Asking questions is an important part of providing governance oversight
Good governance for most organisations relates to the four elements that can be captured by the 'Tricker Model' of governance:
- Policy Making
- Strategy Development
- Monitoring & Supervising
- Providing Accountability
In addition to these, we believe culture and capability should also be considered.
Investment Specific Governance
In addition to the usual corporate governance issues, some organisations are responsible for material capital allocation or investment decisions. We believe the governance process for these entities can benefit from combining standard corporate governance principles along with a sensible due diligence process.
Before undertaking investment specific due diligence, we ask investment fiduciaries to make sure the organisation has a good understanding of the following:
- What will help meet our Purpose & Objectives?
- What opportunities are available?
A due diligence process then can be viewed as the way the organisation can take investment and capital allocation risks with eyes wide open. Broadly, the process we recommend asks:
- If this particular opportunity does what it says on the tin - how will it help?
- Does it actually do what it says on the tin?
- If we proceed, what issues will we need to monitor?
Here's five Real Estate questions from our Online Tools - Ask database below:
- Objectives: How do the expected returns from this strategy correlate with the rest of our portfolio?
- Mechanics: Is the intention to simply hold the asset for an extended period or is there a strategy to create additional value from this property?
- Returns: What is driving the assumptions about rental growth expectations?
- Risks: Who will be responsible for managing the leases?
- Check: What investment opportunities did you pass on before settling on this one?