In conversation with Vijay Bharadia of Intermediate Capital Group

Teresa Owusu-Adjei:

Welcome to the latest episode of our Business in Focus podcast. I am Teresa Owusu-Adjei, I am a partner in PwC’s Financial Services Tax team and I am your host for today. We are excited to bring you the second of our ‘In conversation with’ episodes. These feature discussions between our people and our clients about the impact of COVID-19 on their organisations. We are going to explore what we've learned from the disruption that we've experienced over the past year, and how we can take those lessons forward to help us navigate future challenges. We will also discuss how PwC has been working with clients with speed, imagination and care to deliver results that make the difference. Joining me today in our virtual studio are Vijay Bharadia and Marissa Thomas. Marissa is PwC’s UK Tax Leader and Vijay is the Chief Financial and Operating Officer, that's the CFOO of Intermediate Capital Group or ICG. ICG is a global alternative asset manager in private-backed credit and equity. It’s focused on providing capital to help companies grow through private and public markets. Welcome Vijay and Marissa. A quick question for both of you - first of all Vijay, where are you in the country today and how are you doing?

Vijay Bharadia:

Hi, good morning everybody. I am in Northwest London, and I am doing very well, thank you very much. I had my first vaccination over the weekend so I am quite excited.

Teresa:

Awesome, lucky you. And Marissa hi, how are you doing, where are you today?

Marissa Thomas:

I am in our Embankment Place office Teresa. With the stay at home order lifting last week, I have had some fun being back in the office and it's fantastic to be back here.

Teresa:

I am really jealous about that; I can't wait to return back as well. I am in a somewhat sunny-ish Kent today, talking to you all. So welcome to both of you and thank you very much for joining us today. Vijay, can I start with you - really exciting to hear that you've had your vaccine - I just want to reflect with you about the last year and just to understand what has been the impact of the pandemic on ICG?

Vijay:

Sure, a couple of points to raise there actually. ICG was admitted to the FTSE 100 at the beginning of March, just before the pandemic last year. We were very excited, and then the pandemic struck. Our share price suffered a significant decline, it lost nearly 70% in value. Our shareholders were extremely concerned on what that meant, what the crisis meant for us and our liquidity specifically. Given we are a March year end company, it was very difficult to try and establish how much we can communicate to our shareholders and help them understand the resilience of our business. Anyway, fast forward a couple of months later, we were then able to share our results with them. Our share price has recovered significantly since then, but specifically from a business operations perspective, both fundraising and deployment (given we are an asset management firm, we tend to fundraise as well as invest for our funds), and fundraising and deployment came to a pause, as we spent a lot of time trying to understand the impact of the pandemic on our portfolio. We went asset by asset, company by company across all of our fund strategies to try and understand exactly how the pandemic is going to affect these companies around the world - this is across all three regions; Asia, Europe and the US. After about a couple of months, we managed to get to the bottom of everything. We had to create communication channels with our fund investors to help them understand how the portfolio is affected, where it's affected and what we're doing to help our portfolio companies to reinvigorate, so that was the key initial impact.

After a few months, we then actually had to start thinking about getting back into normality, and we had to really adapt. We had to adapt to our clients, our fund investors, depending on whether they were new investors or existing investors - where we had trusted relationships with our clients, who are familiar with our track record, or they knew us, they knew our portfolio management teams, it was much easier to raise funds. We were targeting new clients, who are raising new funds, that became a lot more harder. In fact, for some of our new funds, we had to really shelve the strategy of raising new funds. With new clients, we started to try and think about how we can help them understand our capabilities, so in a virtual environment it was extremely difficult. Then from an investment perspective, after the first couple of months of no activity, a lot of opportunity started coming up actually surprisingly - to our own surprise. We saw a lot of opportunities across private equity, across private debt, across real estate as well, including our own companies, where they were able to find, buy and build, or M&A opportunities. After about two or three months, we started getting back into normality - the first couple of months was quite tough. Then finally, in terms of people, obviously we had to make capabilities of remote working for all of our employees globally. We have 14 offices with over 400 people. We had to figure out how we can mobilise everybody around the world, and make sure we can remain connected with them. We had to introduce quite significant levels of communication channels at all levels, introducing pyramid systems, townhalls, otherwise, just to make sure that they were adapting quite well, and we were looking after their wellbeing.

Teresa:

Wow that sounds like such a, well first of all a bit of a journey, such a turbulent year. You had me gasping at the 70% drop in the share price in the first two weeks of the lockdown. So you said at the very beginning that you had just had your vaccination, which I am really excited about for you. It's made me reflect that a couple of weeks ago PwC published our annual CEO survey. It shows that there is confidence that the crisis has bottomed out and vaccinations are evidence of that. The majority of CEOs are expecting the economy to improve this year. Many CEOs were telling us that they're prioritising investments in digital transformation. Does that ring true for you?

Vijay:

First on the economy, clearly vaccine programmes are beginning to take effect in countries where they've had a pretty successful rollout. This is helping the numbers to come down, infection levels to come down. This will hopefully allow restrictions to be relaxed. Here in the UK, we've got a roadmap obviously through our government to look forward to. The lifting of these restrictions will clearly help improve the economic growth, saving rates have increased substantially, and as restrictions are relaxed, we would expect consumer confidence in spending to revitalise and increase, fuelling economic growth. It was only earlier this week that the IMF issued revised forecasts. They are expecting, from what I read, global economic growth to be about 6% per annum, which is quite significant. On the whole everybody is expecting the economies to come back up significantly, quite sharply. In terms of digital transformation, for us, the pandemic acted as a catalyst for us to accelerate a lot of our technology investment. Specifically, as I mentioned earlier, enabling our people to work from home and collaborate more effectively. What this translates into is simple things like rolling out laptops to over 400 people globally. We use Microsoft Teams as our communication channel, so rolling out Microsoft Teams literally within three days across our 14 offices, and that capability has actually just continued to be used much more significantly, both for our internal communication as well as our external communication. We use that narrative in terms of trying to think about how do we communicate with our clients.

For example, in respect of our fund investors, we tend to have fund investor days where we used to in pre-COVID times invite investors to a specific location over two or three days and actually go through what's happening with funds, what's happening with the portfolio, introduce them to the portfolio management teams, introduce them to the CEOs of our portfolio. We started doing that with videos during the crisis. We basically brought in a very high-tech video capability to do that, with interactive capability as well. That's been extremely valuable, extremely effective. We are now thinking about actually trying to roll that out more, including for fundraising, including for deployment, including bringing our portfolio companies into the mix, and it's become quite powerful to actually connect directly with our stakeholders - I expect that to continue. From a workforce perspective, most recently we rolled out an e-learning capability as well. Once again, learning used to be very much in person. It was quite difficult to get everybody globally to come to one place to do that. What we are finding is that actually doing e-learning is becoming much easier now, and virtual reality training is actually proving to be quite effective. We've only tested it in some small parts of our organisation, but it's actually turning out to be really effective. I expect some of these initiatives will continue and evolve and help all of us to work and live better.

Teresa:

Isn't it great how things that we may not have done this time last year, that one positive out of it is how the disruption has enabled us to really move forward digitally? Really interesting to hear that you are going to keep a lot of those benefits that you've accrued over the last year. Thank you, Vijay.

Marissa, can I turn to you now and ask you a couple of questions as well. Marissa, when you listened to Vijay talk about the journey over the last 12 months. As you said yourself, some of our clients have had it really tough. Can you just give us some insight into how you've worked with clients during the past year, and how you've supported them during this pandemic?

Marissa:

You mentioned in the introduction how we really pushed ourselves to support our clients with speed, imagination and care. I really hope any of our clients listening right now feel that's how we have responded to them over the last 12 months. In particular, imagination has been absolutely critical, as people, our clients have looked to us to reimagine how we might deliver for them, I’m not simply talking about how we deliver for them sat in our front rooms versus sat in our offices.

Let me give you a specific example actually. A lot of the tax teams we work with in clients in particular, really had to push themselves on how is it we stay connected, how is it we make sure we continue to work with advisors to ensure we are on top of all risks and issues while we are all working remotely. The traditional advisory model of using us to do the tax returns, picking up the phone for some of the harder more complex stuff; for a lot of clients it wasn't enough, because they felt that they needed to almost augment their internal capability as well as lean on us as advisors. What we developed early on during the pandemic, actually it was about April/May last year, was an interim managed service offering.

In fact, I remember talking to Vijay about this last summer, when we were talking about a possibility of a secondee going to ICG to support Vijay’s tax team. Managed services arrangements by nature are long term, because you tend to take a service, a series of tasks off a client, we provide them to the client, we take on more responsibility. To set something up like that can take quite some time, but what we did in response to changing client needs and actually demands from clients to really help in a more substantial way and more quickly, is develop what we call an interim managed service offering. Whereby we didn't need a commitment from a client for a longer-term period to be able to support them, and we didn't need to spend weeks and weeks working out what the current contract would look like. We quickly just worked out what support was needed and worked out how we could take the risk and some of the pressures off our clients, by servicing them in a more fulsome way that augmented their internal capability. We saw quite a lot of that type of shift Teresa, particularly during the first six months of the pandemic. A lot of that has stuck, I would also say actually our clients have got much more comfortable with us engaging with them digitally. I am not talking about talking to them on screen, but using all forms of technology platform to share deliverables, share advice, share input, and importantly exchange data information. Certainly as the last year has progressed, we've seen more and more of that - I suspect that will endure. Again, a bit of an accelerant around how we work together, and it's been absolutely critical actually during the last 12 months.

Teresa:

Thanks Marissa, and a lot of what you've said about what you've seen certainly resonates in terms of what I see on my day-to-day clients as well. Vijay, I just want to come back to you. Marissa talked about speed, imagination and care, and she gave some examples there. A couple of weeks ago, I was actually looking through the ICG website, a bit of a nosy. I spotted - it was the third quarter interim results - it was talking about some of the wider stuff that ICG has done, you haven't mentioned though. I just wanted to bring those up. One of the things that I saw, which I thought was really inspiring, was donating more than 300,000 pounds to support relief efforts. As you haven't touched on that so far, would you mind just talking a little bit about it and say why that was important to ICG as part of its response and your response to the pandemic?

Vijay:

Sure Teresa, first of all thank you for being nosy and looking at ICG's website, any advice on how we can improve will be more than welcome. Let me just talk about, not just donation, but ESG in a more broader sense. ESG, and certainly the ‘S’ part of ESG has suddenly become more prominent in how businesses think about what they do and why they do it. We take ESG very seriously in terms of both at the firm level, and most importantly in terms of how we invest responsibly through our front portfolio. At the firm level, you mentioned the donation. Yes, we donated to a couple of charities which were focused on working to lessen the impact of COVID-19 on people around the world. We have separately actually committed 1.5 million pounds to the education endowment fund in the UK, which is dedicated to breaking the link between family income and educational achievement.

During COVID-19, this particular foundation actually worked with the UK Government to provide additional support to children who actually missed out on development needs during the real tough times last year. In respect of our portfolio, this is where we are able to make the most impact really, frankly. In addition to having exclusion lists, or having very robust ESG or a climate risk assessment screening process in terms of our investment process, from our societal impact what we did with our portfolio companies was try and find angles on how they could support societies in the local countries that they operated in. Once again, just to call out some very anecdotal examples from our portfolio in the UK. Again, one of our UK portfolio companies repurposed 1000 staff to really go out and deliver food and supplies to hospitals, care homes, or people who are needing such types of equipment, PPE or otherwise. A company in South Korea, which manufactures cosmetic puff, repurposed some of its manufacturing capabilities to produce face masks and donate face masks to local relief organisations. Another European pharmaceutical company repurposed its manufacturing facilities to effectively produce disinfectant gels to provide local emergency relief efforts. Those are the kinds of ways that we've tried to find, to try and make an impact to society. As I said ESG is going to become quite prominent, S has become more prominent now because of the crisis. At our board level, we've actually also nominated somebody, a board member to be directly responsible for ESG matters and this topic is going to continue to be at the forefront of businesses for some time now.

Teresa:

So much of what you said is really inspiring, and you must feel incredibly proud of what the group has done over the last year - well done to you and to your colleagues. Can I just take a step back from everything, there are certainly interesting threads that we talk through, looking and reflecting back over the last year, but looking forward, can I just ask you what your key priorities are for the coming year?

Vijay:

The most significant priority in the near term is really getting our employees comfortable with what the new norm could look like - that's not an easy task. Going into lockdown was very easy, actually coming out of lockdown and returning back to offices is not going to be straightforward. We, with our footprint, will have to determine how do we actually get people comfortable with coming back to the office and what that timeframe would be. We will need to help people understand what it will take, some people may not be able to take vaccinations, vaccination programmes may not be available to all the countries we operate in at the same pace. We will actually have to adapt with people in terms of when we get back to the office. Then the other challenge that we need to think about - and I know PwC has actually taken quite a proactive approach about this, last week, I read about this - it is really what choice is offered to employees in terms of flexibility of working. Whether we have a hybrid mechanism, or do we have different teams having to come into the office or different teams can continue to work from home. It will really depend by country, by function as well. Investment teams will be very different to back office functions, will be very different to marketing functions for example. We will have to figure out exactly how we actually go about doing that. We’ve started some of that work, but it's not very straightforward to actually try and strategise that given different governments have got different strategies in terms of opening up.

Teresa:

Yeah, and as you referenced, over the last week we've come out in public and said what our approach is to return to work, which is giving people the choice and saying the expectation is that people will be in between two to three days per week. But as you've highlighted, there are so many kinds of complexities around that. A real centre of that is around employee wellbeing. One of the things that our CEO Survey focused on was the fact that CEOs are beginning to say that employee wellbeing is becoming increasingly important. Can I ask both of you, and maybe I might switch to Marissa first actually, and say, as people leaders do you think that given everything that's happened over the last 12 months that we are experiencing a permanent shift in the way in which we think about wellbeing at work?

Marissa:

Thanks for that Teresa, I am not sure you can separate wellbeing at work from wellbeing more generally, that has really for me come home over the last 12 months, when we've been working at home or some people would say living at work. I do think the experience for the last 12 months and what we are experiencing over the coming months as people start to shift their work pattern once again, is quite a different approach to wellbeing. Previously, as you know as an employer, we have always been very focused on encouraging people to work flexibly and work in a way that allowed them to maintain and optimise their wellbeing. But I would say historically we've done that probably in quite a traditional way through one promoting flexible working, but two providing people with resources to allow them to invest in their own mental health, to invest in stuff that really is additive to their wellbeing, but now what we are seeing a real shift in is really empowering people to work in a way that in itself recharges their wellbeing. That's part of what our announcement was about last week. It wasn't about working less, not being there for clients, it was about let's take some of the really good things about the way we've worked over the last 12 months, that have really added to our wellbeing effectively, so let's make sure we keep them, and just really empowering our people to invest in that, and keep going with the more flexible ways of working that have allowed us to keep the wellbeing moving over the last year or so.

Teresa:

Thanks Marissa and to you Vijay, same question, do you think that we're experiencing a permanent shift in the way in which we think about wellbeing at work?

Vijay:

Yeah, I would echo what Marissa mentioned. One of the other challenges is actually there have been some positive impacts of working from home. By the way, people talk about return to work - people have always been working throughout the pandemic, it's about returning to office. The key here is productivity arguably has increased significantly, where people have been working from home. Also, it has helped people connect virtually globally, where in the past people were not able to connect so seamlessly, so there's been some pretty positive impacts. The key question is going to be how do you maintain some of that whilst you still want to come back into some kind of in person working environment. Although we've had some positives, this doesn't replace two key factors, at least for us as an organisation. First is maintaining the culture. This is much harder to do virtually. For example, in our case we've been hiring throughout lockdown at all levels. Whilst we can train everybody to settle within the firm virtually, many have never met the team members, and most haven't met anybody else within the firm. Over the long term this can actually have quite a detrimental impact in terms of maintaining the culture of an organisation, so we have to think about how we keep that as well. The second element is creativity. It's very hard to have innovation without collaboration in person. That's one of the other areas that we are thinking about - how do we maintain the wellbeing of people, but actually still maintain the culture and the creativity that was being created by being able to work in person together.

Also finally, agility - work from home has meant that people have always been on throughout. People have been constantly working and this has translated to the speed of change that some organisations have been able to harness. Organisations have been able to execute on some things very quickly in some cases, because of the ability to do things virtually and people working all hours. I don't think this is sustainable. It's one thing during a crisis to be all hands-on deck and working very long hours, it's another thing being able to keep that over the long term. We need to think about how can we keep the agility but actually still make sure that the wellbeing of our employees remains intact.

Teresa:

I was literally nodding along to you - so much of what you were saying that really resonated with me. This is all gone so fast and I've got a final question for both of you and I'll probably turn to Marissa first and then leave you with the last word Vijay, which is when you think back, what are the biggest lessons that you've learned from the pandemic as leaders? To you Marissa first.

Marissa:

I'll call out one, Teresa, and that's around listening. Listening obviously is critically important - listening to our clients, our employees, our stakeholders - but the last year has really taught me that you can never stop listening. I've been quite surprised at the pace at which sentiment from employees, from clients, from other stakeholders can shift really quite suddenly. One thing that I've been really focused on is don't assume what you've heard and listened to last week still stands this week - take every opportunity to validate, retest and listen again, because I think listening has been absolutely invaluable over the last 12 months.

Teresa:

Brilliant. Vijay, your biggest lessons from the pandemic as a leader.

Vijay:

Two lessons actually. One is very similar to Marissa’s actually, and it is related to listening, but for me it's about engagement. This pandemic has taught me to engage more with my teams, with my clients, with my stakeholders - really try to understand them better, which comes down to what Marissa was saying about listening and the only way I could do that was actually make that extra effort to connect with people. Over communication and over engagement is something that I learned is never going to be enough. That's one thing that I took away. The other thing that I had to take away, given the level of crisis I had to deal with, was being bold to make quick decisions. In a crisis, one will never have all the answers as a leader; however, you need to be seen to be in control and show your resilience to be able to make decisions very quickly, and bring your people with you, as they will be looking for direction from you as a leader. And that took a while for me to understand and to me that's the second thing that I've actually taken away from this crisis.

Teresa:

Vijay, thank you so much. Great answers both of you to that final question. Unbelievably that actually draws us to the close of another episode of ‘In conversation with’ in our Business in Focus podcast. Thank you so much Marissa and Vijay. I’ve really enjoyed that and I hope our listeners have too. Thank you to both of you and also thank you to everyone for listening. During the podcast I've mentioned a couple of times our CEO Survey findings. So if you'd like to explore them further, or read some of the one-to-one interviews that we've got with some of the UK’s top CEOs and there are some really good ones, have a look at our website, its pwc.co.uk/ceo-survey. Finally, don't forget to keep up to date with future episodes- so subscribe, and thank you again everybody and stay safe.

Participants

• Teresa Owusu-Adjei, Partner, PwC
• Vijay Bharadia, Chief Financial and Operating Officer, ICG
• Marissa Thomas, UK Tax Leader, PwC