Moody’s CFO on value of information sharing

When Mark Kaye was hired as the group CFO of Moody’s Corporation in 2018 he set about finessing finance to ensure the financial services giant could become increasingly competitive.

But as the coronavirus epidemic spread in early 2020, the moves undertaken to provide fast, accurate data on how each area of the group is performing, have paid off in a world where staff were forced to work remotely.

It meant that the owner of  credit rating agency Moody’s Investors Service and Moody’s Analytics, a provider of financial data and analysis software and services, was able to navigate the crisis effectively.

“Two years ago, we started on a journey to move finance from a function that generates monthly results in a fairly manual fashion, to one that produces insights in an increasingly controlled and automated basis.

“Senior staff could receive access to financial results on their computers, or on their phones, in a way that they wanted to receive it, so we developed a lot of underlying templates and visualisation formats,” says Kaye.

The underlying financial architecture was redesigned using technologies such as Microsoft Power BI, Tableau,and SAP, while at the same time the group increased communication through collaborative systems like Zoom and Slack.

On January 1, 2020, Moody’s new SAP general ledger system was in place, a matter of days before the coronavirus was recognised as a deadly pandemic in China.

By the time the coronavirus began to sweep across the world, Moody’s was rolling out the new system across its  offices worldwide. “Through January, February and March we were training people on the access, use, and interpretation of our new financial analytics via their preferred visual format and technology. So when the pandemic came, the ability for business managers to access to information was seamless,” says Kaye.

In fact such was the ability for Moody’s to operate its functions, used by businesses and financial institutions, effectively through the global lockdowns Kaye says the pandemic “was, a non-event from the perspective of our being able to work effectively despite being digitally dispersed. As a workforce it really did not have an impact on the way we collaborated, and actually increased our productivity,” he says.

That said, early fears about the impact of the pandemic saw Moody’s share price slide from $285 on 19 February to $165 on 23 March. But by year end the stock had recovered to $290 giving the group a market value of $55bn.

Kaye says coronavirus revealed the importance of moving into a much more digitally seamless realm, “where the way in which we can interchange and use information has greatly accelerated.

“I think it’s given my peers and me an appreciation for what technology can actually do in enhancing our effectiveness as a management team out to the organisation.

“For example, I can hold an earnings calls, talking to peers and my fellow presenters on Zoom and communicating with them on Slack at the same time, so that the Investor Relations team can pull out answers on the screen simultaneously,” says Kaye.

Finessing finance

When he joined, Kaye’s mandate for running finance at Moody’s was to make the CFO a much more strategic position within the organisation. “That’s become incredibly important over the last year as my function in finance has taken the lead in designing things like the workplace and workforce of the future, partnering with HR.

“And it’s been very important in taking steps to move forward, in innovation and growth. So whether that’s technology for the purpose of collaboration, or whether it’s technology for the purpose of delivering insights and data to our customers, finance has a big role,” says Kaye.

An actuary by training, he arrived at Moody’s after a Master’s degree in finance from the Wharton School of Business at the University of Pennsylvania and roles in finance at retirement provider Voya Financial and by life insurer MassMutual, where he rose to become CFO of its US arm.

The organisation he joined in 2018 had grown from the firm founded in New York in 1909 by John Moody, the inventor of modern bond ratings, to become a global giant. Along the way it was acquired by Dun & Bradstreet in the 1960s before being spun off as a separate entity in 2000.

A combination of demand for its core credit rating business and the success of its analytics arm, launched in 2007 to focus on non-ratings activities, has delivered a more than 20-fold rise in Moody’s share price since 2000.

Given the data heavy offerings of the business, it makes sense then that the Moody’s leadership team would be seeking new ways to capture value from this potential goldmine- with the finance function playing a pivotal role in achieving that aim. “The third area where we have evolved the CFO function is to be much more strategic around operating effectiveness and efficiency for the organisation,” says Kaye.

Drawing on experience of previous roles, Kaye says: “I tend to gravitate more towards the data and analytics. I like experimentation, I like technology.”

He says these elements have impacted how he is looking for finance team members to make a greater impact across the group over the next five to ten years. “That’s the horizon that we should have. What do we do today will allow us to be on that journey,” he says.

Culturally he is looking to tilt the finance team to what he describes as “digital accountants”, as the function evolves. “There’s a great deal of training in coding, data science and data architecture that allows classically trained accountants to apply new skills to fairly old and established disciplines.

“This creates a burgeoning of knowledge, and the ability to allow the business to make decisions based on the analytics and the insight that we’re able to provide,” says Kaye.

 Coronavirus the catalyst

Although Moody’s had been busy building technology and expertise across the group, there have been great strides to manage the cultural shift also required,” says Kaye. This has involved direct communication in the form of hundreds of town halls and employee meetings throughout the course of the year, led by “anyone with a valuable perspective to contribute on a particular topic”.

A recent example was on the topic of reimagining joy- “how to find joy and fulfilment in interacting with your colleagues, when none of you see each other in person,” says Kaye.

“We would not have done this without the coronavirus, which has really forced us to communicate through multiple channels. “Using technologies like Zoom can be very freeing in some ways, very democratic, and it has served us very well when it’s come to decision making.

“That’s the one thing that I take away from this pandemic that has been incredibly positive for Moody’s,” he adds.

When it comes to plotting the future ahead, Kaye says that Moody’s has been looking to develop more effective ways of understanding the complex economic environment thrown up by coronavirus.

Alongside rolling forecasts that were implemented two years ago, he says: “We have made a lot of progress in the last few months around what we call innovating with purpose, using alternative or unstructured data sources to help our forecasting capabilities through machine learning and AI (artificial intelligence).

“For example, to measure credit card use we are using Google credit card apps or Google Mobile data to provide alternative data to augment our forecasts. Another example is using a number of computer algorithms to estimate debt issuance activity in the markets, three months or six months out with a certain degree of confidence.

“We don’t necessarily have point estimates, we have probability estimates for making management decisions. There’s no one point of perfect accuracy and stability, there’s a range of outcomes with a degree of probability, that’s the big development within the last year.

“Another technology we’ve looked at putting in place is natural language processing, to offset the subjective judgement or the opinion of the finance team in writing a report. The idea is to get all of that available information to the business when they need it, where they need it on their iPhone, or their Galaxy,” says Kaye.

All of this chimes with his view of the CFO as a steward of the business, whose responsibility extends well beyond just understanding and reporting financials. “It really extends to that critical business partner to the CEO and the other executive leadership team members to provide them with guidance and options for managing and running the business.

“I offer input and advice all the time to my business partners. I use my data that I have available to me and my expertise in understanding that data to make recommendations to them that hopefully they find helpful,” he adds.

In a moment in time when so much changed, Kaye says the breadth of data being provided, including non-financial, has raised further the profile of the finance leader.

“There has been an evolution in the last year that the coronavirus has expedited. People want to know more and more about what’s happening on a particular day. But the information needs to be right,” says Kaye.

“That’s the natural tension that we’re constantly trying to balance out,” he adds.

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