Effective investment program oversight

When managing investments, nonprofit board members need to shape an effective investment program and decide how best to work it. Fiduciaries have several options: they can create something unique, but it will take a lot of time, money, and the right team, or they can find and purchase a profitable solution for their company by hiring consultants. Either way, the board member plays an important role in the oversight and responsibility of the organization. Therefore they need to know how to oversee the investment program effectively.

The main problem with an investment oversight program?

When it comes to investment oversight, many companies hire an experienced consultant who can provide strategic guidance and select the right manager or delegate investment management responsibility to their investment committees. To follow the consultant’s recommendations and manage them well, companies need to own enough internal resources, but the problem is that many organizations have a fairly limited budget. Another problem is that investment committees do not spend enough time on this task; they are convinced that they are only dealing with priority issues. As a result, they spend much more time reviewing the past than developing new strategic solutions. Nevertheless, an investment oversight program is a modern-day requirement for conducting investments. Therefore, board members must become familiar with the key aspects of completing this process to run it as efficiently as possible.

What is the board’s role in overseeing the investment program?

For an investment program to be successful, the most important thing is the availability of resources and an adequate budget. Then what is required of board members to make the oversight process run more efficiently?

  • Structure

The board needs to make sure that their organization has the structure necessary for oversight so that the oversight of the investment program will be successful. This means that board members should form several oversight groups, which typically consist of members of the finance and investment committees. In addition, it would be best if you took sufficient time to select truly experienced and specialized participants for this role.

  • Hiring consultants

The board of directors, or supervisory committee, should not choose individual investments but recommend the selection of an investment advisor. Of course, the best way to select an advisor is through a trusted advisor, ensuring that your company’s interests come first. However, don’t be hasty in this endeavor, exercise caution. You may even have to send inquiries with this proposal to several professional candidates.

  • Efficiency Analysis

The Oversight Committee should perform performance reviews regularly, once a quarter, and monitor compliance with investment program policies. As stated earlier, this should be reported to the board every quarter, and the oversight team presentation should be done semiannually or annually.

  • Maintaining adequate records

Board members can change quite frequently, so it is simply essential that your board keep records in writing and properly archived. That way, when a new board member comes on board, they will be able to become familiar with the board’s governance structure and policies in detail. Suppose the board devotes enough time to quality records of past investment decisions. In that case, it will give board members confidence that they are making the right decisions in managing the current investment program. It is important to store these records securely, and cloud-based solutions such as a board portal or virtual data room are most effective for this purpose.