Investment Governance Practice
Applying private equity best practices to corporate investment management
Most Fortune 1000 companies' annual investment portfolios exceed the fund value of many private equity firms. Do they apply the same rigor and scrutiny in tracking the allocation and ROI of these investments as PE firms, both in theory and practice? Through Investment Rationalization, corporations can leverage the best practices of private equity funds to reduce overall investment levels while increasing growth and improving profitability. While many companies maintain an investment management process in form, most lack private-equity-like rigor due to implementation and cultural barriers associated with the corporate environment.
Historically, by implementing Investment Rationalization at top-tier financial institutions, Opera has delivered investment savings of 25-35 percent during the first year of implementation. The process also enables simultaneous redeployment of previously stagnant assets contributing significantly to organic growth through optimization of revenue enhancement initiatives. The process ensures that all the investments have defined timelines and a return portfolio which is tracked continuously.
The process attains the following:
Spend Effectiveness: A combination of spend savings and greater returns on redeployed capital increases investment value
Portfolio Management: A centralized financial planning view achieves an appropriately balanced and diversified investment portfolio
Process Efficiency: A new internal structure ensures that an appropriate amount of effort and rigor is applied to the investment process
Performance Accountability: Adequate transparency and accountability are institutionalized across all aspects of the investment process
Fiscal Flexibility: The implementation of a disciplined governance process minimizes resource constraints Print