Profit, return on investment, risk management. These are the type of concepts you would expect to hear at an Executive Master in Finance, with CEOs and participants from various industries attending the four specialization tracks (Asset/Wealth Management, Banking Transformation, Corporate Finance&Control, Real Estate Transformation). So it may come as a surprise, that the most frequent words uttered at SDA Bocconi’s 2021 EMF - Executive Master in Finance CEO Forum were inclusivity, diversity, sustainability.
But this can only be surprising for those who have a limited vision of finance, one that has become obsolete. At least in the last two decades, when – as one of the speakers recalled – the world has undergone four major crises: 9/11, the sub-prime systemic shock in 2008, the subsequent sovereign debt crisis and finally the Covid-19 pandemic. The past twenty years have changed the bases, dynamics and perspectives of everyday life and have given us key lessons for the future. Even the way we think of finance can no longer be the same as it was in the past, when the shareholders and investors were absolute sovereigns. Now their interests can only be safeguarded when in line with those of a broad and diverse pool of stakeholders. That this awareness was the guiding thread throughout the EMF CEO Forum, was clear from the title: “Roaring Twenties? Strategic Finance for sustainable competitiveness and wellbeing”. The Forum is an integral part of the Strategic Finance Lab, a new entry in EMF design that aims to analyze the role of finance in making sustainable investments and in integrating ESG criteria at the heart of companies.
Another roaring decade?
The first topic addressed in the event conceived by EMF Program Director Alessia Bezzecchi and EMF Academic Director Andrea Beltratti had to do with the decade that has just begun: is it going to be a recovery and growth period comparable to the Twenties of the past century? “Yes, but I feel we really need coordination and direction,” Banca Generali’s CEO Gian Maria Mossa answered. “From a macroeconomic point of view, the financial system is not always in line with the real economy. And there also is an important disruptive factor: blockchain. From a microeconomic point of view, the key evolution has to do with the digital identity, that concerns everybody and opens up great opportunities but also great risks.”
“The upcoming NextGenerationEU funds are a booster comparable to that of a post-war recovery,” Linklaters’ Global Business Development and Marketing Partner Claudia Parzani added, “but it is the central role of people and of their values that must guide the recovery; this is the great lesson of the pandemic.” Hope’s CEO and EMF Strategic Finance Lab faculty Claudio Scardovi echoed: “As in the 1920s, there’s a great desire to restart, supported by the injection of funds that is coming; but we must be careful not to repeat the mistakes of that decade, which led to the Great Depression, the hyperinflation of the Weimar Republic and what followed. We need to invest in the future and avoid macroeconomic mistakes, social tensions and narrow-minded souverainism.” Growth might now be spurred by the savings accumulated during the pandemic and by the long-lasting compression of consumption,” Kiko’s CEO Cristina Scocchia continued. “The European funds could be an opportunity for the Italian economy to recover a structural deficit that dates back to well before the pandemic.”
Fincantieri’s General Director Fabio Gallia is also cautiously optimistic: “Until 14 months ago, all statistics showed that it takes 7-8 years to produce a vaccine. For Covid-19 we did it in less than one. It was only possible because so many resources and so much effort were put into it all together. Europe has also proved more united than it was at the time of the sovereign debt crisis, and this is also producing results.”
New ESG (Environmental, Social, Governance) approaches
The future has inevitably to do with the idea of sustainability. Looking ahead, in space and time, is the operative word for everybody. “Companies can no longer focus on 2-3 years, following budget timing; they need to start thinking 20-30 years ahead,” Parzani underlined, “and map out all their stakeholders, also to find the resources and talent needed to make their business really sustainable.” The theme of human capital came up. “Companies should look at all the people within and around them.” “Today, talent needs to be ‘diffuse’,” Mossa added, “the more diversity in organizations the better for sustainability in the long term.”
From her position as the CEO of a successful company, Scocchia recalled the breakthrough in 2018-2019 thanks to a transformation in terms of operative efficiency and funding, with investments in process and product innovation, the digital transformation and an evolving ownership structure with private equity bringing in a more sophisticated governance style. This reorganization doubled EBITDA, and allowed the company to be resilient during the pandemic: “The strategies allowing a company to be successful begin first with financial sustainability and second with job sustainability. Working is not just about getting a salary; it is also about fulfillment, satisfaction, dignity. It’s about the community in which you operate and about environmental sustainability, and then it’s about achieving all-round sustainability.”
But sustainability is no lavish lunch. Becoming sustainable means going through deep productive, organizational and cultural changes. This has a huge impact on companies, especially in the manufacturing sector. “This is a complex matter, we must avoid ‘ticking the box’ and hypocrisy,” Gallia said. “In the short term, sustainability is a cost, and a heavy one at that, but it cannot be avoided and it is up to us to transform it into a high-profit investment for the future.” This is in line with the banker’s point of view: “A culture of sustainability is still far from widespread,” Mossa concurred, “we need to understand there are not only shareholders but also stakeholders. Everybody agrees, in theory, but you need to translate it into practical action.”
The point is also how to use the incoming European funds: “This money will have to be repaid, partly as a debt refund, partly pro rata, by all EU countries, Italy included,” Scardovi warned. “We need to find a way to create value from this capital. A private track must work alongside the public action. We need to overcome the old trade-off between public and private with a view to cooperating and creating value in the long term.”
Leading a transformation of this magnitude also requires a new leadership model. Specific and interesting suggestions came from the leaders in the room: “This is the time for ‘situational’ leadership, leadership that can adapt to constantly evolving scenarios. First of all, a leader needs to be able to evaluate the context,” said Parzani. “She or he needs to have a strong moral compass to design a ‘holistic’ route combining financial, social and environmental results. More and more, power equals responsibility,” Scocchia highlighted. “A leader is by definition the one who shows the way, but with the ability to stay connected to the people who follow him,” Mossa added. According to Gallia, it is important “to always identify the fine line between consistency and stubbornness.”
As a conclusion the CEOs left food for thought for the future financial leaders. “Surround yourselves with people who are different from you and get out of your comfort zone: it is not easy but it’s enriching,” said Gallia. Mossa recalled the importance of acquiring the tools “to compete with the world” and Parzani that “skills are not enough; you need heart, the ability to listen and collaborate.” Scardovi and Scocchia were short and to the point: “do the right thing” and “make a difference”. A great challenge for the decade that has just begun.
SDA Bocconi School of Management