Ronan Donohue Of Q4 Capital Advisors: How AI Is Disrupting Our Industry, and What We Can Do About It

An Interview With Cynthia Corsetti

Stay close to regulators and other external stakeholders, including rating agencies, accounting and tax advisors by way of knowledge sharing. Scenario test assumptions against implications arising from these and other relevant bodies.

Artificial Intelligence is no longer the future; it is the present. It’s reshaping landscapes, altering industries, and transforming the way we live and work. With its rapid advancement, AI is causing disruption — for better or worse — in every field imaginable. While it promises efficiency and growth, it also brings challenges and uncertainties that professionals and businesses must navigate. What can one do to pivot if AI is disrupting their industry? As part of this series, we had the pleasure of interviewing Ronan Donohue.

Ronan is a financial markets consultant with more than 25 years of experience working in bond markets, with specialist knowledge on hybrid capital. He is a regular commentator on how the old world of banking is changing in relation to FinTech and AI. He set up Q4 Capital Advisors in 2020, offering consulting services relevant to capital markets stakeholders. His clients include the European Commission, which he advised on innovative funding for the Green Deal. He previously held senior roles at five different banks, becoming a managing director in his 30s, and most recently spent nearly a decade as managing director at Rabobank.

Thank you so much for joining us in this interview series. Before we dive into our discussion our readers would love to “get to know you” a bit better. Can you share with us the backstory about what brought you to your specific career path?

In short, the lunar landings! My earliest memory of a career path that excited me involves reviewing grainy footage of NASA’s mission control room, where it was evident a team was excitedly working towards a common purpose. I would later discover exactly what attracted me to this: the camaraderie and adrenalin projected from those images. Bond trading rooms deliver much of the same, complete with ‘Go/No-Go’ calls on deal (rather than rocket) launches — suffice to say without the same level of global significance! My interest became calcified on a school trip to the City of London aged 16, especially the vibrant energy on the floors of the various institutions we visited, from the stock and futures markets to the metals exchange and Lloyds insurance. I was hooked on arrival and never let go of this as a career choice. After a spell in New York, I arrived in London almost 28 years ago to take up a banking position and have not looked back.

What do you think makes your company stand out? Can you share a story?

As a former banker now working as a consultant, I bring more than 25 years of experience dealing with C-suite executives of global banks and corporates, bank regulators and other influential bodies such as the European Commission (EC). Being self-employed, I can advise and comment on relevant developments free from company messaging and in a manner that is quick and nimble on delivery.

For example, I recently advised the EC on innovative funding for certain aspects of the Green Deal. I was able to identify parallels between how investors operate in financial markets and how philanthropists select projects to support. Without the corporate baggage of larger consultancies, I was able to quickly produce a report setting out a strategy to better harness philanthropic backing and I’m pleased to say my primary recommendations were taken forward.

You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?

Working in financial publishing in New York in the mid-1990s, I was influenced by a magazine cover story titled “What CEOs think of Investment Bankers”. It will not surprise your readers that the latter were not trusted. Trust is a card I played with clients throughout my banking career, with some success. I am always conscious that the person sitting opposite must trust you to award a deal. In addition, they must on-sell your story to internal stakeholders, so along with building trust, I have always sought to impress with detailed knowledge of my subject matter and to explain it in as straightforward a manner as possible (a skill honed in part from a third-level economics lecturing position I held in my pre-banking career). Finally, appropriate use of humor. Traveling extensively and meeting clients from all over the world, I have always been impressed by the essential good nature of most people, and thankfully there has usually been time to share a joke or amusing story at some point during our various exchanges.

Let’s now move to the main point of our discussion about AI. Can you explain how AI is disrupting your industry? Is this disruption hurting or helping your bottom line?

Given my role as a consultant, I interpret the question as to how it is disrupting banking, and most of my observations are to do with how it is likely to disrupt, rather than how it is doing so now. However, one way it is already happening is in the legal sphere, an essential support service to capital raising. I commented recently on a new AI-driven contract negotiating service launched by Allen & Overy. I expect this to reduce both the timeline from mandate to launch (historically up to two months in my own specialization of hybrid capital) and to reduce fees. This is a positive for banks, but they also face challenges. Several of the larger names have already incurred significant research and development costs.

Which specific AI technology has had the most significant impact on your industry?

A number of bond transactions have been completed on blockchain in recent years, although I do not expect a wholescale transition from current methodologies to blockchain in the near future. This is due primarily to a lack of legal and regulatory clarity, along with ambiguity as to how outstanding securities will be handled. That said, blockchain would appear to be a technology that can increase transparency in the bond market, especially among illiquid and more opaque securities, as well as lower transaction costs. Various initiatives are underway by financial institutions, and plenty have been discontinued. However, in time I would expect standard protocols to emerge, which will also facilitate regulatory clarity. I have always held that the City’s essential characteristic is its ability to adapt to changing circumstances and clients’ needs, and I remain convinced it can do so now in the face of any-and-all challenges this new technology may present.

Can you share a pivotal moment when you recognized the profound impact AI would have on your sector?

I have been watching the rise of robo-investing among retail clients in the US for some time and speculating how soon this trend might disrupt institutional investors, so in certain areas my views have been arrived at more gradually. However, for a line-in-the-sand moment, it would have to be on first hearing of the breakthroughs in generative AI, especially the launch of ChatGPT, late in 2022. I had already been impressed by the potential for blockchain in a range of settings, not just in banking but in terms of trade, verifications of asset ownership, even voting. The marriage of these two technologies presents possibilities that seem endless, almost unfathomable. I realized a careful approach would be needed however it plays out. But, while recognizing the drawbacks, I am an optimist in this space.

How are you preparing your workforce for the integration of AI, and what skills do you believe will be most valuable in an AI-enhanced future?

Having started out on a Philosophy, Politics and Economics (PPE) degree, I branched into pure economics after my first year at college. I recall well my last philosophy exam, where my final question asked for the difference between man and machine. The contrast seemed so absolutely obvious I thought the question misplaced, and was fully expecting a recall of the papers or a resit. I worried about my upcoming summer in the US and whether or not it would be interrupted. All these years later it no longer seems such a daft question; in fact, it appears my professors may have been ahead of their time. Philosophical and ethical questions such as this now permeate the AI revolution, from how driverless cars may be programmed to react in a collision to how we deal with the potential of mass redundancies. Constant reading and learning is required by management to be prepared in this fast-moving space.

What are the biggest challenges in upskilling your workforce for an AI-centric future?

At a recent Parent Teacher Association (PTA) meeting at my children’s school, we were informed that 60% of school kids today will end up doing jobs that haven’t been invented yet. It seems obvious that those in employment, especially young adults, will end up on the same path in the future. I think it is important to be honest with workforces and for management to explain that they too cannot foresee exactly where it is all going. However, characteristics like reliability, flexibility and dedication to the task at hand will always be valued by employers. So, I would encourage workforces to stay focused on the current job, but to be prepared for second and subsequent careers depending on their age. Life-long learning will be important as never before.

What ethical considerations does AI introduce into your industry, and how are you tackling these concerns?

Until we know the landing point in any given industry, I think responsible organizations should prepare their staff for potential change. In banking, employees must be made aware of the possibility for greatly altered operational norms and readied for such an environment to the greatest possible extent. In addition, they should be assisted in contesting positions outside the industry (or in related fields) should an alternative career become inevitable. For example, perhaps standard Continuing Personal Development (CPD) training should include elective upskilling courses to help employees gain knowledge outside of what is strictly necessary for their core role. This should be at the expense of management, so standard employee packages might need to be imaginatively reconsidered.

What are your “Five Things You Need To Do, If AI Is Disrupting Your Industry”?

1. One blockchain consultant I read about advised CEOs to take one full day whenever possible to go into a quiet room, turn off their phone and spend the entirety of it reading up on blockchain, watching YouTube clips and gaining knowledge in whatever way they could. I might advise they and others among the management team adopt the same approach with generative AI also.
2. Assemble an internal taskforce composed of certain key personnel skilled in relevant areas. In the case of investment banking, I would include IT, legal, compliance, origination, syndication, trading, among other fields. Brainstorm, map and remap a range of likely outcomes for the business along with credible timelines, erring on the side of caution in each case. Use the forum to generate an outline plan (becoming more detailed as new information comes to light) for the top three most likely scenarios, even if all are considered low probability. Be guided by the fact that even low probability outcomes must be considered ‘high-impact’ events if they do come to pass. As far as possible, position the bank to be in a state of preparedness for disruptive change.
3. Incubate certain lighthouse projects in key areas. For example, if appropriate, encourage treasury/long-term funding to structure and issue a limited-size blockchain bond to become familiar with the process and to identify possible drawbacks and implications.
4. Stay close to regulators and other external stakeholders, including rating agencies, accounting and tax advisors by way of knowledge sharing. Scenario test assumptions against implications arising from these and other relevant bodies.
5. Give regular updates to employees, including (but not limited to) townhall meetings where employees can ask questions to management. Do everything to ensure it is a non-intimidating environment where no question is deemed too basic or ‘silly’. As this is a fast-moving and uncharted space, anxiety is likely to be bubbling along under the surface within the workforce. It is management’s job to bring this out and also to learn from what employees themselves are hearing and anticipating. Their feedback is valuable and free.

What are the most common misconceptions about AI within your industry, and how do you address them?

In my experience, reactions among stakeholders tend to be polarized between those who deep down believe AI-related (scare) stories are accompanied by too much hype, and others who believe significant change is inevitable and are merely on watch for the ‘tipping point’. For them no amount of information is too much. I expect convergence between these opposing views over time.

Can you please give us your favorite “Life Lesson Quote”? Do you have a story about how that was relevant in your life?

“The only way to do great work is to love what you do. If you haven’t found it yet, keep looking and don’t settle.” — Steve Jobs.

In no way am I attempting to compare any achievements I may have made to those of Steve Jobs, but the quote summarizes well a viewpoint I have always held. Whenever the occasion arises, I advise young people to find a career they are passionate about. This will take the sting out of learning and significantly increase the probability of them standing out. I remind them that if you are good at what you do, the compensation will follow.

My own career in banking was reached through a roundabout route, both in terms of early positions I held and geography. However, I was always clear on where I wanted to get to and having that beacon fixed in my sights helped enormously.

Off-topic, but I’m curious. As someone steering the ship, what thoughts or concerns often keep you awake at night? How do those thoughts influence your daily decision-making process?

Having survived 14-hour days on six hours sleep for many years, I am now making up for lost slumber and only infrequently lie awake. As to my concerns, freed from many of the daily operational issues of banking life, I have more time to address any worries I may have during waking hours. Although I am fundamentally optimistic about the future, the evolving nature of working life presents unique challenges for young people today trying to plan their careers, including in time for my own children. The binary choices of my generation have largely dissolved and career flexibility will be a key requirement for current and future candidates. In many ways, it’s an unenviable position they find themselves in, but investment banking never attracted people overly concerned with job security so I am confident of the ability of those choosing this industry to adapt.

You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

Bringing about honesty and integrity in politics. From that a lot of positives would follow. I see a role for AI there too.

How can our readers further follow you online?

My LinkedIn is: https://www.linkedin.com/in/ronan-donohue-88079412/

Thank you for the time you spent sharing these fantastic insights. We wish you only continued success in your great work!