk.

I think also maybe more pedestrian is just that the market is up a lot. The equity market is highly valued in the US and … I think that makes people nervous. They think that, you know, maybe those are overvalued, and the air will come out of that level. So, in that sense, they’re right to worry about that, and right to worry about these great companies, but do we really want to value them as how these were valued?

GF: Are you talking about a company like Nvidia?

Bullard: Nvidia, would be a classic, you know, classic one that went way, way up this year. You know, it’s a great company, and they’ve got a great product, and they’re selling a lot of it, but what’s the right valuation, I think, is the question.

GF: How do you see the global economic landscape beside the US?

Bullard: I would say the global landscape is less rosy than the US, because you’ve got China, which I think is struggling, at least by Chinese standards. China is struggling, not growing as fast as they used to. They’ve got clear fundamental problems in their real estate market, maybe elsewhere, and then Europe, which has not had as much growth as us, and has the war going on in Ukraine and has been more tied to, at least the leading economies have been, more tied directly to China. So China slowing down, it’s very clear more than the US. I would say that for global growth, it’s not as clear that we can get the kind of numbers that we’ve had in recent years. It’s a little bit slower there, and there’s more recession risk there than in the US economy.

GF: Do you expect trade tensions, and the decoupling between China and the US continuing?

Bullard: I think both parties in the US have decided that a more protectionist stance on global trade is something that they want to pursue. One of the hallmarks of the Biden administration was that it didn’t really reverse any of the policies of the Trump administration with respect to trade, and I would expect that to continue going forward.

[The attitude toward global trade] fundamentally, it’s more protectionist. It’s less globalist than it would have been even a few years ago, or certainly during the Reagan-Bush years. And I don’t see that turning around. I think we’re going to have more volatility from that dimension going forward, and I’m a little concerned that you could have markets anticipating a trade war even before one actually occurs because both parties, both political parties are talking about getting tougher on tariffs, maybe not only China, but everyone in the world. That would invite retaliation or threats of retaliation that could lead to a lot of volatility.

If GIX gets the green light from the US Securities and Exchange Commission, it plans to kick off trading in 2025. And it’s a global initiative, too. Labovitz tells Global Finance that while a security must be listed on another US exchange to list with GIX, he’s already chatting up counterparts abroad.

“Conversations with exchanges and broker-dealers in Europe and Africa” about potentially bringing equity-linked products, i.e., American Depositary Receipts and exchange-traded funds, from those regions to the US markets via GIX are taking place, he explained. “We’re still in the early stages of those discussions.”

As GIX waits for regulatory approval, Labovitz is mapping out a future where saving the planet is thought of as a savvy corporate finance strategy. The following interview is edited for length and clarity:

Global Finance: Who’s expressing interest in GIX and why?

Daniel Labovitz: We have spoken with hundreds of public companies. From our conversations, it’s clear that they understand the logic and importance of sustainability to their business and their shareholders. Company leaders know that significant portions of their investor base, employees, and customers care deeply about it and are looking for evidence that companies are not just greenwashing. If a company is perceived to be greenwashing, it puts them at a disadvantage when competing for the best talent and consumers—especially younger cohorts, who, more and more, are considering a company’s values as part of their employment and purchasing decisions. Ultimately, company leaders know they will lose access to sustainability-minded investors willing to trade short-term gains for long-term sustainable value growth.

GF: What were some of the questions that get brought up?

GF: Is there data to support that?

Labovitz: There is growing evidence that focusing on sustainability leads to the company’s stock outperforming the broader market. For example, a 2022 McKinsey study found that “green leaders” in the chemicals market doubled their total shareholder return compared to “green laggards.” A 2023 study in Britain found that a board sustainability committee positively impacted market value, while a separate study found that corporate environmental commitments can play a buffering role during disruptive market events. In other words, markets agree that sustainability investments and sustainability-focused corporate governance can improve returns and lower volatility. You’d be hard-pressed to find a CFO or CEO who said “no, thank you” to either.

CEOs and CFOs also like our trading model. It will help companies generally by incentivizing market makers to post liquidity on the exchange. Once the exchange is approved for trading, we plan to seek SEC approval for a market maker support program specifically for GIX-listed companies. That program would reward companies for making up-front investments in green transition by incentivizing market makers to add liquidity in listed stocks.

GF: How does GIX hold companies accountable?

Labovitz: Investors develop skepticism toward company promises, particularly in sustainability, due to the frequent abandonment of ambitious environmental commitments. This lack of accountability often occurs once the public attention wanes. GIX, however, is uniquely positioned to bridge this “trust gap.” We mandate our listed companies to establish a robust governance infrastructure, ensuring that their promises are not just words but deeply embedded in the company’s DNA.

GF: Has something similar been done before?

Labovitz: Incentivizing good corporate governance has been a core function of stock exchanges in the US for more than 100 years. In the early 20th century, there were little standardized accounting or financial controls inside companies, and investors were not entitled to the right to receive disclosures from the company. This allowed a lot of fraud to thrive. To combat this, the NYSE told companies that if they wanted their stock to be traded on the exchange, the company would have to abide by specific corporate governance standards, implement standardized accounting, and commit to regular disclosures to investors. As a result, an NYSE listing became the gold standard for public companies, so much so that when the SEC was formed, it incorporated many of the NYSE’s governance standards into the federal securities laws and rules that we still live with 90 years later.

Sustainability reporting is in a place where financial reporting was in the early 20th century. There is a lack of standardization, insufficient mandatory disclosures to investors, and a lot of greenwashing, whether unintentional or otherwise. To date, the NYSE and Nasdaq have not adopted corporate governance standards for sustainability, so GIX is stepping up to address that gap.

GF: How do investors benefit from GIX?

Labovitz: Regarding value for investors, it’s important to note that even when it was the gold standard for listings, the NYSE never guaranteed that a company would be profitable and did not anoint winners and losers. To the extent it guaranteed anything, it was that investors would get quality, timely, reliable information from which they, the investors, could make informed investment decisions. The same applies to GIX and sustainability: our role is not to anoint companies as “green” or “not green.” GIX’s listing standards ensure companies give investors quality, timely, and reliable information about sustainability initiatives and performance so they can make informed investment decisions. Efficient markets need transparent information; GIX ensures investors get it. After that, it’s up to the market—not the exchange—to allocate capital where it will be most productively used.

GF: What are your next steps?

Labovitz: Our first goal is to launch the exchange and build experience and credibility running a dual listing market. It’s not a small task—several exchanges have tried to launch a primary listing business right out of the gate and not succeeded, so we wanted to learn from those examples.

The timeline for our launch depends on securing SEC approval of GIX’s Form 1 application for registration as a national securities exchange. After approval, we will need approximately five to six months to complete all the pre-launch work that can’t be done until then. That puts us on track to launch trading in the first half 2025.

Once we launch, we’ll be better positioned to evaluate what’s next, including listing green derivative products: ETFs, ETNs, index products, and ADRs, and creating markets for innovative green equity products. Whichever way we go, we promise to keep you posted.

Global Finance: You have served at various companies. How much of a CFO’s role is company-specific?

Alan Taylor: The role of CFO has consistent responsibilities across companies. You have a responsibility to help allocate resources in the best way possible. You are the chief resource allocator, and that is a fun responsibility in general. At Weave it has been unique because we’re building something that people really want, addressing a significant need, and the growth has been incredible. Experiencing this growth over the past eight years has been rewarding.

GF: What has been your biggest challenge?

Taylor: The biggest challenge is managing this exceptional growth. Scaling and balancing resources is critical. I’ve made mistakes by under resourcing some groups and over resourcing others and erring on both sides is a problem. People generally respond well to frugality, but there’s a limit. Adequate resourcing is essential to avoid stifling productivity. You’ve got to get people adequate resources; you can’t starve them.

GF: What is the thing you spend most of your time on?

Taylor: As a public company CFO, I focus on reporting earnings and engaging with investors. It involves communicating our story, delivering results and maintaining credibility with investors and analysts, which helps establish us as a trusted investment. You become the face of the organization; you develop a level of credibility that helps the organization to be a trusted ticker symbol.

GF: Is it true that the role of the CFO has become more strategic over the years?

Taylor: Absolutely true. We recently introduced a Strategic Annual Plan Process [STRAP], which is a three-year forecast, updated annually. In the fall, the first year of the plan becomes our annual operating plan for the following year. Although the software industry evolves rapidly, and three years out is a very long time, this forward-looking approach provides valuable direction and helps us remain agile. This kind of strategic planning is essential for our role as CFOs.

GF: How do you see artificial intelligence (AI) affecting your work?

Taylor: AI’s potential is immediately apparent in several areas. It excels at fact-checking and data verification, traditionally the responsibility of CFOs. AI performs these tasks quickly and accurately, improving efficiency. Financial reporting tools like Workiva are integrating AI, enhancing the preparation of documents such as 10-Ks and 10-Qs, incorporating risk factors and issues from other companies.

There are tough aspects that will become clearer in the future. Operationally, AI promises substantial efficiency improvements. Reports indicate a 25%-30% increase in coding efficiency for product development teams. The finance team must drive the planning process to realize these efficiencies.

GF: What keeps you up at night?

Taylor: Security and phishing. As the allocator of resources, protecting them is vital. Ransomware attacks and system hacks pose existential risks, threatening customer trust and operational integrity.

GF: What advice do you have for aspiring CFOs?

Taylor: At the end of the day, the key thing you take with you from different job experiences are the relationships. Our CEO Brett White often says, “Be kind to people, be tough on the business,” and that is a critical attribute. Caring about people and supporting their success is essential, especially for finance staff. As a CFO, the most valuable resource is people, and they must be treated with respect and consideration. I’m the chief resource allocator, and the best resource you have in any business is the people. You have to care about them.

The Investment Banking unit, which sits within DBS’ newly formed Global Financial Markets group, has already marked a stellar year, further solidifying the bank’s capital markets presence in key regions like Singapore, mainland China, Hong Kong, Indonesia and Thailand.

Despite a challenging period for the markets in the past two years, DBS witnessed a remarkable rise in its equities capital markets franchise. Its Hong Kong market share surged from a mere 0.2% in 2021 to an impressive 6.7% in 2023; Indonesia’s share jumped from 2% to 8.8% in the same period. Notably, DBS was instrumental in Indonesia’s two largest IPOs last year, Amman Mineral and Trimegah Bangun Persada—both pivotal to the electric vehicle battery sector.

So far this year, DBS was the joint bookrunner for two of the largest ECM deals in Singapore: the follow-on placements of Frasers Centrepoint Trust (US$200 million) and Digital Core REIT (US$120 million). Both placements were meaningfully oversubscribed and remain the only ECM deals in Singapore year-to-date to have raised over $100 million.

Read on as we delve into Karoonyavanich’s insights on navigating the dynamic capital markets, DBS’ strategic initiatives and the outlook for key financial markets in Asia.

Global Finance: You’ve been with DBS for almost 10 years, what were the standout moments, successes or trends that you noticed throughout that time?

Art Karoonyavanich: Over the past two decades, Singapore has done a tremendous job in building the REIT market and ecosystem to become the largest REIT market in Asia ex-Japan. DBS was the pioneer in the early 2000s. By the time I joined the firm in 2015 and onwards, we saw a pickup of issuers from elsewhere across the globe looking to access the REIT market in Singapore. We had a diverse group of sponsors — with assets from the US, Europe, China and Japan, across segments such as data centers, logistics, offices and retail — calling the Singapore Exchange home.

GF: Did the recent real estate downturn in China affect DBS’ business in Singapore?

Art: Singapore wasn’t so affected because the exposure to real estate in China was minimal. REITs in Singapore are much more diversified and are backed by high-quality sponsors. While there was some exposure in China real estate for the REITs here, much of the downside was contained. In fact, certain REITs have gone on to do extremely well, including the ones in the logistics space or data centers that may not have much exposure to China. Hopefully, in China, the policies that they are rolling out will quickly revive the sector.

GF: Which areas of focus has DBS grown?

Art: Besides bringing REITs and business trusts to Singapore, we also spent time building our regional equities footprint. One market where I was hired into was Hong Kong, where a lot of Chinese companies were listing. We’ve been involved in many landmark transactions over the years, offering our entire product suite to clients and guiding issuers. In 2017 and 2018, we saw China continue to open up. As a bank, getting our foothold in onshore investment banking, equities and debt became more important. By 2019, we started to prepare ourselves to get a securities license on-shore in China and quickly build a team on the ground in Shanghai. DBS Securities China was officially launched in mid-2021.

GF: Was the timing of that initiative challenging?

Art: It was right in the middle of the Covid-19 pandemic. The transactions that we were working on to list in Hong Kong for Chinese issuers required us to be present onshore, hence making that investment and being on the ground with our clients in China helped a lot. With our bankers on the ground with the ability to do onshore and offshore deals, this allowed us to be much more flexible. From 2021 onwards, we were able to have more feet on the ground, reach more clients and provide them with solutions and support. That positioned us to help them raise capital.

Southeast Asia has grown in importance over the last several years. In Indonesia, for example, we’ve been able to double down on another core market for DBS and build a large capital markets presence there.

GF: Global IPO and M&A activity have been dismal. How have higher interest rates affected ECM activity in Asia?

Art: ECM volume in Hong Kong for 2021 was north of US$100 billion. Fast-forward to today, ECM volume in Hong Kong for the first quarter was just over $1 billion—a huge drop-off. You can attribute the slowdown, in terms of issuances across Asia, to a lot of factors. One big factor is a lack of risk appetite from investors. Another big issue is interest rates. When interest rates are lower, investors deploy capital or liquidity into riskier assets. 2021 was a good year; while 2022 and 2023 were slow, with a bit of a carry through from that in 2024. That said, in the last few weeks there has been a pickup of investors coming back to buy Hong Kong listed stocks. The Hang Seng surpassed the 18,000 points mark, extending gains. So, there’s a bit of momentum coming back into the overall market.

We’ll start to see some more capital or equity fundraising from REITs in Singapore later this year, which will help bring new equity capital back into the market. A couple of transactions were done earlier this year, including two REITs that raised acquisition-related capital in a secondary fundraise. In the near term, with rates having more or less stabilized, issuers are starting to position themselves again to raise capital.

GF: Where else has there been a pickup in activity?

Art: Over the last 18 months or so, there’s been a big push in terms of capital being deployed in India. It’s catching the wave. As indices continue to do well, and new issuers come to market, a lot of money is flowing into that market.

GF: Were you inspired by the recent election results? (In April, Prabowo Subianto was formally confirmed as Indonesia’s president-elect; he will take office in October.)  

Art: With the elections completed, we expect a pipeline of issuances to come back to the market by the end of this year or early next year. We see the progression of the capital markets build out in Indonesia to continue going forward.

GF: What about Thailand?

Art: In Thailand — being the most liquid equity market in Southeast Asia — we anticipate that the issuance market will rebound now that the country’s elections have concluded. For those two big markets — Indonesia and Thailand — deals will ultimately come back.

GF: How is DBS positioning itself for future growth and to help clients capture more opportunities?

Art: As risk appetite returns, corporates from other parts of the region, including China, will look to diversify and expand into Southeast Asia. Singapore is a natural landing point and because DBS is entrenched in Singapore, it’s a natural conversation that we have with a lot of our clients. We will continue to look at how we can help companies raise capital here. I think that that trend will continue.

Institutional demand for well-sponsored REITs with strong fundamentals will return. This demand will help support REIT equity fund raising plans to opportunistically fund acquisitions of good quality assets, which there are opportunities for now.

Eventually, we’ll also see follow-on issuances and quality IPOs return in Hong Kong, and a growing interest for secondary listings in Singapore from businesses seeking to expand their operations in Southeast Asia.

Among equity market league tables, we continue to be the top bank in Singapore. Last year, we were ranked fifth in Hong Kong and we’re number two in Indonesia. We will continue to be consistent in those key markets and help clients there because there’s a large number of them that will need equity capital as the market recovers in the next 12 to 24 months.

In mid-September, Citi CEO Jane Fraser announced a comprehensive reorganization of the banking giant. Part of the simplified operations model included putting its commercial banking, corporate banking and investment banking businesses under one Banking business line. Global Finance met Citi’s Raymond Gatcliffe, head of commercial bank, North America, to discuss the changes and their results.

Global Finance: Have there been any immediate synergies since CEO Jane Fraser’s September reorganization announcement, or is everything still a work in process?

Gatcliffe: Placing investment banking, commercial banking and corporate banking on an even playing field within banking, allows for more collaborative engagement. We have seen that since the announcements, and we’ve seen a lot of internal initiatives looking to see how we can increase the level of collaboration synergies and initiatives where we — with investment banking, can sharpen how we think about serving clients and how we bring the best of Citi to our clients.

Citi has a top global investment bank, and it is really about how we bring the best of that top global investment bank to our commercial banking clients more effectively. One way that we have done that is by the commercial bank adopting an industry coverage approach, which is the same way the investment bank and the corporate bank cover clients. So, by three banking organizations covering clients through an industry or sector lens, we see more collaboration, sharing of content and advice, and ultimately winning.

Gatcliffe: The initiative to change to sector coverage was initiated in 2022, but I think some of the initiatives that have come after September, in particular with the investment bank, have sharpened the focus and aligned the resources between the commercial bank and the investment bank.

GF: Was this coverage change a post-September or a pre-September change for commercial banking?

For example, we have co-located commercial, corporate and investment bankers on the same industry sector floors at our head office at 388 Greenwich St. in New York. That speaks to that level of partnership, collaboration, synchronicity and focus. We see that as one of the biggest opportunities to grow the commercial bank alongside our banking colleagues.

GF: With the new synergies, where does commercial banking stop and corporate banking begin?

Gatcliffe: We separate commercial and corporate banking by classifying clients with revenues or sales less than $3 billion predominantly served by the Commercial Bank and clients above $3 billion being served by the Corporate Bank. We look very carefully at how we cover them. However, many clients have more than $3 billion in sales per year. But if you want a general differentiation, it’s about $3 billion in sales or revenues.

GF: And with $3 billion in sales, that goes beyond SME status, wouldn’t it?

Gatcliffe: Yes. But Commercial Banking begins at $10 million in sales or revenues, up to $3 billion and sometimes over that. Overall, we are far more focused on where Citi Commercial Bank can bring the most value through our global network spanning more than 95 countries, our deep bench of expertise, and our wide variety of products and solutions across our businesses. We aim to offer the mid-market the same level of service and the same products that large caps get through their banks.

Companies that are more mid-sized and have cross-border needs can get the most out of banking with us. However, we cover clients across the sales or revenue spectrum with varying strategic goals. Clients with $10 million in sales, whom we call emerging growth companies, innovators or disruptors for startups, are also covered by Citi. Often, these companies are born with the potential to scale globally, so they benefit from our international presence and range of products. So, we cover the startup community as well in the commercial bank.

GF: Have any additional features been rolled out to the CitiDirect Commercial Banking platform?

Gatcliffe: We have been rolling out different functionalities, so basic visibility, payments, information, records and statements were the early functionality.

Now, we’re rolling into foreign exchange, moving into loans and accessing loans, and introducing different new functionalities.

We are constantly adding new functionality and also giving clients the ability to self-serve some of the things that they would call in our service centers to get done; they can get that information, they can get that access, they can get that question answered through the information that they would have on CitiDirect Commercial Banking. The platform will continue to evolve as it was created with user or client input and we continue to seek feedback on usability as well as where improvements are necessary.

GF: How has artificial intelligence affected your organization’s performance in the past year?

Lori Schwartz: We are looking at ways to harness the power of such technology to simplify and make our internal processes more efficient.

We have large amounts of extraordinarily rich data that, together with AI, can fuel better insights and help us improve how we manage risk and serve our customers. For example, our data solutions help harness a client’s data into actionable insights while helping them confidently navigate rapidly changing economic environments. With Forecasting through Treasurer Insights, clients can strengthen cashflow accuracy, increase cash availability return, and find previously invisible patterns via cutting-edge technology, including AI and machine learning.

Overall, there is enormous potential with technology and how creatively we deploy efforts in a targeted manner.

Has the investment ratio between keeping the lights on and innovation changed? Why?

Nothing has drastically changed in terms of investment ratio. We have always been committed to the cause of technology, and we continue to be a front-runner at various levels, leading by example in the industry.

We also evolve alongside our clients, and we are fortunate to continue to do the right things on their behalf, with the sponsorship and support to push forward on our ambitious tech investment agenda.

GF: What is the most misunderstood thing about having an innovation within the treasury?

Schwartz: A big misunderstanding is that innovation is only about technology. Innovation is more than improving your technology stack or rebuilding your platforms, such as treasury management systems, enterprise resource planning, or bank connectivity. It is also about transforming your process and approach to how business is led within an organization—it’s about creating efficiencies, changing mindsets and re-engineering to drive maximum gains.

Collaboration is critical to managing inefficient processes through innovation. Treasurers who take a long-term approach to technological development and work with technology and innovation teams can greatly impact business efficiency. With a seat at the table, treasurers can apply their financial expertise to advise on technology and cash flow in a way that creates operational efficiencies and saves costs.

GF: Which are the most common innovation-related pitfalls that organizations should avoid?

Schwartz: Some pitfalls that can hinder innovation include not having strategic alignment with key stakeholders, unclear or unvalidated benefits to the customer, lack of prioritization, and lack of long-term commitment to the program and resources needed.

GF: How have you changed your approach to innovation since starting your role?

In this role, I learned that innovation is not just about the next cutting-edge idea or opportunity. It is just as much about the path or journey to innovation, changing how we think about solving problems for our clients. For example, getting folks to see problems from the client or user’s point of view will fundamentally change how we solve problems in existing capabilities.  The outcome will almost always be an innovative solution. Also, sitting down and talking with our clients about their biggest challenges and trying to understand an experience from their point of view is critical to the innovative process.

GF: Does your team “move fast and break things?” If not, how does it approach innovation?

Schwartz: Moving fast is relative but involves alignment and buy-in across critical stakeholders and teams. The most important thing is to relentlessly and continuously prioritize. Competing priorities will challenge most big projects. Innovation requires extreme prioritization and commitment. Instead of “breaking things,” we focus on driving modernization across the ecosystem.

GF: What was the most important lesson you learned during your tenure?

Schwartz: Some important lessons I’ve learned include:

You can’t throw design on top of development; it must be deeply embedded in the organization’s fabric.

Our Digital Channels strategy in my Digital & Design portfolio must be omnichannel, which drives the data and architecture strategy and approach. This gives our clients the option of digitally engaging with our solutions. Whether sitting at a terminal, on the go with mobile or relying on machine-to-machine transacting, we can deliver what clients are looking for.

GF: How have the skill sets needed within the corporate treasury changed since you started?

Schwartz: The corporate treasury function has evolved from the back-office function to leading transformation from within their organizations. They are at the forefront of driving change, whether it is strategic planning for long-term business objectives, expansion plans or even execution of the innovation agenda.

Treasurers are savvy and leverage technology to solve day-to-day needs such as bank-agnostic reporting, virtual accounts and real-time liquidity. This frees their time and resources to focus on strategic projects and initiatives.

Not only are treasurers becoming technology experts within their functions, but they are also key agents of change and collaboration. Given the digital transformation that treasury is experiencing, collaborating across departments to inform effective outcomes is on the rise. Treasurers can create value by speaking the language of their peers across the business and leading with influence.

GF: How will your position change in the next five to ten years?

Schwartz: With an increased focus on innovation in the industry, we will continue to expand our capabilities and solutions to empower our clients.

Continued investments in areas such as the technology stack and expertise mean we can consistently build on our offering over the years.

As a team, we’re committed to continually raising the bar regarding quality. We want to ensure we meet and guide our clients at every step of the way through market movements and their evolution journeys.

Global Finance: You’ve been in the CFO role at Ternium for over 14 years. What has been your most significant challenge?

Pablo Brizzio: One challenging period was in 2009 when Venezuela, under Hugo Chavez’s leadership, nationalized Sidor, a Ternium unit. Negotiating a compensation deal was arduous, but ultimately, we secured around $2 billion. It was a success considering the circumstances, and the process was quite complex. Not every company manages to obtain compensation in such situations.

GF: Did the fact that you are Argentine helped in this process?

Brizzio: In Latin America we are able to navigate through different governments and different ways of doing things, and this helps you to prepare well for the uncertainties and the changes that can happen in the market. Unfortunately, we are used to these swings in ways government interact with companies.

GF: Have there been any recent challenges?

Brizzio: Certainly, our growth through acquisitions—particularly the recent one in Brazil where we increased our stake in the country’s largest steel company, Usiminas—has presented challenges. Since our inception, Ternium expanded from Argentina to Mexico, Brazil, Colombia and the US. Integrating operations across diverse locations while adhering to different regulations and NYSE listing rules has been demanding. Consolidation is a common trend in the steel industry, and with Usiminas we’re working to integrate it into Ternium due to our majority voting rights.

GF: How crucial is the CFO’s role in consolidation processes?

Brizzio: The CFO plays a vital role, as these processes involve extensive interaction across various sectors of the company. We are tasked with both internal and external responsibilities, from core operations to relationships with stakeholders like investors, regulators and customers. Compliance requirements are substantial and are increasingly integrated into the company’s strategy, making the CFO’s voice significant. Operating from Luxembourg and being listed on the NYSE means adhering to different standards, and emerging issues like ESG further emphasize our role.

GF: Regarding ESG, do you lean toward the European or US approaches?

Brizzio: Both regions have different approaches, but ultimately our focus, particularly in the steel sector, is on the decarbonization process due to our production methods. We have set decarbonization targets and are actively working toward them. However, full decarbonization in our sector remains a challenge due to technological limitations. It’s crucial to establish common ground among stakeholders and develop measurable metrics for progress.

GF: What is the single thing you spend the most of your time and energy focusing on these days?

Brizzio: The consolidation of Usiminas. We have 25% of the total shares but we have 50% of the voting share, so we can nominate the people to the board. This process has many requirements to fulfill.

GF: What advice would you give to someone aspiring to become a CFO?

Brizzio: The role of CFO encompasses various aspects, from finance and accounting to investor relations and stakeholder management. Exposure to different parts of the company and external stakeholders is essential for career development. While the role has evolved beyond traditional finance functions, having a well-rounded skill set and adaptability are key attributes for success in this dynamic role.

Global Finance: How important is the transformation practice at McKinsey?

Chris Hagedorn: In today’s volatile environment where the pace of change is rapid, more companies than ever are seeking transformation to unlock untapped potential and address significant external challenges. Over the past decade, we’ve worked with over a thousand organizations. We serve clients on a broad range of topics, but remain grounded in a simple but important premise: wear the hats of the board, the CEO and C-suite to fundamentally help clients achieve a substantial lift in performance.

There are three parts to how we think about transformation. First, there’s the technical, or financial, side. We strive to deliver better bottom-line results. Second is culture: understanding the mindsets and behaviors of the entire workforce. Third is about sustainable capabilities. It’s one thing for me, a consultant, to bring a team in and help improve procurement practices. But we always aspire to leave our clients in a better state going forward, so they can build the capabilities of the organization through general management skills or specific functional skills, whether it’s commercial procurement, human resources, you name it.

GF: At what point in the acquisition process do you become involved?

Hagedorn: I have several long-standing clients who come to me and say, “I’m thinking about doing a transaction. Can you help me? Can you help me formulate the strategy and identify targets?” Once those targets materialize, and the CFO and the CEO start to make approaches, then we’ll come in and serve them on the due diligence-related activities to confirm value and the transformation work.

The most probable case where we get involved is when a company announces the signing of a deal; it’s usually three to six to nine months prior to closing. They will come to us either on an exclusive basis or for competitive request-for-proposal consulting support. We then help them integrate and achieve their value-capture and transformation activity goals. I personally enjoy being involved up front and seeing the whole movie play out. But, often, we’ll get a call and hear, “I just announced a deal, and I think we need what you can provide.”

GF: Are you seeing more mergers and acquisitions involving self-funded public companies and private equity firms?

Hagedorn: For the last two years, M&A activity has been about half of what it had been 24 months prior. The cost of debt has been a major reason why activity has slowed significantly. When I’m talking to my clients, my colleagues, and seeing all the data points, there’s trillions of dollars in excess cash sitting on the sidelines and building up on balance sheets.

Eventually, private equity will lead coming out of this. They need to take transactions on. We’re in a relatively stable environment, and it provides an opportunity for private equity firms to step back into the deal arena. Public-company transactions will come back, too. There’s a lot of interest from those with strong balance sheets and little debt that want to put excess cash to work with companies that are in a distressed situation.

GF: Do cross-border deals require a different approach?

Hagedorn: The regulatory environment needs to be thoroughly considered when you’re doing a cross-border transaction. I have a lot of cross-border experience. During my days at Peabody Energy, we did a lot of transactions in Australia. I looked at targets in places like Indonesia and other corners of the world. And in my client service work, I’ve advised a global set of high-tech companies coming together, where both the acquirer and the target operated on six continents.

When faced with that, you need a systematic approach. It’s not one-size-fits-all. The organizational aspect is always crucial. Aligning workforce structures and integrating teams across different regions is essential. The more geographically diverse the companies, the more important it is to navigate regulatory requirements and cultural differences. You must take a totally different approach in the US than you would in France or in China. The more geographically diverse two companies are, the more critical it is to understand all the cultural aspects before you bring them together and launch value-creation activities.

GF: Many CFOs say meeting revenue targets and succession planning are the two things that keep them up at night. Does this come up in your consulting work?

Hagedorn: It certainly does. The CFO conversations I was having 24 months ago were 90% focused on the top line. They were also concerned about talent, which is in massive short supply, especially in Western Europe and the US.

Now, every time I pick up the phone or visit one of my CFO clients, they’re asking about costs and productivity. They’re asking about what they can do to make sure that their bottom line and their margins are healthy. They’re still concerned about the top line, for sure; it’s a seesaw effect. Suddenly, they’re looking at massively higher interest rate payments and going from positive free cash flow to negative in a short amount of time.

Labor markets will come more into balance in the next 12 to 18 months, but the most important aspect is making sure CFOs have the right talent in place. Most of the CFOs that I serve today say, “I don’t have enough vice president and senior vice president talent at the quality level that I would like in order to drive the activities and value creation activities that I would like to drive.”

GF: Which sectors do you find most challenging?

Hagedorn: I could probably think of five or six different sectors that I am certain the rest of my colleagues would probably say, “Oh, no, Chris, this one’s harder.” But outside of mining and resources, which include oil, gas, chemicals and utilities. I would say anything that has a high regulatory overlay. Telecom, for example, requires a significant level of government scrutiny. Also, pharma. There can be certain aspects around a new drug release that can make or break the enterprise value of a target. Many complications come into the mix.

But I would argue that geopolitics create a lot of challenges. Large multinational companies coming together that operate in many emerging jurisdictions have different political facets. Having worked in China and Mongolia, trying to set up joint ventures with state owned enterprises, I know firsthand that in the mining space, it is incredibly complicated. When you bring together two behemoths like BHP and Anglo American, having to manage all those puzzle pieces—it’s like Jenga. It must all fit together in the right way. There are sometimes asks that are unexpected and can be enough to blow up a transaction.

GF: How does the advice you give acquirers differ from what they might get from a financial advisor?

Hagedorn: For most transactions, we work side by side with investment bankers. We get into the next-level details on markets, operations, and performance. Investment bankers, tax advisers, and the other professionals involved in completing deals typically don’t go as deep.

Our value add is to be able to understand the levels of performance inside the company and dissect the opportunities in new markets that can lead to growth, improve the cost structure, and reduce fixed costs. That’s not a banker’s bread and butter. On the flip side, we’re not tax advisors or brokers, and so there’s a fundamentally different role to play, but a synergistic one.

GF: Where does shareholder value creation fit in?

Hagedorn: It is the number one consideration by far above all else, although sometimes there are situations that cause it to not be the number one consideration. And shareholder value creation can come in various forms. It was the reason an acquiring CEO recently wanted to pursue a deal. However, when we looked at the amount of free cash flow that it would consume to achieve the synergies, the free cash flow dip was significantly underwater for them. And so it just wasn’t possible for them to pull off the transaction. Shareholder value creation was the overriding thesis, but the journey to getting there was going to be impossible for them with their current balance sheet and financial structure.

Any time I advise my clients, I tell them, “usually you can get the most value in about 24 months.” And in that short time, it’s imperative to focus on value creation and EBITDA. That is almost always the guiding north star. You will find that there are other considerations that should be prioritized. Some companies, in the first year of the transaction, will say, “I don’t want to actually reduce the workforce even though I know I have excess employees by 15%.”

So, it’s not always a linear equation to say, “I just want to focus on ultimate shareholder value creation out of the gate.” There may be some other considerations around employee culture that are actually part of the value proposition of the enterprise that eventually maximize shareholder value.

GF: Do you ever tell clients not to do a transaction?

Hagedorn: Yes, it happens. Just a few months ago, a potential acquirer could have made a deal work, but the downside wasn’t more than the upside, and we said, “We view it as risky for you to proceed with this transaction.” And they didn’t pursue it, even though they held joint management meetings, set up data rooms, and conducted due diligence. Sometimes, the best deal is the one you didn’t do.