Investment governance in a multinational world 

From our conversations with clients - including Jeffrey McCroy, President and Chief Executive Officer of Christian Brothers Investment Services - at our recent Global Investment Forum in Amsterdam, market performance is often ranked as one of the most significant risks to the management of large asset owners’ AUM. But these clients are also increasingly citing non-financial risks, such as governance risk, as important to their portfolios.

Among the governance challenges faced by large asset owner clients is creating cross-border governance frameworks that can help balance centralized control against the often diverse and complex local contexts. This issue is prevalent among many multinational investors and often presents an ongoing struggle to optimize decision-making processes amid an increasingly divergent and complex global landscape.

The core dilemma revolves around making sure you understand local market nuances while harnessing the efficiencies of scale that come from leveraging collaborative, centralized resources. For asset owners managing diverse, geographically dispersed portfolios, this tension is particularly acute. However, the escalating costs associated with replicating resources across multiple locations necessitate a strategic approach to interdependence.

We believe that investors should consider how they can build a framework that empowers local decision-making while capitalizing on the synergies offered by a central hub. This requires a nuanced understanding of core competencies, identifying gaps, and strategically partnering to help enhance capabilities.

Centralization versus decentralization is not a binary choice, but rather a spectrum requiring careful calibration. This involves clearly defining decision-making processes, fostering open communication, and helping ensure alignment with overarching strategic objectives.

Ultimately, effective governance in today's interconnected world demands a flexible and adaptable approach. Asset owners should be prepared to continuously evaluate and refine their governance structures to navigate the evolving complexities of the global investment landscape. This ongoing dialogue is important in helping to ensure sustainable growth and potentially achieving long-term investment goals.