An Asset Management Company (AMC) is a business that collects money from individual investors and invests it in various types of securities to earn the best possible returns.
In turn, the company earns a fee from the customers for the services it offers. AMCs include risky and relatively safe assets in their portfolio, such as stocks, bonds, and real estate, among others, as part of a balanced investment.
Considering that AMCs work with investors’ hard-earned money, they are under a lot of pressure to deal with negative situations that might arise, especially when approaching market crises.
Let us see how the AMCs change their strategies and operations to deal with these tough times.
What is Crisis Management?
In effect, Crisis Management involves identifying what might go wrong for a company or its stakeholders and formulating strategies to deal with it. In other words, companies would make a calculated guess of global events that could turn into crises and work out plans to deal with them.
AMCS need to have a rapid change in gears to contain minimum damage and keep things on an even keel once a crisis sets in.
Key to Good Crisis Management
The most important rule of crisis management is to be proactive. This means preparing for possible problems before they happen instead of waiting to react when a crisis starts.
Well-known and reputed companies like Groww Mutual Fund follow this approach to safeguard their customers from any crisis. Being proactive helps reduce damage and keep things stable during tough times.
Differences Between Crisis Management and Risk Management
Crisis Management is completely different from Risk Management. Risk management deals with issues that may arise before an event or situation occurs, whereas the latter deals with issues while they are taking place.
Steps in Crisis Management
Identify the Problem
In the event of a crisis, an asset management company has to establish what is the problem. This means that they must be able to work together well through good communication.
For example, in the case of the recent COVID-19 pandemic, these companies closely followed the crisis and weighed the potential impacts on various types of industries, stocks, funds, and companies.
Create a Plan & Take Action
Having identified the problem, the asset managers proceed to devise a plan to address it. They consult with various experts, such as financial managers and analysts, to develop a strategy. This requires the AMCs to be flexible since each problem can have a different solution.
Assess & Pivot Accordingly
As the crisis continues, the asset managers should periodically check how their plan is working and then make adjustments as needed. This could involve amending the terms of agreements, implementing new safety measures, or adapting to new developments.
Recover from the Crisis
Recovering involves getting back to normal operations and fixing any issues that arose during the crisis. This step ensures that the company can resume its regular activities as smoothly as possible.
Learn from the Experience and Adapt
This is the last stage in managing the crisis. In this stage, the asset managers will take their time to analyze what happened and how they responded to the situation. They will learn from this episode and can improve their ideas and responses for future crises.
Types of Crisis
- Crisis can be caused by external factors like natural disasters or security breaches, or internal issues like employee mistakes or poor service.
- Internal crises can be better managed with strict compliance with rules and protocols.
Main Goals of Crisis Management
- The primary goal is to protect everyone involved with the company, including employees and customers.
- This involves having emergency plans and improving safety measures to ensure everyone’s protection.
Conclusion
Good crisis management helps asset management companies handle problems and protect everyone involved. By planning ahead and quickly adjusting their strategies, these companies can keep things running smoothly and maintain their reputation during tough times.