The investment industry should follow the example of aircraft industry’s structured-learning environments as it is failing to learn from its own experience when it comes to improving its investment committees (IC) practices and governance.
The research from not-for-profit group the Thinking Ahead Institute “Going from good to great” found that in case of the aircraft industry learning from experience and errors increased safety enormously and gave birth to innovations such as checklists to improve decision making and dashboards for tracking mission-critical issues.
According to co-founder of the Thinking Ahead Institute, Roger Urwin, large asset owners were using advanced best-practice governance to unlock the complexities of modern investment, notably when dealing with environmental, social and governance (ESG) considerations.
“Retaining a strategic focus is vital for effective board governance and doubly important for investment committees, where there is often a temptation to get lost in the weeds. Key to this discipline is having an effective chairperson,” Urwin said.
“This leadership role is crucial in terms of setting and managing overall strategic direction, facilitating the contributions from all committee members and extracting all the benefits of a strong culture.”
The Institute suggested that taking an IC from good to great outcomes would be doable with strong leadership and an ambitious strategy and it identified key areas where they could make the biggest gains:
- Getting the right people on the IC ‘bus’ is critical, especially in the areas of competency, teamwork and accountability;
- Exploiting the opportunities for improved efficiency and collective intelligence, notably: extending the chair role; building the IC teamwork; pinpointing its comparative advantages; restyling the IC process; and developing a richer culture; and
- Taking the opportunities this crisis presents, starting with exercising more innovative thinking and practice in the conduct of IC meetings, and applying more innovative thinking to the challenges of the future.
“Could investment committees and boards set their sights higher? Absolutely they could. The stakes are too high for them not to take this path. And these current pressurised circumstances make such steps attractive right now,” Urwin said.
