Case Study – Portfolio management at Man Group
Background
The ED & F Man Group’s origins went back to the 1700’s, trading sugar from the Caribbean. The business extended over the years into other products, from trading to refining and sourcing, and into stock broking, investment management and insurance. Gill Ringland was asked to help the Group anticipate changes in markets, for instance to reduce losses on trading in sugar derivatives.
SAMI’s Role
We used a Board meeting at which the Divisional Directors and their immediate teams were present, to run a Workshop the next day. The scenarios chosen were “London in 2020”, for the future of financial services in the City of London. These four scenarios looked at how the City as a leading home of Financial Services companies might respond if the world is “global” and Information technology (IT) becomes pervasive (Globetech), if Europe, Asia and North America divide into competing trade blocs all using IT successfully (Fragtech), while Slowglobe is a global world with very little use of IT, and Fourth World is a broken-down world with fragmentation of trade and little dependence on IT. At the Workshop, the method chosen was role-playing by the Divisional Directors and their teams based on “what are our strengths in each of four scenarios”. The answers were very different for each business. The Division trading primary and secondary sugar products felt comfortable with Slowglobe. Other businesses had built their business plan on assumptions corresponding to Globetech, Fragtech and Fourth World. The discussion at the report back from each unit was very revealing to the team. They had not realised the differences across the Group, perhaps due to the underlying dynamics of the businesses, their history and tacit assumptions. In particular the Division concerned with ownership of land, refineries and the logistics needs of handling the sugar products had a very different dynamic from the other businesses which relied on trading using IT.
The Outcomes
In 2000, the Group divested the sugar products division, and later the insurance and stockbroking arms, along the lines seen in the discussion of the scenarios and the alignment of the businesses. This shows the value of scenarios in bringing out implicit assumptions. Although the scenarios were presented as describing 2020, the discussion brought out that a different scenario was recognised by the four Divisions, highlighting the source of their management tensions.
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