This episode features an interview with David Quinn, CFO at BlueVine. BlueVine provides small and medium-sized business owners with the working capital they need to run and grow their businesses. David has more than 25 years of global experience in banking and finance. Prior to BlueVine, David served as Commercial Bank Chief Financial Officer at Silicon Valley Bank. He also served as Executive Vice President and Consumer Bank Chief Financial Officer at Bank of the West. David has held senior leadership positions at Citibank, Morgan Stanley, and Lehman Brothers in the UK. On this episode, David discusses modernizing your technology to work for you, the benefits of using third party software instead of building in-house, and making your business unattractive to fraudsters.
This episode features an interview with David Quinn, CFO at BlueVine. BlueVine provides small and medium-sized business owners with the working capital they need to run and grow their businesses.
David has more than 25 years of global experience in banking and finance. Prior to BlueVine, David served as Commercial Bank Chief Financial Officer at Silicon Valley Bank. He also served as Executive Vice President and Consumer Bank Chief Financial Officer at Bank of the West. David has held senior leadership positions at Citibank, Morgan Stanley, and Lehman Brothers in the UK.
On this episode, David discusses modernizing your technology to work for you, the benefits of using third party software instead of building in-house, and making your business unattractive to fraudsters.
Quotes
*”There's only so much the textbooks can teach you about finance. The rest is on the job learning. And it always makes me smile - you think people have got it all. They come out of their MBA. They have all of the education, but you have none of the tangible. Navigating an economy like this is really tricky.”
*”From a finance perspective, we've really grown up historically by buying bits of technology and then retrofitting our data for that technology. And often, what I've seen is we don't maximize the full benefits. We buy something off the shelf. Best case, we configure our data. Worst case, we customize everything. And that makes it really, really difficult down the line when you are looking to do anything on top of it if you've heavily customized your system. There's a great opportunity to hit reset on that.”
*”We don't build everything. You build where you think you have a competitive advantage. And for us, a lot of the data that we have specifically to our clients, we can use that to enhance and enrich it to go and deliver better services to them. But when it comes to things like treasury management, looking at daily deposits, inflows, outflows, how you bring that together in an asset liability management system. Looking at interest forecasting, for example, those are very specialist areas. That's not where we are focused. I would absolutely engage with third party software to manage that.”
*”You just have to make yourself the least attractive for fraud from an external perspective. Internal is slightly different. And to do that, you need strong systems right across the board, strong data health checks, a strong understanding of where you have any gaps. And you need to be able to close them quickly. You need good QA testing, you need great product requirements. And I think importantly, you need to collaborate with other industry peers and share best practices. Fraud rings tend to bounce around the institutions. And so what you can learn from other institutions and put in place as protective measures quickly is important.”
*”We have a significantly healthy balance sheet. But at the same time, you want to extend your runway as long as you can. Nobody really knows how long this emerging recession will last, how deep, how it's gonna bounce back. So you need to be prepared. You prepare for the worst, hope for the best. And so as we think about managing our liquidity and employment of technology, we focus on a few areas. One, we focus on how quickly our assets turn. So we're using it to understand what our pay down scenarios are, what our loss rates are, what the demand is on the front end. So getting a really good view of those is critical for us.”
*”I think there is a broader role for CFOs outside of the financial services sector to be way more focused on getting value from the liquidity that they have trapped across all of their companies. But be them global or just international, how do you untrap that liquidity and maximize it? The data and technology combined together can help you do that.”
Time Stamps
[2:43] David’s path to CFO
[11:44] Cash Crossroads: How BlueVine uses technology to track and unlock liquidity
[12:25] How the CFO acts as a strategic partner to the business
[16:57] Using data to make better business decisions
[23:00] Is it better to buy software or build it in-house?
[37:14] The Playbook: Finance Strategy at BlueVine
[27:47] The BlueVine approach to risk management
[38:04] Report from the Future: What the future CFO will need to find success
[41:00] Quick Hits: Rapid fire questions with David Quinn
Sponsor
The Invisible Vault is powered by the team at Kyriba, the global leader in cloud treasury and finance solutions, empowering CFOs and their teams to transform how they activate liquidity as a dynamic, real-time vehicle for growth and value creation. To learn more visit www.kyriba.com
Links
Connect with David on LinkedIn
Connect with Daniel on LinkedIn
David Quinn: From a finance perspective, we've really grown up historically by buying bits of technology and then retrofitting our data for that technology. And often what I've seen is we don't maximize the full benefits. We buy something off the shelf. Best case we, uh, configure our data. Worst case, we customize everything. And that makes it really, really difficult down the line when you are looking to do anything, you know, on top of it, if you've heavily customized your system. There's a great opportunity to hit reset on that.
Narrator: Hello and welcome to The Invisible Vault.
This episode features an interview with David Quinn, CFO at BlueVine. BlueVine provides small and medium-sized business owners with the working capital they need to run and grow their businesses.
David has more than 25 years of global experience in banking and finance. Prior to BlueVine, David served as Commercial Bank Chief Financial Officer at Silicon Valley Bank. He also served as Executive Vice President and Consumer Bank Chief Financial Officer at Bank of the West. David has held senior leadership positions at Citibank, Morgan Stanley, and Lehman Brothers in the UK.
On this episode, David discusses modernizing your technology to work for you, the benefits of using third party software instead of building in-house, and making your business unattractive to fraudsters.
But before we get into it, here’s a brief word from our sponsor…
So please enjoy this interview with David Quinn, CFO at BlueVine, and your host, Daniel Shaffer.
Daniel Shaffer: Hey David. Welcome to the Invisible Vault.
David Quinn: Hey, thank you.
Daniel Shaffer: So glad to have you on the Invisible Vault today. I'm Daniel Schaffer, the host of the Invisible Vault. And we wanted to talk a little bit about, um, kind of the global situation regarding, uh, finance today. How CFOs are interpreting the ongoing impacts to the financial markets. This volatility really is putting a lot of stress and strain, not only on individual companies, but also on just the larger financial ecosystem. And what we're finding is there's just not a rule book that gives any one CFO, the full comfort to sleep at night. I know you have a lot to navigate through and tools at your disposal. But before we get into that, I'd really like to know a little bit about you. Uh, why finance?
David Quinn: Yeah.
Daniel Shaffer: What was your path?
David Quinn: Well, I've always had an interest in finance, Daniel. I loved economics. I loved watching the financial markets, but I think the interest was more than just numbers. It's sort of what they tell you, how you can interpret them. And what it means, like what action they can drive you towards. You know, there's such a broad scope in finance and within an organization, you know, finance is embedded. It's like tech, it's HR. Like everything has a path back to one of those groups. So you have a, you have a stake in all areas.
Daniel Shaffer: So certainly at the corporate level, you have this stake and responsibility. And as one of our recent guests just mentioned you, own the number, um, across all of those different areas. So you have a great reason to interact and help with leadership. But for you, I mean, when did it all start? Like when did finance become, okay, this is for sure where I want to be?
David Quinn: So way back when I started my career as a surveyor at the intersection of sort of the numbers side of the house and the construction of the building piece. But what I quickly realized when I looked around is everybody who was really senior was at a desk crunching numbers. And I just thought, let me do shortcut that and take the path, go get my CPA. And then go straight into the accounting and finance route. It was really a, thought of like, how could I maximize, uh, and the shortest path there. And my mother told me you'll never find an out of work accountant.
Daniel Shaffer: Yeah, she is definitely right. We have a few strong moms giving early guidance here with the CFOs that I'm not sure if I'd call it a trend, but, uh, great to hear. Uh, so starting off in that kind of shortcut to CFO was crunching numbers. Other than your mom, were there any influencers along the way, maybe later on in your, uh, senior studies that offered similar guidance that you've kept in your back pocket or key lessons that you learned along the way?
David Quinn: Yeah. what I've learned is like you pick up a lot on the way, like there's only so much the textbooks can teach you about finance, right? The rest is on the job learning. And it, it always makes me, you know, smile and people, think they've got it all. They come out of their MBA. They have all of the education, but you have none of the tangible. Like you mentioned the beginning, like navigating an economy like this is really tricky. When we look at at BlueVine, our employee base, like there's a lot of young people here that have never been through a business cycle. So they don't really know like what's in store, how to manage it. What to look for, what scenario planning is. So along the way, I've picked up from various managers, from colleagues and from people in different functions, just tips and tricks on, either their leadership style. On how they think about strategy, how they approach controls, how you do efficiency, M and A, outsourcing. It's really about, for me, watching what other people were doing and then trying to get involved in it, you know, it sort of comes back to poking your nose in everything.
Daniel Shaffer: You've been really involved across the board. Is there any one area that you are thinking really stood out as something that helped you, even in managing teams, especially during the crisis?
David Quinn: Yeah, I think know what your objectives are. Like, that was key. In times of, business as usual, you can get a little bit lax, right? You can monitor your metrics and KPIs. You can spend a little bit too much, but you can lose sight of really what the core drivers are of the business. And so bringing that back and saying like, what do we have to get done? Like, what's nice to be done. What do we have to get done? What is this, um, environment presenting in the way of risks? How do we quantify those risks? And then how do we take action to minimize those risks? and every crisis is a little bit different, right? If you look back to 2000, that was a very different crisis, very different economic set of situations that you have than we are faced with in the pandemic, which was huge unemployment followed by massive subsidy. And now we're faced with something really unique as well, low unemployment, high inflation. That part is really difficult to manage, certainly from an expectation standpoint.
Daniel Shaffer: Yeah. And we're, uh, seeing at least here in the U.S. another, interest rate hike, certainly a lot of re guidance from CEOs. Um, no doubt CFOs giving them the update on their expectations. Um, let's get into that in just a minute though. You've spent a considerable amount of time in the banking industry at that really large enterprise level. Um, and currently, you're in a function that's a little bit different. You're at that kind of corporate SMB. I know there's most likely a lot of difference between the two, but just curious, what brought you to kind of being passionate about that SMB level?
David Quinn: It's interesting. Like I worked, I started at larger, um, organizations. Think the Morgan Stanley LeMans. And slowly worked down to smaller, regional banks had got more niche when I was at Silicon Valley Bank. Um, but at the front end of everything, you sort of get further and further away from the client. So when I moved to BlueVine, which is a digital, um, fintech, it was really nice to be close to the clients close to helping, you know, the small businesses, which are, you know, there's over 32 million of them in the U.S. and they provide over 99% of the jobs. And their businesses are underserved by traditional banking. So it's, it's such a niche. It's so important for the U.S. economy that, it was, how do I bring my experience to bear and help this company grow at the same time as helping small businesses?
Daniel Shaffer: Oh, that's great. I love that. Tell us a little bit about BlueVine. I mean, you gave me just a snapshot there of helping small businesses. How do you do that?
David Quinn: Yeah. So BlueVine is a digital first banking platform. We focus specifically on small, medium businesses. Think businesses under 5 million of revenues, maybe three to 20 employees. Um, and that could be anything from a flower shop on the corner to a pizza place or to a small consulting firm. And what we offer them that traditional banks don't offer them is a re-aggregation of services that have become very fragmented. So we offer them integrated payments. We offer them lending. Lending's been particularly underserved by banks over the years because of the high cost of, um, underwriting those loans. It's just not a niche area for them. You you've seen a sort of proliferation of. lending FinTech startup. And then we offer, um, bill pay. We offer a full, platform for their accountants to join the clients and see all of the transactions and interact with them. So the mission here is really to make small, medium business banking, uh, seamless, efficient. So the business owners can really concentrate on running their businesses
Daniel Shaffer: Excellent. Just curious about that lending. If we could maybe open that up a little bit. I know the supply chain and supplier financing market is kind really challenging right now, just given the kind of corporate machinations and global banking, um, shifts. Is that something that's maybe not impacting your customers, but maybe impacting you, BlueVine, as a business? To date, I would say we have not been impacted by that. I think we have great partner relationships with our existing banks. Um, and so, you know, if you think about our size and scale of liquidity management, it's significantly lower than, um, institutions that I've worked with before. As, as a FinTech, which is sort of on the later stage, you're really focused on building the product, right? Maximizing, um, your build, your efficiency, your speed to market. You know, cash and liquidity management are crucial, but they're not at the forefront, I would say. Which is very different from my back
Daniel Shaffer: Yeah, for sure. I mean, liquidity management is important. Um, but as you're saying, those are different goals that you're attending to at the moment, given your size.
David Quinn: Yeah, maybe I should add to that Daniel, like we do think about liquidity management and the efficiency of capital. So we think about when we lend, how much our advance rates are from our warehouse providers. Like when we think about investment decisions, like what is the payback on these decisions? How quickly will they turn to cash? Um, and certainly this environment we have, we've shifted our focus a little bit in the last six months around that, right? Like really maximizing our liquidity, but it's on a very different scale than I'm used to
Daniel Shaffer: Yeah, understood. No, completely get the numbers. Um, but some of the ways that you're optimizing liquidity and how you're focusing on technology to give you the right information in real time are some of the questions that I'd like to get into here in this next section that we call the cash crossroads. So let me start out with this, David, the kind of framing this idea of where we're going. There is a point where the CFO really is a strategic partner to the business. And as you've said, you really like that. You like the part of being in touch, being maybe at an arms reach, um, not only to your clients, but also I'm guessing to your colleagues and your peers. So tell me how do you in your personal experience, you know, guide other CFOs. as being the best strategic partner you could be? What's the guidance here?
David Quinn: I think being a strategic partner is about, adding value. I heard it not so long ago. The CF no. Right. Somebody who says no all the time to everything, versus someone that says, okay, well, tell me more, explain that to me. Why do you think that's a good investment decision? What do you need it for? Keeping in mind the bigger picture of, you know, here, we're trying to really grow and scale a business. So I think of my role as really understanding each person's area. Like the more I can understand it, the more I can help, the more the team can help them. um, and then make sure people understand how we think about the balance between short and long term needs. Like try and get some discipline around creating business cases. Like what are the metrics that they should be shooting for? And partnering with them that way. And then, you know, I think part of finance job is to identify opportunities right? Now, whether that's looking at some capacity models for different areas, right? Bringing in benchmarks to hold folks accountable to where the industry is at, whether that is just you, as I said, removing obstacles so they can move faster, right. That might be just getting quicker decisions out to them. It could be providing them with the right data. And I think above all is bringing great people to your organization. Bringing people that get on together, that are aligned to the mission and to the values, and where you need to, use your title and position to help recruit them. You know, I'm happy to jump on calls with engineers and, tell them why they should join such a, a great company. And, you know, I think all of the executive team at BlueVine do that.
Daniel Shaffer: Excellent. That's great leadership advice. I was really kind of keying in on your KPI message there, because I, I think that there has been a lot of change in the last five years. Are you seeing boards and, shareholders, or even these engineers that you're hiring, looking for a different set of KPIs compared to maybe five years ago?
David Quinn: Yeah, I think KPIs today are more aligned to a strategy. if I go back a few years, we were focused on really the financial KPIs that drove everything. now a lot of firms certainly here in the valley, focus on, um, OKR, so objectives and key results. So you have a small number of objectives as a firm, which are written down. You explain what the key results would look like. And then you think about the key indicators that would support them. And those are not necessarily all financial indicators. Those are kind of the velocity of how you are delivering a product, your speed to market, The outcomes of those will support all of your financial metrics. NPS is another big one, if you nail NPS, so net promoter score like how your customers feel about you and it will promote you. Then it tells you that you're doing an awful lot right. Now, maybe on the cynical side as a finance person, if I have a really high NPS, I'm thinking about how much is that costing me to get that right? Am I doing it in the most efficient way? But the idea is I think those have shifted in, we could open up the ESG box as well, but there's been a huge rise in ESG, um, in the last five years.
Daniel Shaffer: Yeah, it's great to hear you say that. It certainly is very consistent with a lot of the CFOs that we've talked to. And even one of the industry analysts, uh, Kevin Permenter at IDC, who said, you know, the leading, uh, companies these days are not just looking at that 3 to 10%, whatever that financial KPI is for growth. That's not the key metric. the metrics are varied and matrixed. And as you said, incorporate more than just bottom line values. Because the growth of the company is involved in, uh, a long term period with a lot of different factors. So great to hear you say that and, and kind of share some of that, uh, how KPIs are different today than they were five years ago. In order to get there, though, what you're talking about is it seems like it's more complex. In other words, if it were just a bottom line, a spreadsheet, an analysis and that data point on finance is kind of all you need, but in fact, there's, you just said ESG and PS. What are those key, uh, outcomes that you're looking for? How do you measure those? So if you're a CFO making these decisions about moving forward with the company, what type of, uh, technology vision do you have that helps you guiding your teams and enable your, uh, strategic business partners?
David Quinn: I think historically we've sort of measured what is easy, right? Like what data do I have? And we'll just use that and great. That's what we can do. Now, it's measure what matters, right? So like, think about what your objective is, what you're trying to achieve, and then find a way to get the data to support it, right, and measure it. There's a lot more emphasis and clearly there's a lot more data available than there ever was. And you specifically on the data side, we've seen the rise over the last 10 years of data governance, of chief data officers. And like that has been just, a proliferation area for growth. When I take a big step back and I look at, you know, not just our finance data, but our broader data set, there is, you know, one, a huge volume now of transactional data, but often in companies, it's unstructured, it's ungoverned. Um, and it's really difficult to access. I could paint you a vision of what I would love to see from a finance perspective, which is all of that data coming in it's reconciled back to the source. We understand what it is. We have a governance structure over it. We can align it in, uh, towards different functions. And then we can find a way to join that data to make the right decisions and then to display it so that we can really manage better. From a finance perspective. we've really grown up historically by buying bits of technology and then retrofitting our data for that technology. And often what I've seen is we don't maximize the full benefits. We buy something off the shelf. Best case we, uh, configure our data. Worst case, we customize everything. And that makes it really, really difficult down the line when you are looking to do anything, you know, on top of it, if you've heavily customized your system. there's a great opportunity to hit reset on that. And for me, um, at BlueVine now at a FinTech company where technology and data are the core of what we do, we have a lot of resources available. Um, although resources are scarce and focused on delivering product. there's a huge opportunity to rethink, um, our data strategy within finance.
Daniel Shaffer: Sure. And I think you're not alone in that. Many companies are on that digital transformation, uh, journey. And for those who haven't really fully reimagined, how, especially at the financial set, I mean, you told me your data driven and liquidity optimization is important. Uh, but in order to do that in a scalable way with kind of that business plan that drives you to your objectives, you're maybe ready for some consideration there. what is the calculus there? When you're trying to put together a plan for investing in technology?
David Quinn: On the one side of the house, um, when we think about our technology platform, it's, you know, what are we building? How quickly we can get it to market. What's the revenue stream gonna be like for that product? Or is it something which is driving a cost reduction? So we think about it in terms of an ROI on that investment, Specifically for the platform aside. When we think about it from a supporting standpoint, there are trade offs. We can think about, you know, investing in fraud, transaction monitoring, in just basic operational activities, reduce operational losses down the line. There's a lot of, um, considerations that go into it. You know, on the one side, you really have to have a good understanding of the risks that you are facing and the trade offs. And what risks you are willing to take, cause that will, you know, help influence where you invest. And on the other side, it's, you know, do I have to do these things today? Is there a better way of doing them? And technology, um, can be an enabler, but without the data behind it, it doesn't always work out as we intended, right. I've seen that multiple times in software that we've acquired and it doesn't do exactly what we do because we didn't take the time to structure the data on the back end or think about how everything should interplay.
Daniel Shaffer: When you're solving for a problem that you have, that you've defined within your company, and as you're saying, you're really looking for those objectives, but then those key indicators of what success looks like. Um, do you also employ maybe some consultants in this process, uh, in order to maybe think more holistically about best practices across other organizations similar to yours?
David Quinn: Yeah, I would say for larger organizations in BlueVine, that's probably appropriate. in the past we've rolled out it's part of a, a full finance transformation, a full data strategy, and we've gone back to basics and said, where do we need to source our data from? Is it complete? Like you have your full extraction layer. And then you build on top of that, you enrich, you create your data structures around it, but yeah, it's an enormous task to do on your own. even thinking about it for a large organization is challenging, especially from my background from banks, like we've grown up with these core banking platforms that have just become so, um, clunky, that's very hard to do anything with them. Right. it's very, very difficult, very expensive multi years, and it's not possible to do anything without some outside assistance. It's just so, so much volume.
Daniel Shaffer: Sure. No, I, I get it. I mean, we're at Kyriba hearing from a lot of financial institutions. Um, and they're kind of bolting on, on a white label version of Kyriba in order to help 'em with payments or treasury or liquidity management, just for exactly that reason, cuz it, you know, when it comes to innovation, and this is kind of what I was getting at with you is, it all in house? I'm sure you have some really great developers, but when your focal point is not particularly building, uh, the infrastructure for a financial technology set can you justify the cost and time required to create a bespoke solution?
David Quinn: Yeah. I mean, that is always the trade off, right? Like you'll either building product to deliver it, to drive customer value, We don't build everything, right. Like you build where you think you have a competitive advantage. And for us, a lot of the data that we have specifically to, um, our clients, we can use that to enhance and enrich it to go and deliver better services to them. But when it comes to things like treasury management, looking at daily deposits, right? Inflows, outflows, how you bring that together in an, uh, asset liability management system. Looking at, um, interest forecasting, for example, like those are very specialist areas. Like that's not where we are focused. It would absolutely engage with third party software to manage that.
Daniel Shaffer: I'm curious about your point of view on APIs, as you're saying, you're really pulling in all these data points, not only from your clients, but external sources that you're working with, your own banks that you have great relationships with, and others. Are you today leveraging more APIs in order to better manage your cash and liquidity?
David Quinn: Yeah. The way we use them today is specifically around our transaction management. Um, so we integrate with Galileo, which is a large banking provider. And so there, we have a lot of calls going back and forth as we look at our transactions. We have a lot of internal APIs as well, but yeah, there's a big, um, increase, I would say in the amount of APIs used, just because of the flexibility, the security, and, you know, everything that an API offers. And then as I think about our, our money movement, for example, those are all facilitated by APIs with our processes. You know, ThinkCheck, Wires, all of the movements that we would do, the reconciliations on the back end. So it's a big, growth area. For us when I think about, well for BlueVine when we bring it all back together, into one dashboard, I think that's where there's more opportunity. You sort of leverage them in a way, which is, for individual transactions or individual processes, but then how do you maximize the benefit of all those APIs?
Daniel Shaffer: Yeah, I think. you're touching on the business intelligence and those dashboards really are indispensable. Seems like table stakes today. Let me probe deeper into that, can you share a, maybe even a personal experience or an anecdotal experience? When really tech could have helped you, but just wasn't available, um, or at least it wasn't even technically, uh, evolved enough for it to do what you wanted it to do? But then in comparison to potentially a situation today that you have that technology and it really gave you or your teams that opportunity to grow.
David Quinn: Yeah, I would potentially go back to the beginning of the financial crisis, and when a whole raft of new regulations were coming out around, uh, the Dodd-Frank and for stress testing, specifically Zika, there was not a lot of technology around to help with that at the time. This is more scenario modeling, sensitivities, um, linkage of specific stress scenarios back to your portfolio. Banks at the time were just not ready. One with the data. And once you had the data, there was no technology really to support it. So there was a lot of, um, ad hoc builds going on. We had, you know, huge spreadsheets to consolidate all these different work streams to come up with stress results. And, you know, it was costing hundreds of millions of dollars across all the major banks to do that. Thankfully today that landscape has evolved significantly. I think the treasury landscape has caught up enormously with the liquidity requirements and kept up with the regulations, which are coming out. But, if I look back to just the manpower or the person power that we had supporting those activities, that was a huge cost. Right. And at the time, the problem wasn't well enough defined really to solve Interesting to hear the, Dodd-Frank, a analysis there. I can't imagine the, level of spreadsheet were even some companies today are still dealing with. Let's talk a little bit about other factors that are impacting CFOs today. And this is our section that we call the playbook.
Daniel Shaffer: We're seeing interest rates, jump supply chain issues across the board. And as you mentioned, David, even at BlueVine, you are constantly analyzing risk and risk management. Can you tell me what is involved risk, but that capital R, what is risk management for you at BlueVine?
David Quinn: so working in a regulated Environment for my, all of my career, risk has become part of my DNA. Right? And we get to partner thankfully with our audit and risk committee, uh, on the governance at the enterprise level. And so we really have some framework to help govern us on those as an organization. What we do is we think about risks across all of the key OCC categories, think strategic, operational credit, reputational, you know, interest rate, market, liquidity decline. Like we look at it across the spectrum and then we create a risk appetite. So we say, what is the nature of this risk? What does it mean for BlueVine and what is an acceptable level that we are willing to take? And then we set thresholds and triggers around those risks, and that really helps you manage your business. You know, a good example would be, for, just say some, some market risk, some FX risk. So we'd say, Hey, we have, um, an Israeli subsidiary, for example. We have to, uh, pay local currency there, but we earn in U.S. Dollars. It's been pretty volatile over the last couple of years, from an FX perspective. Let's set a strategy to make sure that we have, um, an FX hedging program in place that ensures that we can manage that risk. And then understanding how much of that risk you are willing to take determines, you know, the size and the scope of your hedging program. FX risk is one risk, you know, operational risk, fraud risk, um, or fraud under operational credit risk, are other things, especially in this environment now that we are hyper focused on. Right. And it comes a little bit round to managing both risk and managing liquidity, Right. When you talk about risk, I mean, FX risk, absolutely. Let's talk about that for a minute. Because we're seeing Wall Street Journal, Financial Times, Bloomberg, Reuters. For everybody is talking about restatement and how currency, uh, exchange is completely disrupting the way finance leaders are offering guidance to the street about where their company stands. It's, uh, unfortunately I have to use this word. I'm going to look up a synonym for unprecedented, but it truly is. What is going on in your view with the level of impacts, um, where, and not for your company. I'm saying specifically, if you look at the market, I mean, what is going on that CFOs, um, are having to restate guidance? I think things have moved very, very quickly in the market. The market's moved, uh, way ahead of the data. All the prints that have been coming out, they're lagging. I think we're gonna get, uh, some good reads again this week on jobs and on inflation. Um, obviously the fed meeting is this week as well, but the, we start to go back six, nine months, everything was transitory, right? Like inflation was transitory. Since then, you know, it was a couple of factors. The pandemic has continued. We have the war in Ukraine. The inflation now has gone from, you know, what was extremely, extremely low, peaking uh, now at 9.1%, I just think there's a lot of uncertainty. It's really been difficult for people to make sense, for economists to make sense of the numbers. From a period of, of very, very low rates to rising very, very quickly and then the confidence falling out of the stock market, uh, back in December, January timeframe. You know, people are really questioning the mixed signals from low jobs and high inflation. And then, the feds' actions, certainly from a U.S. perspective, in fact, you know, across Europe, rates are going up across the board. So you're trying to balance investment returns. it's complicated right now. It is. I think, as you say, unprecedented, it's a very different type of environment that we were in for the last, uh, 13 years.
Daniel Shaffer: Last 13 and, and I'm seeing comparisons even all the way back to, the 1970s, where that was such a major market had such a major global market impact, inflation and recession. But as you said, it's completely different now. You can't just look back to the past and say, well, history taught us this lesson. Here's how we have to manage it. And there's so many more data inputs that are unclear. So one of those that macroeconomic risk you're talking about is understanding inflationary challenges and potentially how you deal with that. With other types of internal risk I'm wondering if you're managing fraud risk or payments.
David Quinn: Yeah, I think cyber security is certainly the hottest topic in terms of the risks, in terms of, uh, both the regulatory side, you CVS C guidance around it. It's a huge focus area, for us as a transactional institution, fraud risk is front and center for us. Fraud can be very, very sophisticated. The fraudsters are opportunistic, and they take advantage of weaknesses in your company's processes and systems. I think over the years there's been an inevitability, around fraud and it's a little bit like jello, right? Like you push it down in one area, it pops up somewhere else. And so, one of the things that I've seen in the past is that you just have to make yourself the least attractive for fraud, right, from an external perspective. Internal is slightly different. And to do that, you need strong systems across the board, strong data health checks, strong understanding of where you have any gaps and you need to be able to close them quickly. You need good QA testing, you need great product requirements. Um, and I think importantly, you need to collaborate with other industry peers and share best practices. Fraud rings tend to bounce around the institutions. And so what you can learn from other institutions, and put in place protective measures quickly is important.
David Quinn: and I think, cause we think about transaction monitoring, it's a competitive advantage in some ways that, you know your clients better than anyone. So being able to have a transaction monitoring system that you are really, really close to, you understand the behaviors and you can look at them across your portfolio, you can understand the rule sets of those. I think making sure you have the data from that is a key competitive advantage.
Daniel Shaffer: Last piece on risk here. Cause I'd love to keep things moving into a report from the future. When you talk about that objective of having cash on hand and you are monitoring your liquidity, there's some, maybe a head room, uh, that you trying to be able to fund new opportunities, but you also wanna make sure you have enough money in the bank. to ensure if something unexpected did happen, you were able to, you know, pay your employees or take care of any lines of credit or not have to take out an expensive, unnecessarily expensive line of credit. What is that portfolio risk or head room kind of confidence level. How do you get there? And is that something that you're leveraging technology to give you that advantage?
David Quinn: We look at it across, um, a number of dimensions like firstly. I would say that we thankfully we're well capitalized today. Um, you know, as startups go, we have significantly healthy balance sheet. But at the same time, um, you want to extend your runway as long as you can. You know, nobody really knows how long this emerging recession will last, like how deep, how it's gonna bounce back. So you need to be prepared. You prepare for the worst, hope for the best. And so as we think about managing our liquidity and employment of technology, we focus on a few areas, One, we focus on, uh, how quickly our assets turn. So we're using to understand what our pay down scenarios are, um, what our loss rates are, what the demand is on the front end. So getting a really good view of those, um, is critical for us. You know, again, on the other side of that, our outflows, when we look at, you know, our largest cost is employees, followed by marketing, et cetera. So not dissimilar to a lot of, um, FinTech companies, like we are really closely monitoring all of those outflows and trying to plug, um, I wouldn't say plug gaps, but be conservative in, in those key areas. We try and bring all of that together in sort of one view. We run scenarios off of that, but for us at this stage, I think there's more use of technology that we could employ, to do that in the future, right? As we get more sophisticated around ALM management, daily liquidity reporting, um, and cash management. Right now, we've in, we've increased the frequency of our cash monitoring, uh, to weekly from, from monthly. Um, and with the rising rates, we're just making better use of where we are placing that spare cash, uh, to earn yields right now.
Daniel Shaffer: Yeah, I think that is something that we're hearing as well, right. That you're looking at your reporting on a daily basis, on a weekly basis where it used to be a monthly and a quarterly, and that was sufficient. With that new level of information, you're making decisions on how to invest your money, whether your overnight sweeps are really generating the kind of interest returns that are supportive of the amount of money you're pushing through, uh, into the banks. Are you seeing that level increase as well, David? Are you, do you think your investment opportunity is increasing or are you being more conservative, um, and holding that cash?
David Quinn: We are naturally conservative. So we only focus on risk free returns, right? So the, kind of more of the sweep side of the house. Our core focus right now is building and scaling. But the curve is it's hard to get too much yield out on the curve without taking a lot of other risks that we talked about. The rate curve is getting flatter. To extend a duration that long, it's not worth it for us personally, but you know, I think for treasurers of large organizations, it's a really tough job right now. I think there's probably a lot more hedging and unhedging going on right now, along the shape of that curve than there was a few months back.
Daniel Shaffer: So let's move in David to one of our final segments report from the future. In this section, just curious about your point of view on the future CFO. What's really needed for that next generation of finance leaders to be the best business partner at their organization?
David Quinn: Maybe the way I would answer that is relative to the current crop. I think CFOs that bring the outside in, uh, are crucial. The knowledge around technology is a prerequisite, I think before you could have got away with it. Um, now you really need to understand the data and the technology landscape more so than ever before. There's just more data to manage. There's more value in that data. And so how can you turn that to a competitive advantage? And I think the other component we sort of touched on it is around liquidity management. I think there is a broader role for CFOs, you know, outside of the financial services sector, to be way more focused on, getting value from the liquidity that they have trapped across all of their companies. Right. But be them global or just international. Like how do you untrap that liquidity and maximize it? And, and then the data and technology combined together can help you do that.
Daniel Shaffer: And do you think to do that, you'll be leveraging more artificial intelligence. Um, how is AI gonna be supportive here?
David Quinn: Yeah, I think so. I think you can divide it, uh, the AI and sort of the operational side and, and how it makes you more efficient sort of auto approval or reccurring payments, settlements. So you understand the float that you need out there, where exactly when you need to fund, um, and then how it improves your customer experience. Right. In terms of retention and reducing your expenses. There, there's so many ways that you can, um, add AI into what you are doing that have the outcome of understanding, um, your cash movements and your liquidity. You know, even small things like improving your booking ratios, recognizing attrition behavior using AI that has a downstream impact on what you can fund and what you later gain in as cash flows. So there's a huge amount, even we used in the past automating process, closing operational efficiency gaps, using bots and things like that that are generating, um, leverage and even looking for seasonality trends within, um, your cash flow so that you can just balance just more efficiently across the board.
Daniel Shaffer: Well, I really like your point of view there. And just your depth of perspective on all the levers that require more intelligence and information to be served up, but served up not by themselves. Served up in a collective context so that you understand how they interact. Let's move into the last section here, David. This is called our quick hits. So we're just looking for maybe your knee jerk reaction. Short, um, kind of punchy thoughts on these couple questions here. Tell me a little bit about the future of digital currency for treasury and finance.
David Quinn: Uh, I, I think there is space for digital currencies. For things like crypto, uh, I'm less sure. Like, I think there's a lot of work to do on that. May, may Maybe I'll leave it there. I think the jury is out on that right now. Block Blockchain. I'm unsure of, I think there's value in blockchain. Um, but maybe as a, as an enabler.
Daniel Shaffer: Right. We're not there yet. Got it. We'll leave it at the jury is out. You said there'd maybe be a focal area for finance or the chief financial officer around other types of liquidity management. I mean, is there gonna be a chief liquidity officer? What are your thoughts there?
David Quinn: I think it depends on the organization. Like CFOs are naturally risk averse, and the incentives that we have created around us create an environment where the cost of reducing risk, results at a potential reduction in liquidity. So I think there's been less emphasis on it. I think there's a lot more talk around the need for a liquidity officer. I would say outside of banking, I feel like there's probably a valid case to do it. I think banks are incented both from a regulatory perspective and from a profitability perspective, probably more so than other institutions.
Daniel Shaffer: Yeah. Real interesting there, we're just hearing so much about liquidity, not only from you, um, but also from others. That specialization requires more focus than is currently being given. And as I'm hearing, even you today with HR, with, you know, hiring, spending time with really assessing the right, um, investments to make that broad spectrum knowledge that the CFO has about all the levers that move a business forward, potentially a CLO, Chief Liquidity Officer, uh, is a specialization that could emerge. David it's been such pleasure. Uh, I feel like we really got a lot of information here on the invisible vault from you, um, that adds to kind of this collective, uh, platform of knowledge. Um, is there anything that you wanted to share, uh, that you didn't get to cover today? Uh, or a question I didn't get to ask?
David Quinn: No, I think, we've covered a lot of ground today. Daniel, so it is a pleasure to be on and talk to you. I love what you're doing with the podcast and I love the fact that, you know, Kyriba provides these great liquidity frameworks for us.
Daniel Shaffer: Excellent. Thank you.