Client Portfolio Research Articles

TEAM MANAGEMENT: POTENTIALS AND CHALLENGES OF PROJECT MANAGEMENT

This article aims to propose a team management plan for the development of employees in the department responsible for project development, called Product Engineering, belonging to the Technical-Commercial Division of a company specialized in the assembly and sale of generator sets, which creates projects for various energy solutions. The case study method, of a qualitative and exploratory nature, was the research strategy used. The analysis, interpretation, and stratification of the textual content were consolidated through the technique of content analysis based on data collected through direct observation, document evaluation, and exploratory qualitative interviews with managers (general, client portfolio, product development, and project details) and with the focus group formed by four collaborators directly involved in the processes of this research. The results point to suggestions for improvements to the management plan in the project management team, such as the elimination of Excel spreadsheets, through the implementation of dedicated software for programming engineering activities. Daily or weekly use of the corporate system. And a better preparation of employees in regard to changes with training, or through direct communication between team management and employees. And as a result of these improvements, the team will be developed through new management models, accompanying the professionals to realize their importance within this process and will lead them in search of new challenges, knowledge, and professional qualification.

DIGITAL TRANSFORMATION OF THE FINANCIAL MARKET: RISKS AND OPPORTUNITIES

The introduction of modern digital technologies into the practice of financial market entities contributes to the resolution of contradictions in economic relations between suppliers and consumers of financial products by forming a local compromise. The digitalization of financial services helps to increase the physical and tariff accessibility of financial services, reduces the costs of a financial company to expand its client portfolio. However, it should be noted that the production, sale and consumption of digital financial services and the digitalization of business processes of financial companies are associated with additional risks for all participants in economic relations.
 Purpose. Study of opportunities and risks of forming an effective financial strategy for a consumer of financial services in the context of digital transformation of the financial market.
 Methods and methodology. The article used the methodology of conflict-compromise management of economic relations, the general theory of risk, as well as content analysis of the literature on the research problem.
 Results. Results were obtained that confirm the hypothesis that the digitalization of various business processes in financial companies will lead to an increase in the process of disintermediation, which will inevitably lead to the transformation of traditional business models of companies, a revision of the factors affecting the formation of profits of financial companies, and for consumers of financial services to the need to form patterns of responsible financial behavior in the context of financial market transformation.
 Practical implications it is advisable to apply the results obtained by economic entities involved in the formation of functional strategies of companies.

Fair value hierarchy, bargaining power, and audit pricing across audit firms’ client portfolios

AbstractThis study explores how the presence of Level 2 and/or 3 fair value assets (FVA_23) influences audit pricing across small and large clients for Big‐4 and non‐Big‐4 audit firms. Through analysis of 7918 firm‐year observations, we investigate whether companies with FVA_23 incur higher audit fees than companies without FVA_23 and the differences between how Big‐4 and non‐Big‐4 firms price risk for large and small companies. Our theoretical basis is product differentiation and economic importance, which suggest competing influences on audit fees based on firm and company size. We are the first to analyze the effect of FVA_23 on audit fees with the United States sample including all industries during a stabilized regulatory period, and we are the first to explore the effect of FVA_23 on audit pricing across small and large audit clients for Big‐4 and non‐Big‐4 firms. We find companies with FVA_23 incur higher audit fees than companies without FVA_23. More specifically, we find small and large companies realize different audit fees compared to companies of similar size without FVA_23. Additionally, Big‐4 and non‐Big‐4 firms price audits with FVA_23 differently than audits without FVA_23. Furthermore, Big‐4 and non‐Big‐4 audit pricing is influenced by FVA_23 differently based on company size.

Portfolio Factory

The author formalizes the concept of a portfolio factory as the automated implementation of an active model portfolio on a wide range of client portfolios that differ across benchmarks, regulatory constraints, or client-specific constraints. Within this context, the article shows that portfolio factory as an active portfolio optimization problem is equivalent to tracking error minimization between an active model portfolio and active client portfolio. This approach allows well-established portfolio optimization frameworks and creates greater acceptance among investment professionals because portfolio factories create optimal tracking portfolios.

ANALYSIS AND EVALUATION BY THE INTERNAL AUDIT OF THE QUALITY OF THE BANK’S CUSTOMER PORTFOLIO

The speeding business operations and the necessity for strategically-oriented activities determine the relevance of research in the domain of business audit, including marketing. Given the feasibility of studying these aspects of internal control, the objective of this paper is to improve the existing methods of client portfolio analysis as well as theoretically justify new methods and ways of analysis and internal audit. According to the results of the study, the methods of ABC and XYZ analysis were amended and adapted for use in the banking sector, where ABC is based on ranking customers according to the operating and transaction income, and XYZ studies the frequency and regularity of transactions conducted by bank customers. The improved indicators applied to measure the profitable activity of a client’s portfolio in general and in terms of profit centres (business lines) enable to promptly identify a decline in the profitability of certain groups of customers,reveal its causes and offer effective solutions. The reorganization of the analytical part for client portfolio management and the implementation of ABC and XYZ analysis as well as other methodological approaches allow to monitor the dynamics of a bank’s client portfolio quality as quickly and effortlessly as possible. Analytical mechanisms for determining the quality of the bank’s client portfolio is one of the basic elements of internal audit, and this study proposes the optimal form of the internal auditor’s working document, which is best adapted to the needs of auditing business units, their quality and efficiency.

Indirect effects of regulatory change: Evidence from the acceleration of the 10-K filing deadline

This study examines the indirect effects of regulatory change by studying the audit office effects of changes in client time pressure caused by the first acceleration of the 10-K filing deadline. The extant literature provides evidence that increased client time pressure adversely affects the timing and quality of individual engagements. We argue that because audit offices possess finite resources and production capacity in the short run, client-level pressure can have office-level effects. We document within-office differences related to changes in audit timeliness. In the same audit office, clients with no pressure (with pressure) experience an increase (a decrease) in audit report lag post-acceleration. This evidence suggests that auditors alter the timing of concurrent engagements in response to client pressure, and clients of the same office are affected differently by changes in time pressure. We also document across-office differences in audit/filing timeliness and audit quality. Clients of audit offices with more time pressure across the entire client portfolio experience a greater negative impact on audit timeliness, are more likely to file late, and experience lower audit quality. Taken as a whole, our results are consistent with client time pressure producing office effects as a result of the auditors' response to increased resource constraints. Further, we show that the time pressure documented during the first acceleration is transitory in nature. These results should be informative to regulators and practitioners because they suggest there are indirect costs associated with regulatory compliance, and such costs are not limited to directly affected clients.

The drivers of the financial integration of microfinance Institutions: Do financial development, agency costs and microfinance performance matter?

The aim of this paper is to identify the drivers that could increase the financial integration of microfinance institutions with commercial banks. Importantly, financial integration ensures the sustainable growth of microfinance institutions through the provision of more financial resources, if needed. To identify these drivers, we used a panel dataset of 953 microfinance institutions (MFIs) from the MIX market dataset and country-level data from the World Bank for the 2003–2016 period. We applied a panel quantile approach with nonadditive fixed effects. Our results reveal that an increase in financial development slows the financial integration of MFIs. However, considering the transitory aspect of financial integration by each quantile, it appears that financial development positively impacts the financial integration of MFIs. The impact of financial development increases as the financial integration level increases. Similar results show a positive link between agency costs and financial integration. More financial interconnections with commercial banks justify the appearance of high agency costs due to an increased interest of commercial banks. There is a significant and negative link between the profitability of MFIs and their financial integration. Moreover, the results reveal that financial integration is a significant determinant of mission drift occurrence in client portfolios.

Impact of portfolio turnover levels on liquidity: A case study of a home appliance company

This article is focused on the analysis of the financial ratios during the years 2018 and 2019 of Marcimex S.A., considered the largest home appliance trader in the country, with the purpose of establishing the variation that exists in the recovery of the portfolio from one year to another, in order to know if the current situation of the company is adequate. The research methodology developed is of inductive - deductive type by means of instruments such as direct observation, of longitudinal type where the results analyze reflect variation between the years 2018 - 2019; it is important to review its financial statements in order to verify the real and current situation of the company, applying the financial indexes: Liquidity, Portfolio Turnover and Leverage. It is possible to distinguish a significant percentage in the collection of accounts receivable in 2018, however, 2019 reflects a year with greater demand and variation of products. New strategies are proposed to provide encouraging results within the credit and collection area of this institution with the purpose of improving the client portfolio without affecting the commercial relationship.&nbsp

Large and New Clients in Auditors’ Client Portfolios and Earnings Quality

Large and New Clients in Auditors’ Client Portfolios and Earnings Quality

Health plans and insurance: financialization of companies and economic groups that control the private healthcare scheme in Brazil

The article aims to describe the characteristics of financialization in a set of ten companies and economic groups operating health plans and insurance in Brazil from 2008 to 2016, selected according to their turnover and the size of their client portfolio. The financial/accounting and net worth dimensions were analyzed according to the balance sheets and cash flows, compared to microeconomic indicators of financialization and the records of changes in the shareholding structure filed with commercial boards. The authors analyzed the companies' policy positions based on primary data from semi-structured interviews with qualified representatives and the analysis of shareholder reports and news from the specialized media. In short, financial dominance is expressed in the health plans studied here, but their characterization does not follow a universally reproducible and homogeneous pattern, and empirical research should play a key role in further investigating the phenomenon. Since health and healthcare are defined constitutionally as publicly relevant goods that require support by stable and equitable policies in the distribution of available resources, and given the oligopolistic and concentrating trend in the inherent resources in the process of financialization (in opposition to this guideline) and the strategic place occupied by these companies, the prospects for the system as a whole tend to evolve towards an increase in total health expenditures, with greater concentration of healthcare resources and circulation of resources in the financial accumulation sphere.

Opportunistic Avoidance of Litigation Loss Accruals and the Mitigating Effects of Auditors

We find that firms with preliminary earnings that are expected to just meet analyst forecasts are more likely to only disclose (i.e., not accrue) litigation loss contingencies, claiming that the litigation event falls below the qualitative thresholds necessitating accrual. We also find that this opportunistic treatment of a subjective estimate is reduced when firms’ auditors have expertise in the defendant’s industry or have experience auditing litigation contingencies. Furthermore, we find that opportunistic disclosure usage increases when firms are more economically important to auditors’ client portfolios. Our results are robust to a series of additional tests. We provide evidence to support the Public Company Accounting Oversight Board’s (PCAOB) call for increased auditor professional skepticism toward management bias and opportunism when evaluating subjective estimates.

Examining drivers and deterrents of individuals’ investment intentions: a qualitative multistage analysis

PurposeEven after appreciating multi-faceted merits of retail participation in stock markets and extensive efforts by policymakers and financial service industry to increase it, the present low retail participation in Indian stock markets is cause of grave concern. The purpose of this paper is to identify plausible drivers and deterrents of prospective and current household individuals through a multi-stage qualitative enquiry.Design/methodology/approachTwo qualitative studies are conducted. In Study 1, scholarship of stakeholders is engaged through participative diamond model to propose behavioural classification of retail investors based on two-parameter framework. In Study 2, behavioural substructures of retail investors that drive or deter investment intentions and actions are identified through in-depth interviews.FindingsFinancial self-efficacy, past experience (own or peer group), financial eco-system, operational literacy, higher charges by financial experts and low liquidity in the hands of the investors are some key factors that influence investment intension and action of individual investors. Though digital platforms have helped to overcome hurdles faced by an investor but its availability, awareness and ease of use still remain a concern.Practical implicationsThe inductive findings of this study uncover some important take-aways for the financial service industry – improve operational literacy, digital awareness, ease of use and incorporate risk assessments in client portfolios – and for the policymakers – improve investment eco-system through digital availability, financial literacy workshops focussed on operations.Originality/valueTo the best of the authors’ knowledge, this study is one of the initial attempts to adopt a multi-stage qualitative enquiry to propose behavioural classification of retail investors and uncover reasons that drive or deter individual investors’ intentions and actions in the context of Indian stock market. Moreover, this study provides necessary impetus to analyse and improve operational literacy (instead of financial literacy) and financial eco-system for higher retail participation.

Impact of asset size on performance and outreach using panel quantile regression with non-additive fixed effects

This study focuses on the impact of asset size on financial performance and outreach. More specifically, we determine whether an increase in asset size is more relevant for microfinance institutions with low performance than for those with high performance. To achieve this goal, we applied a panel quantile approach with non-additive fixed effects that helps to organize our microfinance sample into subgroups with similar performance levels. The results reveal that an increase in asset size leads to increased profitability, with a greater impact for microfinance institutions that have poor or low-end profitability levels than for those with satisfactory levels. For outreach, we found that an increase in asset size positively impacts the average loan and the number of active borrowers, but reduces the percentage of female borrowers in the client portfolio. An increase in asset size reduces the percentage of female borrowers more for MFIs that target women less. Conversely, for MFIs that already have a high level of female borrowers, an increase in asset size reduces the percentage of female borrowers less. In other words, increasing asset size drives out female borrowers from the client portfolio, and this driving-out effect is greater for MFIs targeting fewer female borrowers.

Análise da rentabilidade de clientes sob o enfoque da decisão multicritério

O processo de relacionamento com o cliente é vital para a sustentabilidade de uma organização e para a manutenção da vantagem competitiva. Este trabalho objetivou analisar a rentabilidade dos compradores de uma empresa produtora de artigos de couro localizada na Região do Vale do São Francisco a partir da Análise de Decisão Multicritério. Trata-se de uma pesquisa descritiva, com enfoque quali-quantitativo. Os resultados obtidos a partir da aplicação do Preference Ranking Organization Method for Enrichment Evaluation (PROMETHEE II) proporcionaram à instituição o estudo da carteira de clientes, onde se identificou quais os consumidores são os mais rentáveis (A5, A9 e A8), com base nos critérios custo de oportunidade, participação sobre a receita, respeito ao ponto de equilíbrio, quantidade consumida de artigos de baixa vazão e variedade de artigos consumida, quando comparados com os trinta (30) demais. Então, em posse desses resultados, a organização poderá criar estratégias de relacionamento com os clientes para torná-los ainda mais rentáveis, atribuindo maior assertividade na busca pelo alcance dos objetivos organizacionais.

The costs and benefits of retirement policies at U.S. audit firms

The mandatory retirement age within U.S. Big 4 audit firms ranges from 55 to 62, which has attracted controversy and legal scrutiny. The potential costs of an earlier retirement age include the loss of established networks, experience, and expertise. However, studies in non-U.S. jurisdictions conclude that partners nearing retirement disengage from their work, which manifests in lower audit quality. Using intensive hand-collected data on the age of 3,148 U.S. audit partners, we provide the first evidence of the costs and benefits of mandatory retirement policies at U.S. audit firms. We find that audit quality does not vary, but that fees are significantly higher for U.S. partners approaching retirement. These findings suggest that U.S. mandatory retirement policies are forcing out experienced revenue earners that are producing audit quality equivalent to younger partners. Additional analysis reveal that partner retirements are mechanisms to promote and grow the client portfolios of younger and female audit partners, and therefore increase partner diversity. Our additional analysis of non-U.S. audit partners leading audits of U.S. listed companies shows that partners approaching retirement are associated with lower audit quality across certain measures. This suggests that the audit quality of older U.S. partners is superior to their non-U.S. counterparts.

Measuring Financial Advice: Aligning Client Elicited and Revealed Risk

Financial advisors use questionnaires and discussions with clients to determine a suitable portfolio of assets that will allow clients to reach their investment objectives. Financial institutions assign risk ratings to each security they offer, and those ratings are used to guide clients and advisors to choose an investment portfolio risk that suits their stated risk tolerance. This paper compares client Know Your Client (KYC) profile risk allocations to their investment portfolio risk selections using a value-at-risk discrepancy methodology. Value-at-risk is used to measure elicited and revealed risk to show whether clients are over-risked or under-risked, changes in KYC risk lead to changes in portfolio configuration, and cash flow affects a client's portfolio risk. We demonstrate the effectiveness of value-at-risk at measuring clients' elicited and revealed risk on a dataset provided by a private Canadian financial dealership of over 50,000 accounts for over 27,000 clients and 300 advisors. By measuring both elicited and revealed risk using the same measure, we can determine how well a client's portfolio aligns with their stated goals. We believe that using value-at-risk to measure client risk provides valuable insight to advisors to ensure that their practice is KYC compliant, to better tailor their client portfolios to stated goals, communicate advice to clients to either align their portfolios to stated goals or refresh their goals, and to monitor changes to the clients' risk positions across their practice.

Implementation of an e-Commerce System for the Automation and Improvement of Commercial Management at a Business Level

At present micro and small businesses engaged in the production and marketing of products and have a single means of sale, whether stalls or physical stores, have been affected by the current crisis that is happening due to the pandemic, which came in early 2020 to Europe and different countries in Latin America, which is causing terrible damage to the economy of enterprises, since it does not have a means of virtual sales, where they can offer and market their products so that trade continues to operate during the pandemic. In this way, we designed a prototype e-commerce system meeting the requirements required by the organizations. Where it was based on the Scrum methodology as an agile development framework for the realization of the project. The use of the Marvel design tool allowed the creation of web platform prototypes. Obtaining as a result, prototypes according to an e-commerce system complying with the development procedures established by the Scrum team, which gives you a novel proposal and a productive approach to start implementing e-commerce within the sales processes of each business area. Therefore, this e-commerce system prototype proposal can be implemented by the different micro companies that wish to have a new online sales method and improve their commercial area process, allowing the increase of their client portfolio, as well as their production.

Robo-Advisory: From Investing Principles and Algorithms to Future Developments

Advances in financial technology have led to the development of easy-to-use online platforms referred to as robo-advisors or digital-advisors, offering automated investment and portfolio management services to retail investors. By leveraging algorithms embodying well-established investment principles and the availability of exchange traded funds (ETFs) and liquid securities in different asset classes, robo-advisors automatically manage client portfolios that deliver similar or better investment performance at a lower cost as compared to traditional financial retail services. In this chapter we explore how robo-advisors translate core investing principles and best practices into algorithms. We discuss client onboarding and algorithmic approaches to client risk assessment and financial planning. We review portfolio strategies available on robo-advisor platforms and algorithmic implementations of ongoing portfolio management and risk monitoring. Since robo-advisors serve individual retail investors, tax management is a focal point on most platforms. We devote substantial attention to automated implementations of a number of tax optimization strategies, including tax-loss harvesting and asset location. Finally, we explore future developments in the robo-advisory space related to goal-based investing, portfolio personalization, and cash management.

Indirect Effects of Regulatory Changes: Evidence From the Acceleration of the 10-K Filing Deadline

This study responds to a recent call for research on the indirect effects of regulatory changes and examines the audit office effects of changes in client time pressure, using the first acceleration of the 10-K filing deadline as the primary research setting. The extant literature provides evidence that increased client time pressure adversely affects the timing and quality of individual engagements. We argue that because audit offices possess finite resources and production capacity, client-level pressure can have office-level effects. We document within-office differences related to changes in audit timeliness. In the same audit office, clients with no pressure (with pressure) experience an increase (a decrease) in audit report lag post-acceleration. This evidence suggests that auditors alter the timing of concurrent engagements in response to client pressure, and clients of the same office are affected differently by changes in time pressure. We also document across-office differences in audit/filing timeliness and audit quality. Clients of audit offices with more time pressure across the entire client portfolio have a greater increase in audit delay, are more likely to file late, and experience lower audit quality. Taken as a whole, our results are consistent with client pressure producing office effects as a result of the auditors’ response to increased resource constraints. These results should be informative to regulators and practitioners, because they suggest there are indirect costs associated with regulation and such effects are not limited to directly affected clients. Further, the results indicate that auditors do not always respond to changes in resource requirements in a manner that prevents undue strain.

Propuesta metodológica para calcular pérdidas crediticias esperadas, utilizando el método simple de la NIIF 9

La presente investigación tiene como objetivo proponer una herramienta metodología que permita el cálculo crediticio de perdidas esperadas, a través del uso del método simple, dotando a las microempresas un instrumento de análisis de información que permita a la Dirección realizar una eficiente planificación financiera. El estudio es de corte transversal tomando información de fuentes secundarias internas, dentro del periodo de tiempo del año 2019. El método instaurado en el caso se compone de un enfoque cualitativo, en primera instancia, se analiza los datos de naturaleza primaria y secundaria para generar una construcción acorde del marco teórico; con este razonamiento se seleccionó una ficha de entrevista aplicada a los encargados del área contable. Los hallazgos investigativos demuestran que el sector automotriz está conformado por micronegocios que en su mayoría no cuentan con una correcta planificación; el grado de aplicación y conocimiento de la NIIF 9 es carente, debido a que no existe una medición y evaluación precisa de las pérdidas crediticias, que son otorgadas mediante una línea de créditos a la cartera de clientes. La propuesta metodológica se adaptó a la industria de venta de repuestos automotrices, además pretende ser un soporte para la mejora sistemática en el rendimiento contable y financiero del departamento de cobranzas.