120: Liam Costello

Value Creation is Key for the Modern Finance Executive

Liam Costello has returned to South Africa after gaining diverse financial management experience in Switzerland and the UK, and he now has his sights set on opportunities within the Southern African market.

CIARAN RYAN: Today’s podcast is sponsored by Draftworx, which provides automated drafting and working paper financial software to more than 8000 accounting and auditing firms and corporations. CFO Talks is a brand of the South African Institute of Business Accountants. It’s my great pleasure today to welcome Liam Costello, who is part of a new generation of finance executive, currently fresh off a one-year MBA programme at Catolica University in Portugal. Prior to that, he spent several years in Switzerland in the securities and biotech industries. His roles in these companies span securities controller, financial analytics, analyst, and business consultant. He’s a chartered accountant and currently studying towards a CFA or chartered financial analyst. Apart from that, there’s the family business in the Eastern Cape, where he assists from time to time. Currently based in Cape Town, Liam has spent many years working in the UK and Switzerland. So he has a deep level experience of working in international organisations, operating across multiple jurisdictions. First of all, welcome Liam, where are we talking to you from today?

LIAM COSTELLO: Thank you, Ciaran, looking forward to being here on the show with you today. I’m in Durban today. So I’ve been flitting around the country in my time here, back in South Africa, as you mentioned, predominantly down in Cape Town.

CIARAN RYAN: Tell us a little bit about the reasons you decided to do an MBA in Portugal during the year of Covid, I might mention. Did you feel that your accounting background had some gaps that you were trying to fill?

LIAM COSTELLO: Absolutely. So the decision to do an MBA is not a decision to be taken lightly at all. There’s obviously a lot of commitment from time and resources that all needs to be balanced out. I started looking at doing an MBA as the natural progression to my career, to expand on my capabilities and responsibilities, around about 2016, expanding away from being a pure play finance professional. I’ve always enjoyed being very hands-on with the products that my various firms have been involved in over the years. I really enjoy being part of making an impact and creating new value throughout the entire firm, and that is invariably where finance professionals sit, they really are responsible for many touch points within an organisation. So the decision to do an MBA was certainly predated to Covid but as everyone else did during the course of 2020, we certainly had to make some adjustments to the way that the programme was going to be run. We had periods of time where we were on campus and other times where we were locked in and stuck away at home, as everybody else was. But one of the unfortunate things is that it’s a very international programme with a lot of movement abroad, an immersion over at MIT in Boston, Massachusetts, and unfortunately, those events didn’t happen in person as expected. There’s a lot of value to be taken away from dealing in-person. So we certainly had to adjust to Covid, as did everybody else. But coming back to the reason for doing an MBA, at the end of the day, the chartered accountancy programmes and the various different financial qualifications that we all earn over the years, there are massive gaps in our ability to frame and approach strategic problems in a structured manner. An MBA certainly covers a lot of areas, different gaps, it plunges you right into the operations, into the HR, into the strategy, the marketing, your product development, all of those areas that I think the modern finance executive obviously needs to have a finger on, specifically if you’re wanting to be value creating within the organisation that you sit.

CIARAN RYAN: That’s an interesting word that you use there, value creating, because this is a new term for the CFO, he’s called the chief value officer, more than he is the chief financial officer, but we’ll come to that. Just go back to your training, you completed most of your training in South Africa, then you ventured off abroad for career experience, I imagine that’s why you went. So you ended up in Switzerland, expand on that a bit, where you worked and what brought you back to South Africa.

LIAM COSTELLO: I started off my early finance career humbly, as many of us do, at an audit firm, audit clerk. That was based in East London, a relatively small part of the country, and as many people from East London do, the next step will be Johannesburg, Cape Town or Durban. I had all of those options, but I also had the opportunity to move myself abroad and at least to look at what opportunities existed abroad. I touched base with a few people in London and found that, at least at that point in time, and for every intent I believe it still is the case, that young finance professionals are in high demand in London, specifically South Africans. At least my experience is that South Africans are viewed very positively within the UK environment.

CIARAN RYAN: Just explain that, why South Africans particularly?

LIAM COSTELLO: There’s a certain degree of hunger that South Africans have, and also our ability to take challenges and move past those challenges. We really are quite resilient as a nation and I think that that shines through when we move ourselves over into more international environments, whether it be the US, the UK, greater Europe or even a Australia for that matter, we tend to be very resilient.

CIARAN RYAN: Interesting. Sorry, continue with your story.

LIAM COSTELLO: So I continued in London for a number of years and ultimately found a new career opportunity to move into Switzerland. Switzerland being the centre of not just European banking, but a lot of global banking. So I moved myself over to Switzerland for a good number of years, where I was initially working predominantly with the Russian banks. Then moved over into the securities controlling space, responsible predominantly for structured products. I’m sure that many of the listeners will be familiar with all of the barrier reverse convertibles and the likes. Then of course, moving over and doing my MBA in in Portugal was the final step in the journey. So it has been an exciting one, being an absolutely wonderful experience, very, very broadening and in one’s horizons and perspectives.

CIARAN RYAN: What about the language part in Switzerland? Was English the spoken language where you were working, did you have to learn a new language?

LIAM COSTELLO: It’s obviously beneficial to learn one of the local languages. In Zurich, where I was based, the local language is a Swiss German, which is a dialect of German. It is always beneficial to have a smattering of German. But in truth, being an international business destination, everybody, and the workplace, the official workplace language is English. So that’s not a hang-up in any way whatsoever in most international firms in Switzerland.

CIARAN RYAN: And do you speak any other languages?

LIAM COSTELLO: I do have a, a fair helping of the German, Danish and as a result of last year, Portuguese, which I’m really hoping to take to new levels because I do see a lot of opportunity within Southern Africa. If you look at the two dominant languages in Southern Africa, there would be English and Portuguese between Mozambique and Angola.

CIARAN RYAN: And Danish, how do you come by that?

LIAM COSTELLO: Family lineage resulted in Danish.

CIARAN RYAN: Your mother is Danish, but your name is Irish, people might get a bit confused. Liam is an Irish name, but Costello is also an Irish name, it’s not an Italian name, as some might think.

LIAM COSTELLO: Very much so, it’s entirely overshadowed by the names but yes, half my heritage is Danish.

CIARAN RYAN: So language is definitely an advantage internationally. Do you see yourself, by the way, operating internationally or do you see yourself based in South Africa or is that pretty much open at the moment?

LIAM COSTELLO: The more internationally I can be focused, the better. Obviously, it’s not an easy thing to get the balance right, one’s responsibilities are invariably going to be in one country or another at any point in time. But yes, I fully support my career moving  more in the direction of South Africa and focusing on Southern Africa. However, I think that there’s a lot for South Africa to gain in opening up those connections to the world and really growing the relationships that we have with Europe, with Asia, Australia, and the United States for all intentions. In fact, all of the smaller players do. I think that it’s a little bit of a problem that I see in South Africa, maybe not necessarily a problem, but something that can be developed further is removing ourselves from the silo that we exist in and really starting to collaborate more globally. This is all the way into the services industry rather than just focusing on the manufacturing and primary industries.

Freelance guns for hire.

CIARAN RYAN: So you’ve just finished this MBA and obviously, while you were working in Switzerland, you realised that there were these gaps that you needed to fill in your competencies or your toolkit or your skillset, whatever you want to call it. So would you define yourself as part of a growing body of freelance guns for hire operating in the senior financial space? Is that how you would position yourself?

LIAM COSTELLO: I certainly wouldn’t be able to comment on whether that body is growing. I think that anecdotally I’d be able to comment that the majority of my peers are looking to be a little bit more on the freelance side, and that comes into the fact that all of us are wanting to make an impact. We want to get stuck in and involved with the initiatives and projects that have an impact, have specific value that they’re creating, and once that’s up and running and completed, we’re moving on to the next challenge. Whether we are able to find those challenges internally or externally of the environment that we’re in, we’re always going to seek those challenges out.

CIARAN RYAN: Tell us a bit about the MBA programme that you did and what you felt you got from it that you didn’t get from your chartered accountancy training?

LIAM COSTELLO: As you mentioned, it was the MBA at Catolica and NOVA University, in collaboration with MIT. It’s a general MBA, so you’re not specialising in finance or law or any other specific. What that really did is it is shifted to the way that at least I think, and I think that I can speak for the rest of my colleagues in the programme, to being far more strategic, having a greater ability to reach out into all the different touch points that we as finance professionals have across the firm, building relationships, being able to negotiate effectively, both internally and externally of the organisation. Those are all areas that unfortunately, most finance professionals have to develop over time through making loads and loads of errors, and certainly I’ve made my fair share of errors over time. But there’s nothing like adding a little bit of stimulus in getting to that point quicker, which is exactly what the MBA did. Then also as finance professionals, we have a lot of responsibility, whether it be controlling and ensuring that the marketing department is efficient in what they’re doing, at the end of the day we need to be accountable for the expenditure within the firm. That allows us to bridge many of the gaps and understand where the other functions within the organisation are coming from. So it’s not a case of necessarily being able to challenge more but being able to partner more with all of the different functions across the firm, which is what the MBA aims to do.

CIARAN RYAN: What drew you to the world of accounting in the first place? How did you get on that particular rail?

LIAM COSTELLO: Well, there certainly a lot of motivation from the parents, early influences from teachers in schools, and I was also good at it, which I think allows one to make decisions and pursue things that you’re good at. At the end of the day, you’ll probably be able to extract the most value in the field that you’re good at and also where you find value and appreciate, find ways to be able to build value. Certainly, accounting traditionally wasn’t necessarily a value building hub but that is very rapidly changing as we’re moving into the 21st century. Finance is largely responsible for much of the, of the data and understanding, the health checks of the organisation and being able to provide further strategy.

CIARAN RYAN:  It’s quite interesting, recently I interviewed Professor Niamh Brennan, she is professor of accounting at University College Dublin, and the reason she came on the radar was because she has written quite a few papers about the state of the accounting industry and was involved in a review of the audit profession in Ireland at the time of the banking crisis they had there in 2008. There are a couple of themes that came out there, I actually studied a BCom at the same university, UCD, University College Dublin, but one of the things that comes out is what is accounting all about. It really is a question of providing information that you can trust, and it really is a way of telling a story and giving information that is usable. You’ve often got to be reminded of this as an accountant that this is what your job is. So it really is a communication skill in a way. One of the things I’m sure that accounting colleges, and even the CA programme, they focus very much on the technical aspects of accounting. But what are we really doing, it’s like being a journalist, you’re a storyteller, you’re not a technician. What’s your view on that?

LIAM COSTELLO: I couldn’t agree more. In fact, I am directly involved in my family business and that really took me into a new pond effectively. I was having to deal with numerous stakeholders with whose business I had no clue about. I ultimately needed to bring everybody together to see a single strategy and work towards a single strategy, and that’s invariably required effective communication. That is where the finance professional sits these days. You need to be able to facilitate cooperation across numerous departments, and not just on finance but as any senior executive, communication is at the core of what we really do, formulating strategy, communicating and achieving buy-in from all of your potentially conflicting stakeholders. So that’s no small feat and certainly that’s where here was a great deal of focus on from in the MBA in achieving that within the complex organisation.

CIARAN RYAN: Right and, of course, it’s also communicating to the guy on the factory floor. I mean not communicating to him like he’s less intelligent than you, but in a way that will facilitate him and enable him to do his job better. He’s got to understand what are we doing here, why are we trying to cut costs and why are these costs out of range and need to be cut back. These things have got to be communicated in a way that makes sense to everybody. So you’ve got different audiences and different stakeholders that need to hear that message.

LIAM COSTELLO: It’s instilling that sense of purpose into every individual within the firm and just having them understand what it is that we are collectively working towards. If you look at any organisation, it’s nothing more than a grouping of individuals working towards a single goal, and that goal and that strategy needs to be communicated effectively. Certainly, there are going to be limitations on what to senior management can communicate all the way down the ranks, but at the end of the day, senior management does have a responsibility to give that to every single person in the organisation.

CIARAN RYAN: Let’s talk about challenges now, what would you say was the biggest challenge you’ve faced professionally?

LIAM COSTELLO: Potentially that would have been while I was heavily involved with Russian banking or Russian banking relationships in Switzerland. Now, the one thing I can certainly say about the Russians is they are lovely people. Absolutely lovely people, smart and sharp as a tack. Their education that comes out of Russia is second to none. I think that they generally ran loops around the British, the Americans and for that matter, mainland Europe. But with that they are obviously notorious with their political thinking and they’re very political and very effective at it. That is something that certainly any…so there’s a lot of political interference even within the private sector. So that was certainly a challenge to overcome and ultimately…

CIARAN RYAN: Give a practical example of that if you can.

LIAM COSTELLO: Unfortunately, I’m probably not going to be able to give a practical example… CIARAN RYAN: Because when you start mentioning Russia, I’ve also worked with Russians in mining, in Ghana, and I totally understand what you’re saying. I think they have a good work ethic but I have a feeling that there’s this kind of legacy of criminality that comes through from time to time and you have to be aware of this.

LIAM COSTELLO: Yes, and certainly this is not something that I want to paint with any broad brush. That is not something that is systemic, there obviously are elements that do come into play specifically from the state itself, and the Russian state is certainly very powerful. As you say, a high degree of work ethic and they truly do create value in what they do. But ultimately, there was some political pressure on the senior management board and it ultimately took a very strong senior management board and support from individuals such as myself in order to be able to stay firm in our commitment to the organisation and running the organisation as clean as possible.

CIARAN RYAN: I understand totally what you’re saying, and you do have to…and sorry, when I say criminality, I don’t mean that I’m working with criminals. No. I think there’s a little bit of that period, that legacy of the post-Soviet era, when things were in absolute chaos, and there were people doing all kinds of weird financials deals just to survive. It’s a little bit like you see in South Africa, the post-apartheid era, a little bit of chaos, which we’re sorting out in South Africa at the moment, where corruption is a huge thing at the state, and also that intersects then with the private sector. So it’s more of a mindset rather than a practice that I’m referring to.

LIAM COSTELLO: Indeed, and I think that stems a lot from…you see it in South Africa too. At the end of the day, we are very hungry for progress and sometimes a lot of the red tape that arises becomes problematic. So processes are not followed duly and when processes are not followed duly, then obviously there’s always opportunity for a little bit of meddling. That’s something that we see within South Africa. Now, I think that probably comes in where we really are very ambitious as a nation and we do want to press forward, regardless of the challenges that are put in front of us and maybe not always check all the boxes.

‘The greatest skills are found through trial and error.’

CIARAN RYAN: Talking now about the evolving role of the CFO and senior financial executives, they are being required to perform in ways that are not necessarily covered in the accounting schools. For example, team leadership, strategy, communication, and communication is a huge part of the CFO’s role. How have you seen this? I know you’re a young finance executive and you don’t have vast decades-long experience, but you’re very, very fresh off some fairly senior and interesting roles professionally and also an MBA. So you would have been covering this, I’m sure as part of your studies, give us a sense of how you see this role changing now, particularly in the last I would even say year during Covid, has there been a change that you have observed?

LIAM COSTELLO: Absolutely, I think that your statement about CFOs typically not having the training in communications, operations, I’ve certainly within my career seen senior finance executives falling over because they ultimately are very technical and they are asked to fill roles that are leadership first of all, and that leadership comes along with communications, resolving conflicts within and outside of the firm. That is ultimately the role of a senior finance executive. They simply cannot rely on pure play technical ability and many individuals will ultimately fall into grabbing those skillsets simply through trial and error. I think that’s a process that all of us within our careers learn is that the greatest skills are found through trial and error. But now, of course, as you mentioned, the CFO’s role is changing, and they need to be able to partner effectively with all of the different functions within an organisation. You need to be able to look at operations and work with the operations managers in finding ways of improving cost management, improving process. When you can lend a hand from an external financial perspective there can be a lot of value created in operations, being able to partner effectively with the individuals who are responsible for your business development and understanding their marketing strategy, understanding the products, value proposition, and also their strategy to market, how are we finding our customers, what does that customer pool look like so that we’re able to as finance individuals plan out our resources, which is invariably a responsibility that comes to us. So rather than being an aggregator of information, we are actively involved in understanding the information that we require and ensuring that that information can be as accurate as possible. The CFO role is responsible for the majority of the data that sits within the organisation and that is powerful information that can be employed by the organisation.

CIARAN RYAN: I think what you’re almost describing there is this new font or this library of institutional intelligence and information and data, and not only that, but putting it into some sort of coherent sense so that it can be communicated and then executed in a way which advances the corporate goal. I did speak to you prior to going on air about how the South African Institute of Business Accountants launched the certified financial officer designation, CFO SA designation, which is basically in recognition of these competencies. So people who have the experience and have gone through maybe the CA route or they’ve come up as business accountants or tax specialists or whatever, along their route they acquire a lot of experience that does not get reflected in their status and their designation as accountants. Now a CA, of course is, is internationally regarded, but often the CFO brings this entirely different skill set, which we’ve been talking about, strategy. He really is in many ways the CEO in waiting or he’s the right-hand man or woman to the CEO, and in many ways, he carries a bigger responsibility because the financial wellbeing of the company, which is what business is all about, lies in those particular set of hands. What do you think of that? That, that whole idea that there are these competencies that have not been recognised and it should be recognised?

LIAM COSTELLO: I think that those competencies are usually recognised by the people who are directly involved with that individual, those competencies will ultimately shine through. But I think that what that CFO designation really does is it positions that individual now suddenly, and is now able to represent that individual to the rest of the world and say, I’m more than just a technically trained accountant, I’m an individual who is able to take strategic decisions, create value within my firm and effectively lead in a complex environment. Those are all essential to an individual and taking that individual forward both internally and externally to where he currently sits.

CIARAN RYAN: I guess you’d agree with this statement that there are some things that you’re only going to learn through experience and through having been challenged in ways that you’re not really going to find out about in the accounting schools. Would you agree with that statement?

LIAM COSTELLO: Those are going to be the most important lessons that any individual learns. You can speed up the process and allow yourself to be more aware of those lessons and put yourself into positions that you are going to learn those positions. You really do need to take a step out of your comfort zone so those lessons can be learned, but those are always going to be the most important and effective lessons for any individual to learn.

CIARAN RYAN: Do you eventually see yourself as an entrepreneur, is this where you headed with your career or do you see yourself as a professional, senior finance executive in the corporate world, or are you pretty open to whatever direction this path takes you?

LIAM COSTELLO: I don’t believe that there are many individuals, even within the C-suite that don’t see a small potential for entrepreneurship in their future. So yes, entrepreneurship is always going to be an option and was actually a major factor in choosing the MBA programme that I did, there was a huge emphasis on entrepreneurship. Now, that entrepreneurship can certainly find different channels, whether that be internally or externally to your firm. However, there’s a lot to be said for pursuing a formal corporate career plan within a large organisation and still finding opportunities to let out that entrepreneurial spirit that many people start to garner over the years.

So combining a bit of an entrepreneurial spirit, both internally and externally, and all of the lessons that you’re able to learn inside of a large organisation and the mentorship and career opportunities and learning opportunities that you find in a large organisation, I think that people should probably hold back a little while before really going out and putting both hands on the entrepreneurship bicycle.

CIARAN RYAN: A lot of entrepreneurs also go through the school of hard knocks. They have a lot of business failures. There are some very interesting studies around that, the number of failures they have before they eventually strike it successfully. Maybe an exception to that is Elon Musk, he just seems to have this Midas touch, everything he has worked on has been successful. But I agree with you, I think going into the corporate world, you are going to get exposures that will be very hard to get if you’re starting up something. Let’s say you want to do an internet business, I’ve had a few people who had a year or two doing nothing, although they’re very, very highly trained accountants, went into a web retailing, internet retailing business, selling products of one kind or another. But I don’t know if that’s satisfying for a person who has operated at that level, they generally are looking for something else. What do you think about that?

LIAM COSTELLO: I think that being able to see what is required to grow an organisation to a platform to a far-reaching organisation, you really need to be able to see how a large organisation works from the inside before you start reaching out and hoping that you’re going to reach a large audience with your internet company. You really need to have a firm understanding of what all your governance and decision-making structures look like within an organisation and get comfortable with that before you can really hope to make your own small shop or large shop hopefully in the future.

‘We all need to continue to pursue growth in knowledge.’

CIARAN RYAN: We’re running out of time here, a couple of quick questions. What do you do in your downtime, do you do sports or you do more study, what do you do?

LIAM COSTELLO: Studying has always been a cornerstone of my downtime, whether it be through reading various publications or taking online courses, I think that there’s a lot of value and we all need to continue to pursue growth in knowledge. But sports and being outdoors is incredibly important to all of us and I think that a lot of us tend to neglect that. But being outdoors, whether it be surfing, fishing, those are the things that are try to pursue. Every opportunity I can is to be outdoors.

CIARAN RYAN: And, of course, Cape Town is the perfect place for that, right?

LIAM COSTELLO:  Absolutely and we’ve got a beautiful coastline here in South Africa that’s only begging for all of the opportunities to be exploited.

CIARAN RYAN: Final question, are there any books that you would recommend, and they don’t have to be accounting books?

LIAM COSTELLO:  I think that over the course of the last year, the ones that have probably stuck with me the most is Extreme Ownership: How U.S. Navy SEALs Lead and Win by Jocko Willink and Leif Babin. It’s really about holding yourself personally accountable, but also empowering the team that you’re leading to take responsibility in building leaders within your own team. Then something that fascinates me is negotiation, so I do tend to read a lot of books around negotiation and different strategies. I have read Getting to Yes by Roger Fisher and William Ury, and there’s also Bargaining with the Devil: When to Negotiate, When to Fight by Robert Mnookin. Another one is Catalyst, which is really understanding what drives individuals and being able to facilitate cooperation between different individuals. Then one that I’m actually sitting down to at the moment and I’m thoroughly enjoying is the founder of Patagonia, the outdoor apparel company, quite an incredible company. The book is Let My People Go Surfing: The Education of a Reluctant Businessman by Yvon Chouinard. It’s a book that was written mainly as an internal policy guideline and it was ultimately turned into a book. So it’s really about bringing the human back into the organisation and making it an environment where every individual is able to prosper.

CIARAN RYAN: What about The Art of the Deal by Donald Trump, did you ever read that one?

LIAM COSTELLO: I’ll stay quite far away from that one [laughing]. I haven’t picked that up as yet, it may require a little bit of retitling in the coming years.

CIARAN RYAN: Great, Liam, I think we’re going to leave it there. That was a fantastic discussion. I really appreciate you coming on and sharing your history with us and your story, some fascinating details along the way of the various different turns and changes of direction that you’ve made. I guess the one take away from all of that is this continuous upgrade of your knowledge, whether that is through reading, through study, doing an MBA, and just making yourself more useful to the marketplace. I really do wish you the very best and please stay in touch and come back and let us know maybe a little bit later in a few months how things are going and let’s have a catch-up.

LIAM COSTELLO: Thank you, I look forward to it and I think more than making oneself useful to the marketplace, it’s about making one more useful to yourself, in fact. I think that is the core of what anybody should be looking to achieve when they seek to better themselves. It’s always about what value can you bring to yourself and that’s core. But any case, yes, Ciaran, looking forward to the next time that we catch-up and thank you very much, I thoroughly enjoyed the process.

CIARAN RYAN: Great stuff that was Liam Costello, thanks very much for coming on.

 

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