INTRODUCTION
Revolutions in the forces and dynamics of change are
increasingly bombarding organisations with complex
challenges and opportunities.
Three dynamics of scarcity, risk and competition are forcing
organizations to pursue the optimization of performance of
resources, maximization of returns and minimization of risk.
The role and tasks of deciding and managing the portfolios of
an organization’s assets have become a professional
discipline. My assignment is to discuss the role of the
portfolio manager today, especially in financial institutions.
OPENING DISCUSSION
You have been invited by Strategic Business Bank Plc. for
final interview for the position of General Manager, Portfolio
Management .
Provide the answers to the following questions from the
Employment Consultant.
 What are the classes of the Company’s Assets/Resources
that will need to be managed?
 What components of Portfolio Opportunities fall within your
scope as a Portfolio Manager?
 You are informed that if you are engaged, you will be
reporting to the Executive Director, Bank Operations. Any
comments?
ANSWERS TO OPENING DISCUSSION
 CLASSES OF A COMPANY’S ASSETS/RESOURCES TODAY.
 Tangible Resources : Financial, Human, Physical and Infrastructure.
 Intangible Assets: Human Capital, Information Capital and Organization
Capital.
 Capabilities: Projects, Core Competences, Research and Development,
Innovations, Intrapreneurship, Processes.
 WHAT COMPONENTS/DIMENSIONS OF PORTFOLIO OPPORTUNITIES FALL
WITHIN THE SCOPE OF A PORTFOLIO MANAGER.
 Investment/Securities Portfolio
 Product/Business Portfolio
 Project Portfolio
 Portfolio of Core Competences / Capabilities.
 REPORTAGE TO EXECUTIVE DIRECTOR, BANK OPERATIONS.
 Second best – reportage to ED, Corporate Finance.
 Best – Reportage to CEO
 A GM, Portfolio Management, as a Top Executive Director, should have
direct access to the CEO and/or Board of Directors
LEARNING OBJECTIVES
At the end of this presentation, you should be able to:
 Explain the Corporate Governance Structure and its
relationship to Top Executive/ Management.
 Analyze the Role of Governance in driving organization’s
performance in the Financial Institutions.
 Discuss the concept and practice of assets and Portfolio
Mix and Management Today.
 Identify the Role of Portfolio Manager in Governance,
Portfolio Analysis and Portfolio Management.
PRESENTATION STRUCTURE
The following discussions will drive the achievement of the
learning objectives.
 Governance Structure and Executives Pyramid.
 Generic Role and Tasks of Governance.
 Corporate Governance and Performance of Financial
Institutions.
 The Concept and Scope of Organization’s Portfolio.
 Roles of Portfolio/Investment Managers.
CORPORATE GOVERNANCE PERFORMANCE STRUCTURE
© J. MBA (2004)
GOVERNANCE AND CORPORATE
GOVERNANCE
Governance is the exercise of overall direction and control
over an organization and its management in order to ensure
the achievement of its strategic goals and objectives,
deliverance of appropriate values to all its stakeholders and
the sustenance of Superior Strategic Performance.
 The Board of Directors or Governing Council is the principal
agent of governance.
 Governance is not the same thing as managing or leading
an organization or its operations. It does not lead but directs
the leaders, it does not manage, but it controls the
managers.
GOVERNANCE DIMENSIONS
 Public Governance.
 Political Party Governance.
 Corporate Governance.
 Small/Family Business Governance.
 Civil Society Governance.
All quoted companies and Financial Institutions should be
governed under Corporate Governance.
KEY ROLES OF CORPORATE
GOVERNANCE
The six cardinal roles/responsibilities of governance are:
 Strategic Performance Focused
 Strategic Surveillance /Monitoring
 Supervision of Top Executives
 Strategy Formation and Strategic Planning
 Systems and Structure – Overall
 Social, Ethical and Legal Responsibilities
FACTORS THAT AFFECT EFFECTIVENESS OF
GOVERNANCE IN FINANCIAL INSTITUTIONS
 Laws and Regulating Agencies – Effectiveness, Professionalism and
Integrity, CAMA, CBN, SEC, PENCOM, NICOM etc.
 Application of OECD principles of Corporate Governance: Fairness to all
stakeholders, transparency, responsibility and accountability.
 Active Independence of Board Members: Non - ED > ED, Independent
Minds Judgment, Self Determined/Self Leading.
 Contestability/Replaceability: Mechanisms that empower most suitable to replace
unstable Board (3W – Wisdom, Web, Wealth) and Top Executives.
 Participation in Strategic Planning (without over bearing micro – managing of Top
Executives).
 Professional Associations and Committees: Reputation and Persuasive Influence of
Bankers Committee, CIBN, CIA, NSE, Code of Corporate Governance for Financial
Institutions.
CORPORATE GOVERNANCE AND
PERFORMANCE
Management/Leadership is for performance.
Organizations should achieve and sustain superior
performance.
For Financial Institutions, Performance is
indispensable.
Reasons: Finance Sector is the engine of a nation.
Success is based on the trust and confidence of the
public.
IMPORTANCE OF EFFECTIVE GOVERNANCE OF
FINANCIAL INSTITUTIONS
 Accountability: to hold managers of the Institutions
accountable for what they do.
 Performance Information – Credible, Reliable, Accurate.
 Protection/Balancing of interest/influence of stakeholders.
 Need to maintain safety and soundness of the Financial
Systems.
 Need to ensure that general societal interests are weighted,
considered and protected.
 Need to establish a framework where private sector can
flourish.
PERFORMANCE AND PORTFOLIO MANAGER
A Portfolio Manager is a:
 Strategic Manager.
 Senior or Top Manager.
 Responsible to CEO or Board.
Portfolio Manager:
 A person who internally manages the company’s assets
(investments/businesses/projects/products/core capabilities).
 An independent person/company who makes investment/commitment
decisions using money/resources, other people/companies have placed
under his/her control.
Today the role and responsibilities of the Portfolio Manager have expanded
in response to the expansions in the concept and practice of Portfolio
Analysis and Management.
PORTFOLIO MANAGEMENT DIMENSIONS
The professional application of systematic management to portfolio
construction, best allocation of resources to the selected holdings
and the maximization of performance of individual, classes and
combined portfolios.
The professional strategies, models and skills differ according to
the class of portfolio:
 Investment Portfolio Management.
 Business Portfolio Management.
 Project Portfolio Management.
 Product Portfolio Management.
 Core Competencies/Capabilities Portfolio Management.
These technical details are outside the scope of this paper.
PORTFOLIO MANAGERS: FIVE STAR ROLE
DIMENSIONS
PORTFOLIO
MANAGER
PM’S ROLES AND CORPORATE PERFORMANCE
THREE KEY ROLES AND RESPONSIBILITIES
 Role in Corporate Governance Tasks and Strategic Planning.
 PM’S Role in Portfolio Analysis.
 PM’S Role in Portfolio Management.
PERFORMANCE GOALS
 Achieving the best portfolio mix and best allocation of the company’s
corporate resources.
 Achieving maximum performance of individual type or class of
portfolio holdings.
 Achieving optimium and combined, cross portfolio performance
PM’S ROLES IN CORPORATE
GOVERNANCE
Role at Board involves:
 STRATEGIC ENTREPRENEURSHIP – Searching for investment
opportunities and business possibilities, and advising the board
accordingly.
 ESTABLISHING PORTFOLIO AND INVESTMENT STRATEGIES, and
obtaining approval of portfolio strategies from the CEO or Board .
 PARTICIPATE ON DECISIONS AND ACTIONS FOR ALLOCATING
RESOURCES and advise the Board on how to move the company’s
resources to the best portfolio in order to achieve diversification and
best mix of portfolio holdings.
 PARTICIPATE AND ADVICE IN DECISION/ACTIONS FOR BOOSTING
PERFORMANCE of individual investment/initiative and capturing cross
portfolio fitness and synergies.
PM’S ROLES IN PORTFOLIO ANALYSIS
Portfolio Analysis is the analysis of the components of a company’s Portfolio mix to
determine the best (optimum) allocation of its resources among the competing
opportunities.
Roles and responsibilities of PM are:
 Continually and carefully choose the proportion of various competing opportunities:
selecting those that best support and promote the company’s diverse business
goals and strategies.
 Professionally measure goals and strategic assets that represent the best mix of
individual and portfolio, based on the assumptions about market and Return/Risk
Correlations.
 Continually provide oversight and decision making about which
investments/projects/products/business units and core competences/capabilities to
undertake, which to continue or which to reject or discontinue.
 Ensure that all allocation of resources and portfolio holding confirm to applicable
laws and regulations e.g. CBN Reserve Ratios.
 Strive to reduce the inherent risks to its barest minimum possible values and
subsequently get paid for accepting some.
GENERIC PM’S ROLE IN PORTFOLIO
MANAGEMENT
While Portfolio Manager may specialize in any one of the above
dimensions, all Portfolio Managers should have reasonable understanding
of their general roles as stated below:
 Work jointly with the board of directors and his team of analysts and
researchers to establish the organizations portfolio/investment strategy.
 Portfolio construction – selection of the best mix of individual and
classes of investments that will constitute the most appropriate portfolio
mix.
 Allocating individual or class of assets properly for fund – asset
management vehicle.
 Provide the company and the
(investment/business/project/product/capability) managers with
information that will enable them maximize the performance of each
holding and properly balance the performance of each holding.
SUMMARY
We Have Learnt:
 The Structure and Dimensions of Governance and Corporate
Governance.
 The Importance and Roles of Corporate Governance in Driving
Corporate Performance in Financial Institutions.
 The Expanded Concept of Portfolio Management.
 The Three Level Roles of the Portfolio Manager in Organizations.
 The PM’s Role in Corporate Governance.
 The PM’s Role in Portfolio Analysis.
 The PM’s Generic Role in Portfolio Management
CONCLUSIVE REMARK
THE PORTFOLIO MANAGER OF 21ST CENTURY
MUST DEVELOP FROM
INVESTMENT PORTFOLIO MANAGER
TO
STRATEGIC PORTFOLIO ENTREPRENEUR AND
MANAGER.
For the Opportunity
ALMIGHTY GOD BLESS YOU ALL!
Prof Joseph Mba
Director, Research and Learning, SBS
+234 (0) 8037185264
jmba@sbsng.org, jmbasbs@yahoo.com