Using financial projections

Article Abstract:

Making full use of financial projections requires understanding four key elements: who is to use the projection, how the projection is to be used, what data the users need to make major decisions, and what level of detail is needed. The first step in preparing the financial projection is assembly of the project team, which typically should include the CEO, CFO, marketing head, head of manufacturing, legal counsel, and consulting specialists. The top-down and bottom-up approaches are the two typical ways that the task is then approached. The four main functions of a financial projection are: accurately predicting future occurrences, providing appropriate feedback on actual versus projected performance, supplying relevant data to back up decisions, and providing management with suitable options.

Forecasts and trends, Practice, Executives, Corporation reports, Company reports

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Avoiding unnecessary investment risk

Article Abstract:

Three areas of investment risk are considered controllable by corporate investment departments; these are: assessment of investment control procedures, managing interest rate risk, and employment of qualified investment personnel. Each of these controllable risk areas is discussed. The investment control procedures consist of segregating investment duties among departmental employees, safeguarding assets, authorizing investment transactions, and maintaining accurate records of investments. Interest rate risk controls consist of calculating the corporation's exposure due to fluctuating interest rates. Personnel controls are comprised of adequate recruiting and training procedures.

Risk management, Corporations

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Benchmark portfolios: crafting a valid yardstick

Article Abstract:

Benchmark portfolios reflect the manager's investment style in their mix of holdings and investment vehicles. To outperform the Standard and Poor's 500, benchmark portfolios should: (1) be structured, such that each investment manager's contributions to fund improvement can be measured in terms of added value; and (2) allocate asset responsibilities among investment managers according to investment styles, such that the likelihood of maximum performance is increased. Plan sponsors who are displeased with portfolio performance should consider allowing fund managers to allocate responsibilities among themselves, rather than assigning responsibilities (as do most plan sponsors).

Portfolio management, Pension funds

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