Tackling Today's Toughest Economic Challenges

Megan - 00:00:18: Today, my guest is Ali Firoozi. Ali is the Chief Financial Officer at the PAC Group, where he is responsible for ensuring the integrity of the financial information and related systems for the PAC Group's multinational consulting and engineering management firm, with a total worth of $65 million. Since joining the team, he has successfully directed the finance and accounting operations, recruited and trained staff, and implemented new reporting metrics to guide the executive team towards more efficient sales practices and improved cost controls. With over 20 years of experience in the financial industry, Ali initially honed his skills in the banking sector before venturing into new territories that allowed him to actively engage in the growth of digital technology while upholding a human-centered approach. As a senior-level executive, he continues to drive innovation and entrepreneurial initiatives, collaborating with strategic partners, and helping to build a more efficient and more efficient business. To foster mutually beneficial relationships and maximize enterprise value, all while leveraging his comprehensive management skills and financial expertise. Ali, thank you very much for being my guest on today's episode of CFO Weekly.

Ali - 00:02:05: Appreciate it, Megan. It's a pleasure to join you and I look forward to our conversation.

Megan - 00:02:09: Yeah, today we're going to be discussing the recent rate increases from the Fed and its effect on finance and businesses, as well as how the recurring threat of a US Government shutdown affects finance and global markets. And I'm excited to learn about you and your thoughts on this topic. And we've got a lot to cover. So let's get started.

Ali - 00:02:28: That sounds excellent.

Megan - 00:02:29: So first of all, in your own words, can you just kind of walk us through your career to date?

Ali - 00:02:36: Sure. I guess you'd call it my love affair with finance began as these stories often do in college. Initially, my academic goal was not to just be a finance person, it was actually to be a lawyer. So the initial intention was to go into mergers and acquisitions, a way to combine financial law and finance, work in the corporate side, do M&A work, things of that nature. I quickly realized after both meeting many lawyers, when I first started working at the bank, so that's another important side point that pulls me into the finance world, spoke to a lot of attorneys while I was working at the bank. At the time, it was Washington Mutual. And I have some lawyers in the family and friends who are lawyers. And without exception, all of them told me, do not go into law. So that was my first redirect in life that made me focus more on the finance side of things. So I still enjoy learning about law overall, but that was more for just personal knowledge. And that's really what began my focus in finance. So working at the bank, I thought it would only be a short-term thing while I was working on my undergraduate. Well, it was not short-term, went on for years and years. So through my entire undergraduate career, then once I graduated, I remained at the bank. I did a number of different jobs. At one point, I was a vice president for Washington Mutual, later became JPMorgan Chase. So I continued my work there. I was a financial center manager and did some other things for the organization. And that time I was going through some postgraduate work. So I got my MBA, still stayed in banking. The financial crisis of 2008 happened while I was in banking. So that's an interesting story. We can always touch on it, if you ever wish. So I lived through that and everything that entailed, but it didn't deter me. I stayed in finance. And after moving to a smaller credit union, I loved their mission statement and what their purpose was about. Had a great experience there for three years. And then I decided that it was time to do something a little bit bigger. And I had the opportunity to join the PAC group in a CFO capacity. I'd say we are a multinational engineering project management company. We have different lines of business, but that's the easiest elevator pitch version to describe us. And that began my 10-year journey. As of now, it'll be 10 years in about a month or so. My 10-year journey, learning about the global implications of all things, finance and business and therefore. So I've been here. I've been in the business world for a long time. We have offices all around the world on every continent. I like to joke and say, PSE is actually operating 24 hours a day. So if I was so inclined, I could work morning, noon and night and never have a boring moment. But my time here at the company has really led me to develop a much broader picture globally of business and finance. I get to see how there's a lot of interconnection, why businesses oftentimes go to different locations for ease of business function and more just expedited transactions. And I've been in the business world for a long time. Handling more favorable terms, all various types, depending on what matters to a particular entity. So it's really helped define my ability to analyze, digest information globally, and then to project forward what we think is going to happen. Because I have to keep all of our different offices in mind. We have operations all over the globe. So it's not just a US-centric picture that matters for us. We really have a worldview. Our clients are everywhere. We're everywhere. And a number of different responsibilities report up to me into the group today. But obviously, finance and business are a lot of different things. So I'm really happy to be here. Accounting is my prime focus for the entity. That brings me all the way through today and our conversation sitting here together.

Megan - 00:05:57: And perhaps you could share with us some of your proudest achievements over the nearly 10 years that you've been with the PAC group as CFO.

Ali - 00:06:05: Absolutely. I am very proud and honored to have been part of a historic cycle of our growth. We're a privately-owned company. We are rapidly approaching our 40th anniversary, a truly commendable feat. The company was founded in 1985. The original founders are still involved in the company, still own it, still run it. And over the last 10 years, what we've been able to do is really transform what PAC does, who it does it for, and how it does it. We've grown to a number of new markets. We have PAC in Slovakia and Canada and Vietnam, and the process currently of opening Saudi Arabia and Sweden. And we've gone to all these places following our clients. And so that's the first part of what I've been really proud of, is really setting up the company in all these locations for success and for the next chapter of its future soon to come. And attached to that. When we're talking about growth and transformation, it's really the IT transition and transformation we've had. What PAC was 10 years ago, even though it doesn't seem like that long ago, and the clients we worked with back then, primarily automotive OEMs, the largest in the world everywhere. We didn't need certain systems and capabilities, and that rapidly changed. About five years ago, we began working a lot with some IT companies, the biggest globally, a couple of them. And we found that we needed a much different set of capabilities, faster data, more analytics, just overall better systems and better IT infrastructure and security than we had. And we began a transition that four years ago started. It still continues today, but it's really changed what the company looks like. And that is something else that I've been very proud of because as the CFO and CAO, these additional functions are all up to me. And although they're not core finance and accounting, they are certainly related to the success of the company and represent really big advancements for us as a cultural shift. And attached to that, as I mentioned, was the growth into these new industries, enabling our team to really pursue new business and new clients that we'd never worked with before. And to do whole new types of work we'd never really pursued in the past. Our skill set and competency related to it very, very well. We just hadn't done it before. So to draw an analogy, instead of painting a wall for a factory, we were now painting a wall for a clean room for a tech company. A lot of the skills transfer over. We're just doing it for a new generation of client. And the most important achievement for me is always the development of the team. My passion is really trying to be the best leader I can be for my team. I manage people both physically in the office and remotely. All around the world. Travel to see them. But a lot of my time managing them, working with them, leading them, trying to solve problems is done so remotely. So that's always a little bit of a challenge. But it's really been an amazing journey. And to see how much the team has grown has been a huge joy for me and a huge source of pride to watch everyone get better at what they're doing, achieve new things, go into new areas of the company. So if I had to pick one, that's probably the greatest achievement.

Megan - 00:09:02: Well, congratulations. Those are some amazing achievements that you've had to date. Thank you. So four years ago, we had COVID. And when that started to ease, it seemed like the uncertain economic time started. So talk to us about how important strong experience leadership is in tumultuous times like these.

Ali - 00:09:22: I don't think it can be overemphasized how important strong leadership is in a time like this. Because you want to be the steady hand that gives your team confidence and comfort. You don't want to overreact. Your team wants to know that there's a plan to do whatever it is that has to be done or to overcome whatever the challenge is that's in front of you. And you brought up COVID for a very good reason. It was a tremendously challenging time. We had a lot of people very scared in the company. What's going to happen in the future? Obviously, all of our customers were shut down, which meant our work shut down. Doing our work was difficult. We do a lot of work. Work on site for our clients. So having a leader that will keep a steady hand, keep your vision going, tell you how it's going to, how you are going to respond as a team to a situation is of paramount importance. And not only that, someone who's willing to look ahead and go, well, when we get out of this alive, how do we get out of it alive and thrive? So we don't just want to make it to the other side, but we want to make it to the other side with enough juice and energy to run and know what direction we're going to have to run in. So I've seen some entities that did not have this type of experience and you clearly see them struggle out of the gate, whether it's with employee retention, where their business levels are post COVID versus pre COVID, a number of other kind of KPIs we could easily talk about, but I'd clearly seen that, that leadership difference in action. So to your point, it's incredibly important. That's what keeps everything stable and maintains and increases the momentum on the other side.

Megan - 00:10:51: And a couple of years ago, money was practically free to borrow, but that's obviously no longer the case. So can you detail for us the extent of the rate increases from the federal reserves?

Ali - 00:11:04: Sure. And you actually made a very important comment. If you were the actual banks themselves, the money was free just a little while ago. They were borrowing at basically free. Just take the money, please, and do something with it. Well, as you've cited, we've had from March of 2022, just looking to July of 23, we had what is effectively a 500 point or 5% hike in the FOMC or the Fed Funds Rate. That is a truly historic increase in such a period of time. It really doesn't have an equal if you go back looking through a historical record. We've just never had an instance where so many rate increases have been done in such a short period of time. And that's had a pretty dramatic effect, I think, of chilling certain groups and certain businesses, not all, but it has certainly had a chilling effect on the macro environment overall. And what you see is, there's a lot of trepidation and concern about both companies. And now you're starting to see some consumer behavior. And on consumer balance sheets, you're seeing people very apprehensive about taking on anything, definitely anything debt related. And then so you have a point where people are saving a little bit more, those who can't, rates have gone up for savers. So it's the time for them to win again. It hasn't been for quite a while, so I know they're happy. But we are definitely keeping a very close eye on it because it's had a tremendous chilling effect on a number of different industries and groups. Of people and businesses and the effect of it going forward is kind of, I think, what we're concerned about, but I'm happy to answer more specific questions on it if you have.

Megan - 00:12:36: Sure. First of all, what element of companies do you feel are most impacted? Is it innovation or some other area of the business that takes the biggest hits when companies are just trying to stay afloat?

Ali - 00:12:48: I think you touched on important ones. So innovation attached that to, let's say, also R&D. So what happens is companies go very quickly defensive on their balance sheet, on their budgets. Everyone wants more conservative of everything, more conservative revenue numbers, more conservative spending. You start slashing or holding back where you can. And therein lies the actual multifaceted part of the problem. So these effects of what the companies are doing, how it's changing their behavior, a lot of this will actually trickle down and have secondary and tertiary effects. So yes, it affects innovation. So all of a sudden you go, maybe it's not the time to develop that new engine or car or phone or whatever it is you might be in your industry. I bring those because we work with companies that actually happen to do work. Those fields specifically. So we get to see what happens. Then secondary, you go, well, if a lot of people are watching their spending habits, that has a revenue effect. And when it rolls up to your clients, many cases, these are very large companies. It has knock-on effects to all their suppliers and everyone who does business with them and invests in them and so forth. So you see this chilling effect. It kind of radiates out in waves. Companies tighten their belts. You saw a lot of tech companies over the last year do tremendous cost cutting, deleveraging. Those who bought stock back earlier probably, happy now because they did it with very, very cheap money. But what you end up getting now is a period where everyone goes into a holding pattern. They're circling the airport waiting to see when it's safe to make a move, but everyone is looking. It's a wait and see approach. And that can get a little dangerous if it goes on too long. So I'm very curious to see what we see the Fed doing, even though they've gotten very positive data that's given them reason for pause recently. I'd like to see, I think we should all be paying attention to how long they wait to see what happens. Because you're hearing a lot of anecdotal evidence from people, even though unemployment is way down, the numbers all look really good. So according to the empirical analysis, everyone should be really feeling quite well, but you don't see that happening out there. And that's one of those things where you, where everyone believes things are tough. So they behave thinking things are tough. And before you know it, things actually get tough. And that's, that's one of our main concerns, right? As we're watching to see how did the consumers and businesses react also based of what the Fed's doing, because when you anticipate something, sometimes you cause the very thing that you thought was happening when it wasn't in fact happened.

Megan - 00:15:07: And what's the difference in how these rate changes affect small, midsize and larger companies?

Ali - 00:15:13: Great question. I think the primary difference is options. So if you're a larger company, you have a much different capital structure and typically access to financing options than if you're a smaller, even a midsize company. Oftentimes, large companies can go seed capital from their relationships with their banks or finance companies are much more robust. They have accumulated large amounts of assets. Oftentimes, they can pledge if they're public, well, they can raise more money that way. There's just a lot more room to maneuver. And also, they get to take advantage of leveraging their buying power to do a lot of things. So they have advantages both on the raising capital side, or we'll call the financing side equation, liquidity. And they also have some advantages on the cost savings side of the equation. And if you go down the tier, you look at a mid-tier company, all of a sudden options start disappearing. Oftentimes, they're not. Public companies, for the most part, different relationships with their banks and lenders, just less ability overall to weather a storm. So they can be negative or have adverse results for a shorter period of time, as opposed to oftentimes their larger counterparts that can be negative for a little while. We've all heard such and such company just lost $400 million this year. If you even scale that down for a small company, oftentimes companies that might only be a tenth of the size, when they lose $40 million in a year, that can oftentimes be a great, crippling year, and they can't recover from it. So there's less room for error the smaller you get in some ways. And then when you go all the way down to small businesses, well, they're, I think, the most tightly pressed. Oftentimes, relying on capital options that are very sensitive to prime rate. So in that market, you typically have a lot of relationships that are priced directly based on prime or the owner's credit score. So you start seeing much higher borrowing costs. So it's not uncommon today at all to see $12, $13, $14, $15, $16. Borrowing costs for small business owners who are out there getting a small business loan if they can get it. So their options shrink, and the duration that they can weather any kind of a difficult period is substantially shorter. I think those are some of the primary ways that they're different. And also their access to data analytics and visibility. When you're a small business owner in a particular town, you don't really have access to the data analytics that larger companies do. You don't employ an economist. You don't have someone full-time watching out these things. You are all positions of your company all the time. Or you have a few people, but you as a proprietor or owner or one of the key members, usually wears multiple hats. And that means you just have reduced ability to respond to things. You have less clarity, less data, less options overall. And I think that creates a little bit of a precarious situation for our small businesses. Maybe listeners might notice in their local town. I live in Los Angeles. I've seen it. But I have friends who are in Seattle. Definitely, we see it in San Francisco and many other cities around the country right now. A lot of main streets have a lot of empty stores in. And it's a growing amount. And there's a massive amount of real estate that's become available. Not just the big office space that we all keep hearing about, but also the street level storefront space just seems to have expanded precipitously in availability. And I think that's a direct function of their ability to weather storms. First it was COVID and then it led into this. And one, you could argue they're both kind of different parts of the same coin effectively. But I think that's a great indicator that shows you the different... The different levels of being able to weather difficult time.

Megan - 00:18:37: And as CFO, has unpredictability in rates and the threats of a government shutdown frustrated you in your attempts to grow the business as much as you would have liked to over the past few years? Or have you found a workaround that's still allowing you to achieve your goals?

Ali - 00:18:55: Really happy to say it's been the latter for us. Part of the benefit of being global, although it comes with its own set of risks, which I know we'll get to at a later point. But the benefit of being global is that not all the eggs are in one basket for good or ill. In this case for us, it's actually been for the better. We have resources around the world and we have actually hundreds of employees all around the world. And we have designers in some countries. We have different types of disciplines in different areas. And one of the key things that happened during COVID was that companies realized all over that they actually did not need everybody in the same physical space. You did not have to be there necessarily to do everything for things to actually happen. And the benefit for many companies, PAC included, that might have resources in multiple locations. We could then lean on people that we have in different PAC offices in different countries, provide really cost advantageous support to our clients, find solutions for them because they're also tightening their belts. In many cases, save them 50 or 60% over what an onsite person might potentially have cost them by the time we put someone onsite and give them housing and a car and phone and everything else like that. And they're working away from their families for an extended period. We were able to provide a lot of the same support with maybe only a few people onsite and a huge amount of remote support that has been managed by our onsite team members and servicing the client's needs. So that's one example of how we found a workaround just because the business landscape has changed. And that's enabled us to continue growing and find creative solutions for our clients who are also looking to be cost conscious at this moment. So we ended up winning in two ways. One was COVID taught the lesson that we would right now be able to capitalize. We're going to capitalize on for everyone's benefit. Really no, not much of a downside to it. And the second part is now is the cost cuttings come around. Not only are companies going, Oh, geez, you know, we found that we could do that. Now it's become a fixed part of many of their solutions. It took COVID to help us convince them, but now they finally see the value of that. So that's really helped PEC, as we discussed earlier, kind of redefining, working with new customers and new industries, becoming the 2.0 version of itself as we here approach our 40th anniversary. That's been a critical business advantage for us is now being able to leverage the whole company, no matter where they are, and bring that solution directly to the client locally where they are.

Megan - 00:21:15: And in times of uncertainty and particularly inflationary times, how do you guys price long term projects? I assume your projects are multi-year. And how do you share the potential downside risks with clients of prices that keep increasing?

Ali - 00:21:32: Hey, that's a great question. And I will tell you, there's a multi-part answer to it. The first is whenever possible, we tried to, again, this has helped a little bit by what we just discussed, which was our ability to provide support remotely and different from different parts of the world. So when we have that level of flexibility on our side, that gives us a little bit of a hatch because A, we've reduced costs for ourselves and for the clients. So there's a little bit more in the middle that we can help absorb unexpected fluctuations that might happen that are maybe of a smaller nature that we simply don't want to bother the client about because we want them to be focused on the solution we're providing and getting them to success, which is our main goal. Now, can we do that in all instances? No, of course not. When you're global, when you have exposures, and this is both ways, by the way, we don't only look to benefit from it. You look for a partnership with our clients. And that's really the approach is, do we have a partnership? We want to be a trusted vendor, supplier, partner of yours. We're in here to make sure you win. So oftentimes we'll have clauses built into our agreements that if a certain cost or a certain component of this changes by X percent, we will revisit that together mutually and come to an understanding. And again, it's not meant to enrich anyone's side. It's meant to level set things so that what both sides thought they were getting more or less in the beginning is what we constantly strive to achieve during the entire duration of our agreement time together until we can get you to success. So we'll absorb the smaller ones. And on the larger ones, we'll oftentimes reach out to our good clients and say, let's open up a conversation. Now, with that said, are there times that you can't foresee everything? Absolutely. Certain costs can go up in certain contracts. You provide a fixed price, and it is what you want. And in those cases, you oftentimes have to make a business decision and just suck it up and do what you got to do to deliver for the client. You might make less or maybe break even, or in some cases you might lose money. But we consider that just as a cost of doing business. And by mixing the types of projects you have, the durations you have, where they're performed, their makeup, we'll call it, the primary factors, you're able to pretty easily diversify yourself so you don't have too much exposure to it. And that helps us hopefully give our clients really the best experience possible. While protecting us at the same time.

Megan - 00:23:38: And switching gears a bit, but how likely or how real is the threat of a government shutdown?

Ali - 00:23:44: I think that's, you just touched on the 800 pound elephant in the room. I will, I'll say I am pretty concerned about that possibility. I think it is very real. And unfortunately, because we have found ourselves in this position multiple times before, and not that we should have, it's just we've become numb to it, like some other things. We're not paying the proper attention to the likelihood that it'll happen. And in many ways, the possibilities this time around, I feel are much higher than in the past for a number of different reasons. And if that shutdown happens, I think there's effects that are both domestic, international, and definitely financial aspects, domestic, international, that'll affect both everyone here at home and other people who are not even Americans, by the way, all around the world. And then long-term consequences that some of which could be fairly serious. And we're welcome to get into that if you'd like, but.

Megan - 00:24:37: Yeah, actually I would. So what do you think are the ramifications of a shutdown? Both short-term. Short-term at a high level and long-term.

Ali - 00:24:47: Sure. So short term, and we'll go domestic, international, and both. Short term, what happens, the qualifier is, well, what does a shutdown look like and how long does it go on? If it's a short enough period of time that obligations go unaffected, then the damage might be hopefully minimal. We've had rate downgrades in the past, US Federal Government debt, which we never thought would happen. For the longest time, treasuries enjoyed the highest rating from all the major bureaus. That's no longer the case. So if it goes along, even just a couple of weeks, if it gets to a point where we, and this is even though it's short term, it's a relatively substantial effect. If at any point we miss any financial obligations, i.e. Bond payments, you start missing salaries, you start cutting services. Even if it's just you stop paying domestic government employees, I think it's very possible that you're going to look at the rating agencies going, we no longer have a properly functioning Federal Government in the US and you can't rely on the US government, by extension, the dollar and the full faith and credit of the US Federal Government, the way you once could. And we might see a little bit of a downgrade. Now, if we go one step further beyond that, and we see there's been effects on bond payments or other financial obligations, that could have substantially more dramatic effects. Short term, I would expect rates to definitely increase because people are going to go, wait a minute, we've been flocking to treasuries and the dollar for 80 plus years since the US enjoyed reserve currency status. And it's oftentimes sought as the safe haven asset around the world. But if all of a sudden we prove that it's no longer a safe, haven asset, we don't take our debt payments seriously and we don't prioritize those obligations, I think we'll see substantially higher borrowing costs. And you're already, just over the last couple of years, we see the treasuries have moved from sub 2%, some cases it was 1%. Now they've been 3%, it's 4%. That represents a substantial increase in debt servicing obligations. And a lot of everyday people don't think about that. Think about this as your credit card. You don't think about it as your credit card. You don't think about it as your credit card. You don't think about it as your credit card. You don't think about it as your credit card. We could all of a sudden find ourselves in a situation where, this year alone, by the way, we're going to end up paying $500 to $600 billion for just debt servicing. And if you all of a sudden have that 4% borrowing, have to go to 5%, 6%, or 7%, because you've lost faith in US treasuries or the US government's ability to service its debts on time, that's going to have a dramatic effect. Because now all of a sudden you're going to pay 10%, 20%, 30%, 50% more just to service your annual debt. And that means you're going to have to cut from somewhere because you're not going to be able to run a greater deficit. You're going to scare off people who want to invest in treasuries because now you're not running just a trillion dollar deficit. You're running 1.3 and you're borrowing money to pay back interest on other borrowed money. You don't have to be a genius in accounting to figure out that's not a winning solution. That's a recipe for disaster. So those are kind of short and a little bit more immediate side effects that will also bleed into long term, domestically speaking, also international. But if we also switch to international and go, well, what does this do for US overseas? I think it damages our reputation, both as a financial leader, as a business. Fuel to the fire for certain groups that are seeking to no longer have the dollar be the reserve currency. You already see a move against the petrodollar. You see The BRICS group that has gotten together and has made some side deals to buy certain things from each other and purchase oil in different currencies. I don't necessarily think that'll succeed. But caveat being, if we prove in the US. That we're unable to maintain our responsibility for having the position of being reserve currency, i.e. Paying our debts on time and running things in a fiscally responsible manner, I do think we do look at a situation where more people in the globe go, you know what? This, The BRICS... Group or another group that might pop up, maybe there should be more currencies involved. Maybe we shouldn't use the yuan or use more euro use something else. That's my concern. And once you tarnish it, I don't think you can put that genie back in the bottle. And that's my greater middle to long-term view globally for us is once you lose that luster, I think it's unlikely to be regained.

Megan - 00:28:51: And just curious, but you mentioned also that you feel like this risk is more likely now than it has been in the past. What do you think it would take? Why would a politician just walk away from their job and their responsibility? Why would it come to the point where the government is shutting down?

Ali - 00:29:11: Well, I mean, that's to be as analytical and nonpartisan about it. It just seems like we have a climate where we do not have as many adults in the room as we should. And for fear of upsetting a small group of constituency, which any particular individual might view as favorable for them to retain office. So we've exchanged the personal good of someone who's been hired clearly for the greater common good. There's no, absolutely no way you can justify at all under any circumstance that you should shut the government down. Now, whatever you believe should be solved through legislation. This hostage taking approach by anyone on any side for any issue, I think is unconscious because what they're playing with is the futures of not just the 330 million people we have today in the country and their health and financial outlook, by the way, first generation whose next generation is not going to be better off than they were. And that's causing a lot of other knock on effects, probably a conversation for another day. But when we pull back to the politicians, you do not have enough people, I think, who are sufficiently knowledgeable, educated or caring about what happens. The information is out there. The congressional budget officers shared it. The rating agencies have commented about it in the past and proved it with rating downgrades when this landmine has been stepped on previously. But the crop of politicians we have are deciding to hold the whole enchilada hostage for whatever particular views they want to accomplish. And none of them, in my opinion, arise even remotely close to the standard required to pull the trigger. And the effects, honestly, could be permanent. I'm not, no one is a crystal ball and no one can say definitively, but I think if we apply a little bit of logic and go in the modern world where there's much more competition in all ways, in currency. It's not 1945. The US is not the only game in town. There is other currencies, other large economies. It's a different world today. And once people try another brand, and if it works out well, and they go, well, geez, I don't have to pay premiums for this, or it's just as reliable, you may not be able to go back. And I'm not sure our politicians today, actually, I know for a fact, a certain group of them are completely ignorant or just choosing not to care about that. And the price we might pay might be substantial more than they ever imagined. But the downside is these are just like the people who will be gone out of office in a year or two or whatever the term is, but the damage that they will have left in their wake might be unrecoverable for generations, if at all.

Megan - 00:31:35: And how do you as CFO for the PAC group assure investors and try to insulate them during these difficult times?

Ali - 00:31:45: Our goal whenever we're dealing with any counterpart, whether it's a client we're trying to help or any partner that we're trying to work with or any group at all is we emphasize our longevity. You know, approaching 40 years means we've weathered a number of different cycles, depending on how you want to count it, four or five pretty substantial downturns in the economy in that period of time. I mean, PAC is not only made it through, continue to grow and be stronger every single time. And now we're looking at a whole new generation of growth force, new clients and explosive growth for years to come. So we also emphasize how we are a conservative. We are not saddled and riddled with debt. We don't do crazy things that we can't take on. And we've always tried to be measured in our approach of how we move forward and accomplish whatever the goal is. Now, sometimes that means we move a little bit slower. Maybe we don't grow as fast or as rapidly. But our goal has always been to. Be there to finish the project, to know that if you begin working with us or you work for us or your partner with us, that we're going to be there tomorrow. And that means making decisions for the longer term. And that is one thing that's actually really nice about being a private company. We're not worried about an EPS call every 90 days or a couple of analysts who all of a sudden don't like something that we're doing, but don't really understand the business and end up causing a lot of damage. We can really make the decisions and invest for the longer term. And we try to work with partners. Not only our bank, but everyone overall who takes that same kind of steadfast, long term approach to just being successful as opposed to trading tomorrow just to have a little better today. And I think that that message has resonated. Not to mention, I'd like to know we have some customers that have been our customers for 35 years.

Megan - 00:33:22: Wow.

Ali - 00:33:23: So I think that-

Megan - 00:33:25: Volumes.

Ali - 00:33:36: I agree. And that that longevity is by itself.

Megan - 00:33:28: So let's talk about budgeting quickly. How have you had to change the way you look at your budgets, particularly long term, when it's hard to predict what's going to happen tomorrow, let alone a year or five years from now?

Ali - 00:33:43: Yeah, I totally hear you. I go back to using our steadfast conservative approach. So right now we're in the thick of it. Right end of the year, starting the new year. And budgets and forecasts and everything are flying around. My philosophy and motto to my team and fellow leadership members at PAC has always been, let's be conservative. Tell me your need list and then tell me your want list. And then let's create a couple scenarios. Let's figure out a base level of performance that we think is really well baked in. Super realistic. We'll call it the primary one. And then let's build a couple of models on top of that. Up to and including if all the great things that we imagine are happening this year happen. You know, what would that do? What would we, how would that change what we allocate, where we put it, what we put away, what we acquire, you know? So if you have multiple scenarios that you've thought out in the beginning and you've committed yourself to the least expensive one by monitoring headcount, keeping an eye on costs, making sure you're not doing things that are not really absolutely necessary, then that helps you operate with a little bit more peace of mind. And then as business comes in, as you do your variance analysis and you see that the picture is way better than you thought or a little better than you thought, but whatever degree of better than what you thought it is, then you can start taking some commensurate action to add headcount, buy a new system, maybe acquire someone if that's what you need to do or have been thinking about doing. It's the make first, then spend approach. And again, go back to saying sometimes that means we move a little slower. That's okay. We are always happy to sacrifice stability and safety and making sure that we're there for our employees, our clients, and our partners that we work with, rather than just taking something that looks amazing for the short term, but has a lot of long-term risk attached to it. And I think we apply that same philosophy when it comes to budgeting.

Megan - 00:35:28: And last question, but as we enter 2024, what is it that's keeping you up at night besides what we've been discussing for the last 45 minutes?

Ali - 00:35:37: Oh, geez, I can tell you that's an easy one. Two thoughts that are constantly competing. The first one I'll tell you is cybersecurity. That is right at top of mind. I have conversations all the time with my IT manager, with our managed service provider, with our other IT partners. That is what keeps me up the most, making sure we have things backed up and all our policies are as robust as we can make them, doing a lot of training. Because in the modern world, you hear all the time ransomware attack, phishing attacks. People just want to wreck things. People want to take control of all your data or steal it. That is what really keeps me up at night. Because what happens if we wake up one day and there's some cute animation on everyone's computer the next morning when they wake up and says, you know, ha, ha, ha, pay me two billion in Bitcoin to get something done. That's really my primary concern. To make sure that our customer's information is safeguarded. We don't wake up one day and find out we're locked out of our company because data is our lifeblood. We don't make computers. We don't build a building necessarily. We manage the process, so to speak. But our business and our value is the files we have, the knowledge we have, the work that we've done, the cumulative history of all that material. And losing it is definitely top of mind. And then probably the close second is just growing geopolitical issues around the world. Because that obviously does have an effect. On business, what companies do. We travel everywhere with our clients. So if things are not, you know, if there's rising concerns in Asia, well, you might find people don't want to build another plant somewhere. If they think, you know, something's going to happen between a certain country and another country. If all of a sudden another part of the world flares up, you find it has a chilling effect on customers who are going to go there and also build the plant or get involved with another client. And these days, it seems like we have multiple things happening at the same time. We had to close our Russia office actually just early last year. Because of obvious reasons. Because we can no longer operate there. We can't get our people in. You can't get money in or out. So that was the end of that. But that's just one example of how geopolitical matters can quickly affect the business. And it'd be different if it was just one spot. But in the modern world, as you've noticed. We have flare-ups all over the place, and that definitely adds a level of complexity to managing the business.

Megan - 00:37:45: Ali, thank you so much for being my guest today.

Ali - 00:37:47: Megan, it's been my absolute pleasure. Thank you for taking the time to speak with me.

Megan - 00:37:51: Yeah, likewise. I've really enjoyed speaking with you. And thanks for finding the time to be here with us today to share your knowledge and experience. And I wish you and PAC group all the best.

Ali - 00:38:01: Appreciate it. Feel free to check in anytime.

Megan - 00:38:03: Yeah, and to all of our listeners, please tune in next week. And until then, take care.

Ali - 00:38:08: Thank you, Megan.