Securing the Performance of ‘Financial Securities’ by KPIs

Securities are amongst most popular ‘investment instruments’ people use for earning profits

These basically fall into two categories- one of which comprises Equities (the amount these fetch varies considerably) and the other spans debt instruments like debentures (these provide fixed incomes). The choice purely depends on the ‘risk tolerance’ capability of the investor. Fixed- return bearing securities are usually preferred by the risk averters or those who lack the potential to ‘bear’ risk whereas the other category is for those who possess both the interest of indulging in risky investing activities and the ability to bear the loss and bounce back, even if the value of their possession falls to minimum. Generally, clients go for a mixture of options in such a way that the resultant risk they stand is ‘recoverable’.

In other words, the task of managing the progress of ‘financial securities’ is an interplay of two forces, which are ‘Risk’ and ‘Return’. Though the appetite for ‘returns’ is infinite and limitless, it gets restricted by the appetite for ‘risk’. An objective and unbiased judgement of the values of the properties will lead to a ‘right decision’ in ‘right time’, thereby adding to the returns collection. The reason for putting the money in equities is the ‘premium’ investors earn as a ‘compensation’ for the ‘uncertain area’ they venture into.

Organizations can keep a track of the performance given by the volumes invested in debts and stocks. This task of following can sometimes reveal important and interesting trends and facts, providing a useful guidance for future. In this context, a detailed study of the probable options should be carried out, before zeroing on to the most suitable and appropriate one. These ‘prospective solutions’ should be evaluated on various properties like ‘Risk Perspective’, ‘Liquidity Perspective’, ‘History and Past Performance perspective’ and ‘Growth Perspective’. Risk Perspective is needed to evaluate the value of this aspect using a number of methods. This helps in drawing a fair idea of the extent of ‘threat’ being undertaken.

Liquidity is required to maintain the conversion of the security to monetary terms. To quantify risk, parameters that can help are- Sharpe ratio, Jenson’s ratio and Treynor ratio. These give a ‘comparison scenario’ with the ‘risk free rate’ that can be had. Further, Liquidity can be measured and managed via the KPIs such as ‘cash ratio’, ‘Liquid Ratio’ and ‘Current ratio’. One can take care of the Growth issue by knowing the increase in competitive position, % rise in turnover, EPS (Earning per Share) and volume of shares traded. Past performance can be obtained with ‘Portfolio inclusion Index’, ‘% of investors who labelled the security as favourable’ and ‘% increase in the number of investors’.

To utilize the ‘BSC thought’ to the maximum, one can maintain a complete account of the past performance of the securities in which the investment was done or even of the portfolio as a whole. This form of collected information will assist in deriving strong evidences for ‘favourable’ and ‘unfavourable’ decisions.The target values should be assigned in a practical and realistic manner. Setting ‘too ambitious’ aims will not only cause wastage of efforts but also taint the image of the organization. Therefore, the key is to identify the aspects ‘which matter the most’ and frame ‘manageable’ number of indicators for each of these.