The Changing Role of a Chief Investment Officer in the Post Pandemic Situation

The Changing Role of a Chief Investment Officer in the Post Pandemic Situation

Sambasivan G, CFO, Tata Sky, 0

An IIM Ahmedabad alumnus, Sambasivan has been associated with Tata Sky for over eight years now, prior to which he held the role of Executive VP ­ Finance at Vodafone Essar.

CIO as a role has existed for many years. In the past, this role was mainly prevalent in many investment companies and not so much in the corporate sector, where the CFO doubled-up as a CIO. Any investment decision is a fund allocation process and therefore the CIO needs to evaluate alternatives, choose the best one based on the expected returns and continue to monitor and report to the shareholders on the ROI. One of the critical deliverables of the CIO is to align the target with long term returns and consistently achieve them.

Nowadays, there is a growing trend on the role of CIO being a separate function apart from that of the CFO and in some cases also as part of the Strategy head role. Be that as it may, in the current low yield environment, the task has become more challenging for the CIO, as he needs to really be on the lookout for the avenues of growth. For example, there are currently three schools of thought on how the economy is likely to rebound ­ whether it will be a V shaped recovery (meaning sharp recovery), U shaped (relatively slow) or K shaped (where there will be sectors that will rebound quickly ­ for example, manufacturing, but sectors that may continue to decline or will never be able to come back to the original levels ­ For example, Airlines or travel industry). In such a scenario, one has to identify the opportunity for investment in a more careful manner than otherwise.

Coming to the digital revolution that is happening all around us, it is imperative that the CIO is fully able to leverage the latest technologies. Forecasting tools (which were always available in the past) have now become much more sophisticated and are available at a very affordable price. AI and ML have enabled the CIO to do much deeper mining of data and come out with insights. This is true across all the areas of operations, but will be particularly useful for the CIO if he/she is able to optimize the investment using such tools. It is also possible to quickly change the algorithm without any delay if one is not working. Many companies started recruiting data scientists in their teams, and the CIO
should also consider doing the same. One quote I recently heard from a fellow CFO ­ `Data is the new oil, but analytics is the combustion engine that drives the business forward'.

Last but not the least, let me touch upon the skillsets that make a good CIO. They are not much different than the skills required for any functional leader. It is a given that the CIO needs technical and analytical skills. It is also said that the CIO needs to be a mathematician, philosopher and a historian. The CIO needs to be aware of the regulatory landscape of the country he is operating and should be nimble enough to alter the investment portfolio based on changes that are foreseen. Today for example, we see an big upsurge in the broadband, OTT, e-Commerce and online education. One should be able to time the investment and optimize the returns. It is always better to have a long term than a shorterm view. Therefore, I would add that the CIO needs to also be a juggler, economist and a super forecaster.

With the proliferation of social media, the CIO needs to garner skills to deftly manage the visibility and communicate effectively to all the stakeholders

The other important skill which I believe is needed in this volatile environment is how nimble you are in being able to alter the investment portfolio. Do you have a contingency plan if a disaster strikes? What and how do you respond to the repeat of Covid situation. For example, now, there is a talk of third wave and even a fourth one. What does it mean to your investment portfolio? One needs to be constantly on the watch, as it is possible that many years of good work could be wiped out by one or two careless decisions. The importance of risk management cannot be overemphasized for this role.

It is also notable that the recent trends suggest that it is not enough for a CIO to just be a star portfolio manager. He needs to be a strategic thinker and shaper of business strategy. Change management is another skill that is now becoming increasingly relevant for this role. This is true particularly in M&A situations. Also, with the proliferation of social media, the CIO needs to garner skills to deftly manage the visibility and communicate effectively to all the stakeholders.

If you would like to make a career of becoming a CIO, be prepared to go through an unorthodox route. It is not necessary that only persons with finance background become CIOs. Increasingly, people with broader business skills are pursuing the role of investment management and I think that is a good sign.