Impact of COVID-19 on value chain of asset management firms and operating in the new normal

Akwasi Adu Boahene

Economies, firms, and societies across the world have been grappling with the COVID-19 pandemic and its implications. The pandemic has brought to the fore the interconnectedness of economics, technology and health and its impact on the world we live in. There were supply chain disruptions owing to factory shutdowns, empty shelves in supermarkets, strict travel restrictions and national border closures among others (Accenture, 2020).

According to the World Bank’s June 2020 Global Economic Prospects, the immediate and near-term outlook for the impact of the pandemic and the consequential long-term damage affected the prospects of global economic growth.

The anticipation of economic contraction in 2020 turned out better than expected as the global economy grew by 3.5 per cent in 2020 against a projected global growth of -4.9% by the IMF. This partly owes to China’s impressive economic recovery following its commendable handling of the Covid-19 pandemic.

Surprisingly, the witnessed global growth in 2020 exceeded the growth of 2.9 per cent in 2019 despite the economic effects of the Covid-19 pandemic. In addition, Global economic contraction was lower than projected on account of the massive policy support by governments worldwide, through a record increase in their quantitative easing programmes.

The pandemic has hit almost every aspect of economies and Asset Management firms are not exempted calling for the need to reprioritize and reorganize operating models in order to thrive. Can Asset Management companies still deliver value to their clients in the midst of these unprecedented headwinds associated with the pandemic by generating sustainable risk-adjusted returns consistent with Client objectives?

An Asset Management structure consists of the front office, which focuses on portfolio management and client acquisition, the back office which comprises of trade operations, information technology, accounts and a middle office for very large firms, which focuses on compliance, internal control and internal audit. Of course, for small firms, an individual may be assigned to perform the functions of the middle office.

There could also be variants to the structure depending on the focus of business owners.  However, I will hasten to add that in as much as these structures may be in place, teams should be encouraged to break silos with a focus on collaborating to deliver value to the customer whilst at the same time ensuring internal and external regulatory limits are adhered to.

We will take a critical look at Porter’s value chain in tandem with the value-creating activities of an Asset Management firm as we seek to address why some firms through some competitive advantage have better profit margins than others. Michael Porter identified the activities involved in the direct creation of a product or delivery of a service as primary activities and activities that support the primary activities as secondary activities. The primary activities focus on taking inputs and converting them into outputs and accompanying outcomes.

When a company is efficient in combining these activities to provide a superior product or service, then the client is willing to pay more for the product or service than the cost incurred to make and deliver the product or service, which results in a profit margin.

For an Asset Management firm, the primary activities are described below:

  • Portfolio Management is tasked with making investment decisions underpinned by solid research.
  • Trade Operations is tasked with ensuring the investments are in line with the guidelines set forth by the client and the trades are executed in a timely manner.
  • Marketing and Sales is responsible for client acquisition
  • Service (Client Relationship Management) is responsible for providing all the touchpoints to the client to access products and services

Secondary activities of an Asset Management firm are as below:

  • Technology designs a trading and client module that is efficient and effectively allows the team to provide the highest level of service and make the best investment decisions.
  • Human Resources finds and retains the highest level of talent at the firm.
  • Infrastructure includes the lawyers and risk controllers whose oversight is crucial to ensuring the client’s guidelines are followed, the investment risk is controlled, and the firm is operating within the regulations established by the regulator.

How has the pandemic impacted the above-mentioned activities?

Financial Markets

Heightened uncertainty and panic initially associated with the pandemic resulted in a drop in consumption and investment. This has severely affected financial markets across the globe leading to stressed corporate credit markets and declining stock values. The impact of the pandemic has driven market volatility and to some extent affected asset valuations (Deloitte, 2020).

The growth in assets under management (AUM) was expected to be subdued leading to low revenue growth but that was not the case in Ghana as some Asset Management firms in Ghana rather saw positive growth in their AUMs on account of the government stepping in to pay customers of collapsed Financial Institutions. Portfolio management teams are proactively using forward-looking research to review and actively rebalance portfolios to increase yields and contribute positively to Asset Under Management (AUM).


The disruption as a result of the pandemic has globally affected the operations of businesses of various sectors of the economy. Due to low economic activity owing to restrictions and partial/full lockdowns at the height of the pandemic especially in 2020, companies addressed cash flow issues by either drawing on their cash reserves or surpluses to survive.

This had implications for portfolio style, structure and strategy of Asset Management companies where companies were bound to create that healthy balance between investing in long term assets to increase portfolio yields and short term assets to make funds available to meet liquidity needs.

Social distancing and movement restriction protocols

The approach to Client meetings has changed replacing face-to-face meetings with digital engagements to discuss new business opportunities. New technologies such as Zoom, WhatsApp Video, Facebook Video, FaceTime, Microsoft Meeting, among others, have replaced the need for face to face meetings. It is less pronounced with wholesale Asset Management where key clients can easily be digitally engaged with minimal impediments. On the retail Asset Management side, market storms and meetings with various groups to sell products or service have been restricted.

Trade operations

Trade operations, the engine of Asset Management, has also been affected. Firms that have been proactive are investing in IT tools to serve clients faster, better and safer and still not need to meet them face to face. The failure to serve clients during such critical periods can lead to potential loss of business which will further exacerbate the situation.

Firms need to ensure that trades are executed in a timely manner to avoid loss in value of portfolios or opportunities to ensure that portfolio decisions, which could have hitherto generated value for funds, are not missed.

The strain on IT infrastructure and accompanying cybersecurity risks

The sudden change in operating model where some staff have to work from home means provision of IT infrastructure to accommodate this new arrangement with the potential increase in cybersecurity vulnerabilities which could be technical or procedural in nature (CGMA Cybersecurity Tool, 2017). The former could be software defects or failure to use adequate security protection such as encryptions and the latter being system configuration errors or not performing security updates.

The impact of the crystallization of these risks can lead to loss of business resulting in declining revenue, missed opportunities or the possibility of legal suits for not fulfilling agreed obligations.

New Workforce Structure

Staff are one of the key assets in delivering value to the customer. They are at the heart of generating business, account management, portfolio management, and trade execution amongst others. The effect of the pandemic has necessitated the need to run different work models with the introduction of running different workstreams to decongest offices in order to fulfil social distancing protocols. Firms are training their staff on IT-related courses to stay abreast with modern trends and familiarize themselves with new working tools.

Some of the short-term measures taken by firms in dealing with the effects of the pandemic


Firms were concerned with the health and safety of staff. There was information to raise awareness and encourage preventive behavior and intensify personal hygiene habits. Client meetings were conducted via videoconferencing using apps like Microsoft Teams, Zoom, Google Meets, etc.

Business Continuity

Firms had to activate their business continuity plans to ensure that there is no or less interruption to business. The use of a new work structure incorporated working remotely and decongestion of the workspace through a shift system to minimize the impact on productivity was also deployed by some firms.  Where staff were required to work in office spaces, social distancing protocols were strictly adhered to.


There was also a focus on the cash flow to ensure that firms continue to operate sustainably. The Investment in CAPEX for some projects that were not critical were put on hold and the rebalancing of portfolios to address liquidity and credit quality issues in response to information on financial markets.


Firms had to review and enforce all service level agreements with third parties to avoid disruptions to service delivery. Firms also conducted engagements with key stakeholders like pension fund trustees and custodians to ensure the proper synchronization of all activities involved in the execution of clients’ mandates. If there were differences, they were quickly resolved to ensure excellent service delivery.

Medium-to long-term measures needed to operate in the New Normal

Apart from the short-term measures stated above, there is the need to undertake medium-to-long-term planning to ensure that if such uncertainties occur in the future, firms will be better prepared to address any disruptions.

Broadly speaking, firms should focus on key areas that create and sustain value.  Notably among them are crafting of strategy and its execution, innovation, managing risk and uncertainty and ensuring compliance. A healthy balance of the above areas as discussed below will ensure business sustainability.


With some companies experiencing stunted growth with the possibility of haemorrhaging cash during such times, there are calls for the review of strategies to navigate through the uncertainties due to the impact of the pandemic.

The strategy should clearly define key target markets and channels to access them and the value proposition that distinguishes firms from their competitors. Additionally, there is a need to consider key partners and internal processes required to deliver value to clients. The strategy should align with business goals and the direction or happenings on the market. One should also not lose sight of enabling pillars like IT infrastructure, human capital and finance that are needed to support productivity, revenue and cash generation.


By innovation, we mean doing new things or old things differently. The firm should consider redesigning new processes, introducing new products, new technologies or new business models. The pandemic has created opportunities for businesses to reinvent ways of serving the customer. Firms are to invest in the right IT tools to serve clients better.

An example is the use of Robotic Process Automation (RPA) where there is focus on eliminating repetitive activities in the client or investment cycles to bring onboard efficiency. Investment platforms like Robo-advisors can also be considered for sophisticated investors to invest online to improve the topline.

Risk Management

A more proactive approach should be adopted for risk management rather than just ticking boxes on a grid by risk managers. There should be clear segregation between rewarded risks, which is characterized by changes in portfolio value; for example, market and liquidity risks and unrewarded risks (e.g. credit risk and compliance) which are strictly characterized by loss. There is a need for a deliberate effort to balance returns and risk to ensure optimality.

Additionally, COVID-19 has taught us the need to incorporate the management of uncertainty in our risk management framework. Scenario planning and stress tests should be conducted periodically to access the impact of business, economic and health-related factors on the operations of the business.


The issue of internal and external compliance is paramount since failure to meet requirements could result in loss of business or the license to operate. Clearly, in such times, a register of all client and statutory requirements should be kept and religiously followed to avoid an infraction, which could lead to the payment of penalties and put a strain on the cash flow. The systems for reporting on compliance issues should be open to changes since the impact of COVID-19 could trigger possible regulatory changes on portfolio valuation, exposures, risk assessment, investment strategies and business continuity plans, amongst others.


It is clear that the impact of COVID-19 on economies and businesses is still unfolding. Although it has impacted how Asset Management firms create value for clients, it also presents opportunities for firms that are agile and ready to adapt to these changes. Firms should improve on their business continuity plans to make them better prepared for such a crisis in the future and additionally embrace digitization by investing in new IT capabilities to position themselves to address the changing needs of clients.


The views expressed in this article are solely that of the writer and does not necessarily represent that of the Institution he works for.

>>>Akwasi Adu Boahene (FCMA, CGMA, MSc., MBA, BSc) is an investment banker with over 14years of experience in fund management. ([email protected], 0276902032)

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