AFP's new Treasury Management guide, The Missing Links in Investment Analysis, developed by Oliver Wyman, examines how treasury executives can build a portfolio management strategy that, they claim, makes major investments and acquisitions actually work. The new guide identifies the three blind spots inherent in standard investment opportunity assessment tools, and suggests a four step approach that “that, in our experience, have enabled companies to move forward”:

1. define a target strategic portfolio
2. establish an analytical risk-return framework
3. measure individual asset performance
4. optimize the efficient corporate portfolio frontier.

It’s more than analytics: key lessons

The report finishes with a list of the key lessons learned by treasurers introducing a corporate portfolio management approach. These include:

1. Process and cultural changes: Adopting an enhanced and effective portfolio management approach drives and depends as much on process and culture changes as it does on revision to data analysis.
2. Development of a common data set: A consolidated investment portfolio enables improved decision making, prioritization, and resource management from a common core data set.
3. Increased transparency: An effective portfolio management process significantly increases the transparency around capital allocation decisions and supports communications across the organization around the use of cash.
4. A broader perspective: The process helps business unit leaders and others in the organization to look beyond their own silos and to examine a broader portfolio of options and alternative use of cash as the company considers how to deploy capital.
5. Improved project postmortems: The process and associated data support more effective project postmortems with increased spotlight on accountability.

For a copy of the report - recommended - which contains several case studies, see here.