Improving operational efficiency in private equity

The operational complexity of private equity funds is growing along with accumulation of data volume. Modern COOs and CFOs understand that technology implementation is critical in reducing operational risks and improving reporting and LP experiences, especially in today’s environment of constant change and new challenges.

But the hard truth is that most GPs in Asia-Pacific are behind other industries in adopting technology within their operations. Excel is the default source of information for most managers. The lack of centralized data systems and accurate sources of truth across departments drag down operational efficiency and communication quality.

The hard truth is that most GPs in Asia-Pacific are behind other industries in adopting technology within their operations.

Many IT implementations end up with poor adoption due to outdated technology and poor user experience. Others only address basic process management like expense approvals but do not address the core PE operations and objectives such as efficient management of aggregated fund, investor and portfolio data.

We believe that there is a new way forward. A growing number of forward looking GPs have started to successfully adopt more modern, human friendly, technology solutions to streamline their operations with good results in setting up sustainable processes to achieve dependable outcomes.

Earlier this year, our co-founder Jessie Juan had the opportunity to discuss some of these issues at the AVCJ CFO/COO Forum alongside panelists from Legend Capital Management, Eze Castle Integration, the Longreach Group and Quadrant Private Equity. From their collective experiences, below are key success factors for digital transformation of private equity managers.

Success Factor #1: Define Overall Objectives
  • Define organization’s digital transformation roadmap
  • Identify firm-wide and team-level objectives
  • Prioritize critical goals and demonstrate shorter term implementation results to build momentum
  • Define project scope, and set realistic timeline and KPI measurements
Success Factor #2: Select the Right Technology Partner

Below are some critical questions when selecting technology partners:

  • Does the IT Partner have deep knowledge of private equity operations?
  • Do they have successful track record with funds with similar situations in the region?
  • Can the system be customized and configured according to changing needs?
  • Can the system integrate with other existing systems?
  • Does the system get upgraded automatically with new features?
  • Does the technology service providers have local support with development resource and react quickly to clients?
Success Factor #3: Management Commitment with People and Process

Commitment from senior management and CFOs/ COOs is critical in successful digital transformation in planning people and process before, during and after implementation:

  • Assign a project leader “Super-user” within the company for cross-department coordination Project leader to expand the dialogues with teams on balancing short-term and long-term objectives
  • Define critical control point (i.e. finance team controls cash flows data) and develop control process in place
  • Post implementation, set up program office to track and monitor system usage with regular management update required to discuss roadblocks and mitigating actions
  • Ongoing and iterative improvements with IT partner to respond to additional needs from businesses such as new reports, features and workflow

Embarking on the road to digitalization does require time and commitment from senior leaders and cross department teams collaboration. Private equity and venture managers should welcome this endeavor as an opportunity to set themselves up for success and differentiate as modern asset management organizations. Leadership teams with long-term visions can take strong measures and start preparing for the future now.

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