Strategy and risk management under the spotlight

From time to time it is important for Ferd to take a look at how the group works and sets its priorities. And this autumn the time had come for a thorough review of the group’s overall strategy and risk management principles.

“The changes are not revolutionary. But they provide direction on how we are to grow and to achieve better results in circumstances in which market conditions as well as the challenges and opportunities that are out there are changing quickly”, explains Tom Erik Myrland, Chief Investment Officer at Ferd and a member of the Group Executive Board. He and Christian Halvorsen, the Head of Risk Allocation on Ferd’s group management team, have been principally responsible for leading the work on the new strategy, which was approved by Ferd’s Board of Directors at the end of September.

Updated risk management model
In an interview with Ferd Magazine, Tom Erik Myrland and Christian Halvorsen affirm that Ferd’s vision and values remain unchanged, that no changes have been made to its ownership or management model, and that its owner’s risk tolerance is the same as before. The target is to achieve the highest possible return from the entire portfolio within these limits by making the most of Ferd’s competitive advantages and capacity for risk.

“As part of the strategy process we have updated and further refined our risk management model. The model has been developed over time, and is especially adapted to our requirements. We have attached particular emphasis to ensuring it is an understandable model that provides a sufficient basis for decision-making to manage the overall portfolio, based on different risk factors being measured and reported on at regular intervals”, explains Christian Halvorsen.

Ferd Capital investing in stock exchange listed companies
But if many things remain unchanged, Ferd’s strategy has been adjusted to match changed assumptions regarding societal, market-related and economic issues, as well as where good opportunities are perceived to exist. One example of this is that Ferd Capital now invests in stock exchange listed companies in parallel with its direct investments in private companies.

“Ferd Capital’s stock exchange investments are of a somewhat more industrial character and frequently have a longer time horizon than the investments made by Ferd Invest, which will continue to be a purely financial player capable of quickly taking positions in companies and then exiting them in line with changing expectations for their share prices”, comments Christian Halvorsen.

These differences do not, however, prevent the two business areas from working together and from making good use of each other’s expertise.

“We have definitely seen it as an important strategic factor that these business areas’ knowledge and staff can be used more freely across the boundaries between the business areas and mandates”, comments Tom Erik Myrland.

Industry expertise and organisation
In parallel with this, Ferd will attach more emphasis to developing its expertise in specific industries.

“We currently have a clear focus on two industry areas, namely oil/energy and real estate. Aquaculture is a third industry focus that is taking shape. And we are looking at setting up others”, he explains.

Having more people on board can, however, represent a challenge to the competitive advantage inherent in operating a relatively small organisation with a relatively flat organisational structure and the capacity to take decisions quickly.

“How we address this challenge was one of the topics we looked at during the strategy process, and it is a question that we are going to be devoting a lot of attention to in the years ahead”, comments Tom Erik Myrland.

The entire article is available (in Norwegian) here.

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