Focusing on the New Normal, While Transforming Volvo Financial Services’ Future
by Monitor 100 2020
Shortly after taking the helm of the Volvo Group’s global captive finance company, Marcio Pedroso faced the onset of a global pandemic, with markets and society in lockdown, and finance volumes coming to a halt. His plans for the future would need an edit.
“Life is what happens to you while you are busy making other plans,” John Lennon once sang. This sentiment must cause Volvo Financial Services’ new President Marcio Pedroso to smile. While he was gearing up to take the helm of the Volvo Group’s global captive finance company in early March, the COVID-19 virus was busily spreading itself around the world at terrific speed. A few short hours after taking office on March 16, he was facing a global pandemic, markets and society in lockdown, finance volumes coming to a halt, offices closed and everyone switching to working from home. Pedroso’s plans for the future would need an edit.
Pedroso is no stranger to shocks, economic or otherwise. In 2007 he became managing director for Volvo Financial Services’ (VFS) business in Mexico. Almost as soon as he had arrived, so had the financial crisis — leaving him nursing a drop in volume of 80% and a banking sector suffering from a dramatic liquidity crisis. As if that weren’t bad enough, there was a swine flu outbreak — placing the region in lockdown for two weeks, with all of his team working remotely from home — a good experience for what was to come.
Pedroso’s present elevation as the head of one of the largest captive equipment finance companies shows how far he has come from his modest beginnings in his native Brazil. The 52-year-old of Italian/Portuguese descent is one of eight children, and from an early age he demonstrated a keen desire to succeed. In his early years, he played competitive volleyball for his city. But as he grew, he felt a need to help his family financially, so Pedroso began working at 14. He would still be working in his hometown were it not for his optimism and drive.
After a full day at work he would take himself off to night school, where he earned his first degree, becoming the first in his family to get one. Then his education accelerated, winning him degrees from Fundacao Instituto de Administração, a postgraduate degree in marketing from the Getulio Vargas Foundation and another in industrial administration from Parana Federal University, both in Brazil. He topped his formal education with a degree from the Wharton School of Business at the University of Pennsylvania. “It’s been quite a journey,” Pedroso says with a laugh. “But the only way I could see to grow and develop myself was via education.”
The First Brazilian to Head VFS
Pedroso’s journey at work has been similarly determined. Joining the Volvo Group in 2001 after a decade in insurance and corporate finance, Pedroso has consistently gained in seniority. By 2010 he was vice president of Latin America Markets for Volvo Financial Services, followed by president of Brazil and Chile for Volvo Financial Services a year later. He later became president of VFS’ largest region — the Americas — in 2015.
Although he has been thrown into the deep end, his experience of tough times — both in business and personally — has been valuable. “Overall I think the whole finance industry has done well in this crisis by providing liquidity and keeping calm,” Pedroso says. “In our business we are always evaluating risks and scenario planning the next downturn — trying to predict the bad stuff that might happen.
“OK, we didn’t foresee an economic shock as big as this one, but we did have a good plan in place, and that’s what we’ve been rolling out these last few months. We already had the playbook, so what was needed from me was calm guidance and quick decision making to cope with the rapidly changing circumstances. We didn’t always know all the facts or all the answers, but that’s OK, we continually adapt the plan as we learn more.”
One of VFS’ key strategies has been keeping close to customers and understanding their needs. With business activity much lower, many customers are trying to protect their cashflows. Pedroso understands that, and under his leadership VFS has supported customers with customized solutions. “A true measure of a captive finance house is how you perform in a crisis,” he says. “Even though we are focusing on our own performance, I understand that if trucks aren’t trucking, construction equipment isn’t working and buses are not transporting people, then repaying loans is difficult.”
It’s a Family Affair
Being a captive finance house comes with responsibilities. It’s not just VFS’ reputation that’s on the line, but those of the Volvo Group brands it supports. VFS really understands its customers and Pedroso believes that continuing to support them as much as possible now will result in increased brand loyalty in the medium and longer term.
“That’s why captive finance houses tend to grow market share during downturns,” Pedroso says. “We’ve seen that during this crisis — volumes are down at VFS for sure, but finance penetration has gone up.
“While the industry is having a difficult time with the effects of the virus, I don’t believe that the business has changed fundamentally. Society is changing, however, and the pandemic has accelerated some of the trends that were happening already.”
The biggest of these changes is digitalization, and VFS has introduced advanced online customer support, virtual meetings and other initiatives to make lending easier in a world of social distancing. VFS also is piloting how AI can help with repetitive activities, speed up the processing of applications and evaluate risk in a more intelligent way.
“I believe that in this business close personal relationships and really knowing our customers will remain the order-winning criteria, but digitalization can help make the journey — from purchase to repurchase — better, simpler, faster and more convenient,” Pedroso says. “This crisis has shown that we need to move this digital transformation up our list of priorities.”
The Office of the Future
Another change in behavior necessitated by the crisis has been working from home. “The flexibility to work from home was already an evolving policy before the crisis,” Pedroso says. “Our culture is always evolving and adapting to new needs and we will see more flexibility in this area.
“I’ve been amazed at how the entire team has responded throughout my first few months in my new role. Our people have shown energy and commitment throughout — despite the impact on their own lives, kids out of school and the worries of contracting the virus. Despite all this everyone has remained committed to the business and to helping customers. Our people have proven once again that they are the real reason for our success.”
With the world opening up, people getting back to work and massive stimulus programs in many countries set to support damaged economies, Pedroso believes there are grounds for optimism in certain segments but uncertainties remain.
“The virus may have caused changes in our initial plans,” Pedroso says. “But we have kept the faith with customers, maintained the business in good shape, and I’ve been reminded once again what a great, committed and flexible group of colleagues I have.”
Business leaders have largely embraced the rapid introduction of home working and digital processes as an inevitable necessity. Though the global lockdown has rapidly accelerated trends in digitalisation, seeing many asset finance businesses moving their operations entirely online in a contracted timescale, the direction of these developments is not a new concept for the industry.