Our investment approach aims to generate attractive investment returns by following a disciplined approach, develop new investment strategies and support existing ones, as well as enter into strategic transactions, while employing high-quality people, and pursuing the highest standards of excellence, always aligning our interests with those of our investment partners.
Our investment philosophy and the business characteristics we seek, align with service-based businesses, where the most important assets are the intangibles: the people, their business practices and intellectual capital, and their customer relationships.
Although the operating environment is becoming increasingly complex amid the globally sweeping COVID-19 pandemic, Finvest Investments has managed to operate steadily, while extending our digital offerings. At the same time, we became more proactive in risk response against the impact of uncertain factors.
Creation of New Value
Shareholder distributions continue to be delivering value to investors. As a result of efforts in focusing on selected business fields with a high growth opportunity potential and profitability as well as maximizing the efficient use of operating resources, we have grown considerably. However, the need to defend high embedded growth expectations in current valuations will require firms to invest going forward.
As we shape our capital deployment strategy for 2021 and beyond, the need to protect financial flexibility and proactively manage risk is important, as to capitalize on strategic opportunities.
In addition, technological innovation is disrupting many industries – having impacted 10% of global companies (by market capitalization), and threaten to affect nearly another 50%. However, these disruptions also create opportunities.
Analyzing changes in the environment with technological and scientific developments generating new business opportunities. Strategies ranging from proactive M&A, joint ventures and partnerships, must be considered to expand market share and enhance shareholder value. Other transformations in the environment such as climate change, geopolitical shifts and changes in financial markets also create market opportunities.
Consumer segmentation, purchasing decisions, competitors, complementary products and services, and environmental analysis are types of analysis that will help our Group identify new market opportunities, prior to developing a value proposition, plan the commercialization chain and estimate costs, revenues, cash flows and financing needs.
An attitude of making contributions to people and society through business activities and not focusing solely on business results is a management concern.
Assessment Framework In Rethinking Support Functions For The Future
To manage the optimal balance of structure, cost and size, requires an evaluation of the parameters which will create value in alignment with the answers to the following questions:
- What are the most relevant options for the role and positioning of the Corporate Center?
- What synergies are expected? How should each function contribute to the overall financial target?
- What are the opportunities to leverage resources?
- What leadership and management model components or attributes will enable JVs and alliances success?
According to Oliver Wyman, Impact-Driven Strategy Advisors research, understanding the role of the corporate center and where it can create value for the company is critical into how it fits with the rest of the organization, along different dimensions such as business lines, customer types, geographical factors, etc. and requires an understanding of the strategic issues for each business line, as well as the required level of autonomy for each business and function.
The objectives of operational governance are:
- Serve the mission and strategic objectives of the company
- Ensure the quality, consistency, efficiency and rapidity of internal decision-making processes, by clarify the responsibilities of the leaders, specifically with regard to cross-company matters
- Track the execution of decisions while respecting the potential decentralization of designated responsibilities
Financial management
Financial management includes various activities: budget preparation; budget execution; management of financial operations; accounting; and auditing and evaluation. Within this broad financial management function, the Treasury function is to achieve the set of specific objectives that covers the following 6 core functions:
- Cash management
- Liquidity planning and control / Financial planning and forecasting of cash flows;
- Management of interest, currency and commodity risks
- Procurement of finance and financial investments
- Contacts with banks
- Corporate finance / Financial assets management.
Cash management clearly forms a big part of the treasury’s core functions. In addition to dealing with payment transactions; cash management also includes planning, account organisation, cash flow monitoring, managing bank accounts, electronic banking, pooling and netting.
Liquidity planning and control are closely linked to cash management; covers interest and currency risks, as well as commodity risks.
The core duties of the treasury also comprise the procurement of finance and financial investments, and working capital finance.
JVs and Alliances – Guidelines for launch planning and execution
As part of our growth aspirations, we are in the process of acquiring equity and partner interests.
Launching a successful joint venture is complex and demanding.
Apart from executing the classic launch tasks (organization building and project management) well, we should also maintain an intense focus on issues like strategy, deal economics, and governance. Corporate policies aimed at functions such as human resources, purchasing, IT or R&D must be developed to optimize scarce resources, create synergies and improve the quality of delivered service.
What follows are some guidelines for launch planning and execution applying to JVs and alliances.
The requirements of launch planning vary based on the nature of the venture.
There are basically four types of joint ventures:
- In the consolidation JV, the value of the alliance comes from a deep combination of existing businesses.
- In the skills-transfer JV, the value comes from the transfer of some critical skills from one partner to the joint venture—and sometimes to the other partner.
- In the coordination JV, the value comes from leveraging the complementary capabilities of both partners.
- And in the new-business JV, the value comes from combining existing capabilities, not businesses, to create new growth. The transition team should focus on maximizing operational synergies in the first two cases, and it should focus on understanding new or expanded market opportunities in the latter two.
Winning JVs start to address economic interdependencies as soon as an agreement looks likely in order to avoid launch delays and gains from potential synergies.
We generally limit interventions in more operational processes—such as staffing, pricing, and product development—the JV needs independence to ensure competitiveness and market responsiveness. An appropriate structure should allow the JV management team to make timely decisions while providing the parents with sufficient oversight to protect their assets.
Due attention should be paid to the set of challenges:
- The first challenge is building and maintaining strategic alignment across the separate corporate entities, each of which has its own goals, market pressures, and shareholders. If these individual interests are not addressed during the launch phase, conflicts will develop in crucial strategic areas.
- The second challenge is to create a governance system that promotes shared decision-making and oversight between the two parent companies. Weak controls can cost the parent companies money and can expose them to unexpected risks. The secret to effective governance is balance: providing enough oversight to protect important assets without stifling entrepreneurship.
- The third challenge that most joint ventures face is managing the economic interdependencies between the corporate parents and the JV. To avoid duplicating costs, most alliances are structured so that the parents continually provide financial capital, human skills, material resources, and marketing and other services.
- The fourth challenge is building the organization—a cohesive, high-performing JV or alliance—when most managers come from, will want to return to, and may even hold simultaneous positions in the parent companies.
Once a high-level governance roadmap is in place, the launch team needs to translate it into practical decision-making processes that are consistent with the parent companies’ governance and influence structures.
The value in creating a strong management team and a motivated staff is obvious.
We recognize that skills are transferred by people, not by processes or contracts. Failure to acknowledge this can be costly.
The launch team must create a compelling value proposition that makes good people want to join the team. The physical proximity of key members of the JV management team is also important for accelerating team building.
Two groups are worth special attention. The first is the handful of parent company managers who possess distinctive skills that need to be transferred to the joint venture, such as R&D, product marketing, or manufacturing process design. The second is the broader set of employees performing day-to-day work for the JV.
Once the skill holders are identified, we create formal contracts that define their levels of commitment to the JV, and the metrics by which their performance will be evaluated and rewarded. The launch team also needs to create incentives, so that they are motivated to provide strong support.
The sales and marketing launch teams focus on developing rules of engagement for all three sales groups (product pricing and positioning, and the management of joint accounts); defining incentives for all the salespeople; and developing mechanisms for building and transferring product knowledge among the sales forces.
Shared services are often a critical part of determining total venture economics and how the value is distributed between the partners.
Once a list of shared services is finalized, the launch team must develop transparent methodologies for calculating transfer pricing.
The launch team should also agree at the outset on the methods for allocating costs, specifying which operating costs should be included and the basis upon which to allocate each shared cost.
Finally, the JV should be linked to the corporate review and planning cycle.