Prioritizing Digitization in Portfolio Companies to Better Manage Market Volatility

Prioritizing Digitization in Portfolio Companies to Better Manage Market Volatility

In these unprecedented and uncertain times, maintaining confidence in the tools and methodologies that previously guided decision making is difficult. The volatility of today’s markets brings even greater risks for private equity firms when it comes to deal making. But one thing many experts agree on is that prioritizing the digital transformation of your portfolio companies will not only minimize risk, but also lift productivity and enhance the growth capacity of your portfolio, thereby strengthening their competitive position as the economy recovers.

Gain deeper business insight into your portfolio companies

A strong cloud technology platform that encompasses financials, sales, marketing, service, operations, reporting, budgeting, and commerce can minimize risk due to lack of transparency, enabling portfolio companies to provide the reporting you need faster and provide direct access to real-time information anytime and anywhere with a secure cloud platform.

Cashflow management

The financial impact of a slowdown in operations puts new emphasis on the need for private equity firms to be able to monitor and accurately forecast cash flow. Implementing an ERP system with built-in Artificial Intelligence (AI) and Machine Learning (ML) to accurately forecast cashflow gives firms a decided advantage. Use artificial intelligence (AI) and machine learning (ML) to accurately predict when customers will pay their invoices. Proactively act to reduce write-offs and improve margin with immediate visibility into the probability of late or at-risk payments. Improved predictability regarding customer payments, vendor outflows, and the impact of outside factors on customer demand improves decision making and reduces risk to a company’s liquidity.

Consumer confidence

Equally important is the ability to capture unstructured data, such as consumer sentiment expressed through social media. By aggregating this data, firms can gauge consumer confidence in a company’s products and services, then use that insight to enhance customer satisfaction through new product development or services offerings.

Supply chain management

Supply chain disruptions have played havoc with the ability for many companies to meet customer demand.  But those with the ability to leverage AI and ML to tailor demand planning and forecasting algorithms to incorporate supply chain slowdowns are better able to accurately forecast product replenishment, or even pivot operations to supply new products or expand services into new industries or geographies.

Protect your investments by minimizing risks

When the value of portfolio companies is already at risk due to the economic impact of a national pandemic, the perceived threat of more common business risks, such as data security and regulatory compliance, takes on even more importance.

Data protection

Having the right data protection and governance approach is critical to not only addressing regulatory compliance and privacy, but also to mitigating data leak and risk. A solution such as Microsoft Endpoint Data Loss Prevention (DLP) helps prevent data leaks and provide context-based policy enforcement for data at rest, in use, and in in motion on-premises and in the cloud.

Insider risk management

The ability to work from home has helped keep employees healthy during the COVID-19 pandemic. But working from home also brings added distractions, such as limited workspace privacy, remote learning for children, and all of the sounds and disruptions that are common within home communities. According to the SEI CERT institute, user distractions are the cause for many accidental and non-malicious insider risks. Add to these distractions the stress many people are experiencing over potential job loss or health concerns, and the potential for increased inadvertent or malicious leaks grows even stronger. A technology platform that recognizes and addresses these concerns is critical to insider risk management.

Regulatory compliance

Many companies must comply with regulations such as IFRS, HIPAA, FDA, DCAA, and SOX. Mitigate the risk of non-compliance by investing in a technology platform that decreases the associated global financial risk and complexity with built-in regulatory compliance tools, such as transaction-level audit trails and segregation of duties.

Empower your workforce

The initial impact of the pandemic on the workforce focused efforts on enabling employees to work remotely. Companies with the right technology in place were able to continue operations in an almost uninterrupted manner, giving them a distinct advantage over competitors who were not as well prepared. But the focus is shifting beyond remote workforce enablement to the need to create value quickly through enhanced productivity, changing business models and, in many cases, with a reduced workforce.

Robotic Process Automation

Eliminate manual repetitive processes using Robotic Process Automation (RPA). In a nutshell, RPA enables the automation of repeatable business processes: a software bot can mimic human activities by performing recurring tasks and processes associated with structured data and clear action rules. With the addition of Artificial Intelligence (AI) and Machine Learning (ML), RPA can enable more complex, intelligent process automation. An example of RPA would be extracting data from PDFs, scanned documents and other formats: screen scraping, OCR (Optical Character Recognition) and basic pattern recognition technologies enable data extraction from almost any format, reducing the need for keying in data.

Low code, no code productivity apps

Transform manual business processes into digital automated processes through workflow capabilities, responsive designs, and feature-rich content. The ability to quickly develop custom applications with almost no custom code can improve accuracy and data security, while providing more opportunity for analysis and insights. Automated workflows increase efficiencies and give staff members more time to focus on tasks that require human interaction.

For example, a tablet-based app would enable inspectors to gather data from the field, including photographs, which would be stored in a structured and secure manner in the cloud. This would result in eliminating manual entry of data from paper-based inspection forms while increasing accuracy and speed of data collection.

Virtual agents (bots)

These bots are developed to have rich and meaningful conversations with customers and take actions based on the interaction. Virtual agents can be used to reduce costs, better utilize available resources, and help improve overall customer satisfaction. And little to no IT effort is required. For example, virtual agents can be integrated into a company website to answer common customer questions and initiate workflow-based tasks and alerts, thereby freeing up valuable time for customer service agents to focus on more value-based activities.

Ultimately, the decision for PE firms is not one of selecting an ERP application, but rather one of platform selection, where the broader ecosystem directly impacts risk and return. Learn more about how Microsoft 365 and Velosio will enable PE firms to minimize investment risk, accelerate profitability, and protect their investment in their portfolio companies. Download the fact sheet or get in touch with our system experts for private equity firms.