Porvenir is a leading provider of pension and severance pay fund management services in Colombia, South America’s second most populous country after Brazil. The company has 33 offices and 10 service modules located in Colombia’s largest cities, as well as a strong nationwide sales force that rivals most of its competitors. Additionally, as part of Grupo Aval, one of the largest multinational financial companies operating in Colombia, customers have access to an additional 1,000 contact points through its branch network. This strong positioning means that in August 2010 the firm managing the mandatory pension savings funds of 2.9 million people (roughly six percent of the population) and the severance funds of 1.6 million affiliates.
The organisation currently manages voluntary pension funds, mandatory pension funds, the severance fund and trust assets. Each of these areas are overseen by collegiate decision making bodies and approving bodies made up of experienced asset managers well versed in best practice. Indeed, one of the aspects of its business that Porvenir takes greatest pride in is the professionalism of its continuously trained staff.
In order to ensure that its staff are equipped with the latest skills and knowledge, the company put in place an education project known as Universidad Porvenir. The purpose of this programme is to guide the performance of the team towards the achievement of the individual and organisational goals. The objective of the university is to develop company leaders in order to have high performance teams that will lead the administrating company to occupy the first places in the market. During the first semester of 2010, 1,492 employees participated in different education and training courses, totalling 629 hours of training. The main focus was a series of workshops concentrated on training about multifunds, called “Workshops with the Legal Office.” As well as receiving up-to-date skills and knowledge needed in order to provide exceptional advisory service, through this programme staff have been tutored in the use of a simulator that helps to calculate which type of fund is better for the person being advised, taking into consideration age, work stage and aversion to risk.
Indeed, risk management is a key feature of Porvenir’s business model. The idea that risk management can no longer be seen only as a response to regulatory requirements but also as a competitive advantage is deeply embedded in the organisational philosophy of the company. In order to realise this vision, a comprehensive risk management architecture has been put in place. The risk management process itself involves detection, measurement, monitoring and reporting of risk on a constant basis; each risk profile must always be adjusted according to the customer’s appetite for risk; risk management infrastructure should be settled according to the complexity of the markets and managed products; finally, staff members involved in the area of risk management must be able to demonstrate their knowledge and skills by obtaining a market standardised certification in the area.
The risk management structure can be separated into two levels. The first is comprised of the board of directors, which oversees the approval of the risk management policies and provides strategic direction during the investment process, and the Risk Committee, which monitors the adjustment of the investment portfolio according to the company’s risk appetite as well as monitoring compliance with established policies. The second level is the Risk Unit, which acts independently and reports directly to the CEO. It in turn is divided up into many sub-divisions specialised in market, credit and operational risks and has developed several tools and support systems to aid in the identification of risks in these areas, placing a strong emphasis on a methodological approach.
Porvenir has developed different methods for measuring several dimensions of financial risk and performance. On market risk, three different approaches have been implemented: The first is an absolute VaR model, which measures the worst probable loss within a 95 percent confidence level. The second is a relative VaR measurement or the worst underperformance (compared with benchmarks or with an optimal asset allocation) within a 95 percent confidence level, which is obtained through historical simulation using data collected on a monthly basis. The third is a relative VaR model, which is implemented through delta-normal methodology on a daily target horizon. In a joint basis a return attribution procedure is implemented, which permits to evaluate the performance on a daily, monthly and annual basis. This procedure is being detailed in order to attribute the return performance to several elements, such as asset allocation, security selection and risk factors. In terms of credit risk, measurement has been conducted by a master issuer scorecard, which allows controlling the current default probability of all relevant issuers. This scorecard is supported by in-house rating methods that capture the current risk status of the issuers depending on elements associated to the qualitative and quantitative variables settled by economic sector. These methods undergo a process of constant evaluation through the implementation of back-tests. Moreover, the Risk Unit has implemented stress tests with the aim of assessing the performance of the different portfolios under unusual conditions.
Other strategies put in place by the Risk Unit are related to the measurement and management of liquidity risk based on the statistical analysis of the investments and funding sources. Finally operational risk management involves the definition of clear procedures, quality control schemes and monitoring of the action plans established for the appropriate mitigation of losses derived from operating errors.
In order to achieve a better level of risk management, during the last year Porvenir acquired superior market risk software and developed a Corporate Debt Internal Rating System (IRS). The first will improve the system infrastructure of the organisation, increasing the accuracy of information and reducing time taken to generate risk reports. The IRS has three competitive advantages – a credit risk early warning system, different levels of credit risk aggregation, and a complete supervision of corporate bond issuers.
When approaching a new customer, the firm takes the approach not only of seeking to manage their resources but also to educate them in good financial management along the way. The “Aprendiendo Juntos por un Mejor Porvenir” (Learning Together for a Better Future) programme shows clients and potential clients what the pension system is and how it works – it makes them aware of the fact that they are saving up for the benefit of their future. As stated on the initiative’s website, “This project has been created so that people can take the best decisions for their future, showing again that the principal concern of Porvenir is the wellbeing of Colombians.” In addition to encouraging citizens to make their own plans for the future, it also helps them to understand how pension funds are regulated and what mandatory contributions they should be making. This is particularly helpful since the regulations surrounding pension and severance pay funds were changed as recently as August 2009. Porvenir has also provided training to over 1,500 companies regarding multifunds under this same framework.
Additionally, customers who are approaching retirement are provided with a customised advisory service so that this change in lifestyle will not take them by surprise or overwhelm them. While this advisory service provides good customer service at the point when an associate is preparing to draw on their pension fund, Porvenir also seeks to maintain good relations throughout a person or employer’s time with the company. The firm segments all its clients, not just according to whether they are an employer, individual contributor or a pensioner, but also according to their needs and expectations. In this way, the organisation is able to design a differential value offer that will suit the desires of the members of each segment.
Of course, if customer satisfaction is going to be managed correctly, it is also important to monitor customer feedback effectively. The Operations and Services Vice-Presidency of the company has implemented a new service model for handling claims and concerns that involves preventive action plans and timely assistance.
Porvenir has traditional channels such as offices and a telephone line where customers can get help with any concerns they may have, as well as an informative website. Additionally, the company sends out customer satisfaction questionnaires and, to ensure that these systems are working as smoothly as they should be, makes use of mystery shoppers to provide accurate feedback of the service they receive on the phone or in branch.
The organisation doesn’t just look after its own, however, having undertaken various plans to help in the growth of Colombia socially. Among these initiatives are sponsorship of the Bogotá Half Marathon and the Bogotá Ciclovía cycle path, supporting children from low-income families through the charity “Aldeas Infantiles SOS Colombia,” and a blood donation campaign. It also takes on over 100 young people annually to work as trainees through the SENA national traineeship scheme.
When we look at all these factors in context, from meticulous risk management strategies to staff training and care for customers as well as the community, it is clear that Porvenir is more than just a provider of financial services. The company acts as a guide to its customers, helping them to learn about how their money is being managed, as a mentor to its staff, giving them skills and knowledge to excel in their career, and as a leader in the community, giving back to the Colombian people in many different ways each year. With a continuing emphasis on excellent products and customer service, Porvenir is set to continue as a leader in its field over the years that come.