CXO: Globalization and organizations

About Norges Bank Investment Management

Norges Bank Investment Management (NBIM) is the asset management unit of the Norwegian central bank (Norges Bank). NBIM manages the Government Pension Fund Global, often referred to as the Norwegian oil fund, on behalf of the Ministry of Finance, which owns the fund on behalf of the Norwegian people. NBIM aims to get the highest possible return on the fund within its investment mandate and seeks to safeguard the long-term financial interests of Norway's future generations through active management and active ownership.

The global investment management industry faces much complexity and many challenges. In this recurrent CXO Corner relay column, we ask top executives to point the way ahead, sharing their views and best practices for meeting the challenges.

Journal: Thank you for taking over the CXO Corner relay from Klaus Holse, CEO at SimCorp. To begin, could you tell us a little about your background before being appointed Chief Operating Officer at NBIM in October 2009, coming from a position as Global Head of IT.

Age Bakker: Thank you for inviting me to take part in the CXO Corner article series. I will try to contribute the best I can to this column.

I was hired as Global Head of IT at NBIM in May 2009, but was promoted to Chief Operating Officer (COO) quickly after this.  Before I joined NBIM, I spent 15 years in Storebrand’s investment management division, the last four years as COO and before that as Head of IS/IT.

The COO role at NBIM has a much broader scope than IT, as it includes System and Data Management and the traditional back-office/middle-office functions such as Asset Servicing, Transaction Management, and Fund Accounting. I have about 90 people in my team, across all our offices, and we work hard to deliver stable and consistent services to our business users across the globe on a 24/7 basis. When one of our portfolio managers or traders comes into the office to start the day in the morning, the full operations team has taken care of the preparations: technology services are running, systems are up and populated with the most recent security master and price data, and trades and corporate actions reflect the most recent status received from the custodian. This is very much a joint effort from the entire operations team, and I am proud and grateful to have a team of very skilled and professional people.

Journal: NBIM manages the Norwegian Government Pension Fund Global, also known as the Norwegian oil fund, which has an overwhelming market value of over 7,000 billion NOK (over USD 830 billion). In addition to your headquarters in Oslo, you have offices in London, New York, Shanghai, and Singapore. As the COO, what do you see as the main challenges of running a global organization, for instance when it comes to data management?

Age Bakker: The main challenge is for everybody to have common processes, shared knowledge, and a mutual understanding of our operating model to be able to operate 24/7 in a follow-the-sun fashion. The day starts in Asia, where our Singapore team ensures that all overnight data loads, like security master changes and prices, are performed and checked. This gives us a common and correct start-of-day status that is used by our users in Asia, but also in Europe and the US. Fortunately, we have a very competent team in Singapore, which is dedicated to this, and, in addition, we have a great partner in India to assist us with the technical aspects of our data management processes.

Since we operate 24/7, we do not have much time to run batch-jobs overnight. Instead, we need to ensure intraday data quality, which is enabled by our investment management system, SimCorp Dimension. The system’s IBOR concept makes all data accessible and updated throughout the day – something that is necessary for a global organization like ours.

The system’s IBOR concept makes all data accessible and updated throughout the day – something that is necessary for a global organization like ours.Age Bakker, COO at Norges Bank Investment Management (NBIM)

Journal: What additional measures would you recommend to have in place to tackle these challenges – measures aimed, for example, at achieving reliable data and transparency across the global organization?

Age Bakker: We focus on using common processes and ensuring that knowledge is shared across our different locations. We utilize a common, global system platform and a common enterprise data warehouse across all locations. The investment management system is our core platform for collecting all data, all transactions, and all corporate actions – you could say it is a “one-stop shop” for us.

Journal: And with regard to operational efficiency and scalability, which is vital with the amount of funds you are managing, what role does for instance automation play here?

Age Bakker: In our strategy, we state that automation is key. When setting out to buy a new back-office system, scalability was an important requirement, and we have addressed that requirement through automation of trade and data processing. After implementing our new back-office system, we have not significantly increased headcount in Operations. This might not sound too impressive, but if you then bear in mind that we had outsourced most of our back-office processes before, the story becomes a bit different. My Operations team is now well prepared to handle future volume growth, and we are constantly working with our partners to further automate processes, for example within corporate actions, repo settlement, etc. 

When setting out to buy a new back-office system, scalability was an important requirement, and we have addressed that requirement through automation of trade and data processing. After implementing our new back-office system, we have not significantly increased headcount in Operations.Age Bakker, COO at Norges Bank Investment Management (NBIM)

Automation is not only important because of scalability, it also is a prerequisite for good and consistent data quality. The less we need human intervention (and the entailed risk of human errors), the better data quality we will get.

Journal: What barriers to automation could COOs running a global organization like yours be facing? For instance, if you are operating on a number of disparate systems and also have to comply with several different industry standards and regulations? 

Age Bakker: At NBIM, we currently have investments in 78 countries. Settlement processes might differ a bit between countries, and we experience local variations of the SWIFT messages we use for settlement instructions and settlement confirmations. In the corporate actions space, we face even more variations between different markets. It is demanding to cater for all these variations when building the system integrations. In some markets, we face documentation requirements that just imply some manual work.

Journal: Across its global offices, NBIM has more than 500 employees from over 30 nations. On an organizational level, what structures do you have in place to make your operations teams in different parts of the world work together? And do you have processes in place to ensure that best practices are shared and that people learn from each other across distant teams?

Age Bakker: I have regional Operations managers in both Asia and North America, who have daily handover calls with the team in Oslo. The Operations managers ensure that the Operations team members follow the same work procedures in all locations. We are also putting in place System Management capabilities in Singapore and New York to support our users in these locations. Traditionally, System Management has been located in Oslo only, but with our investment management system now in place front to back, we see an increased need for system operations support in the other offices as well. For us, this means that we have asked Oslo-based System Managers to expatriate to these other locations for a period of time. Meanwhile, we have hired some more resources in Oslo to make up for the void.

Working across different time zones and with people from many different cultures is nothing new to NBIM. We have a well-structured and well-functioning set of policies and guidelines in place to ensure that our employees know how to act and behave when working for and representing our organization. These policies and guidelines are of course valid for all of the offices. We are well aware of our responsibility, representing the Norwegian people as a government agency, and we always strive to make the best out of the mandate given to us, being professional and accountable.  

Journal: Cross-cultural organizational theory talks about national cultural dimensions like power distance, individualism, and uncertainty avoidance, which must impact the way employees handle situations and tasks in their daily work life – and the way they behave and work together. How do you recommend global asset managers to tackle the challenges of managing global business teams of individuals representing different nationalities, cultures, geographies, and languages?

Age Bakker: Some of these differences are easy to overcome. To a large extent, we use video conferencing to address geographical distance, and we use English as our corporate language. We have diversity in nationalities and cultures, but we share common objectives and common goals. Our mission statement unites us: “We work to safeguard and build financial wealth for future generations”. We put a lot of effort in communicating our strategic direction and our action plans, in order to ensure our teams know what our common goals are and how we want to achieve them.

We have diversity in nationalities and cultures, but we share common objectives and common goals. Our mission statement unites us: We work to safeguard and build financial wealth for future generations.Age Bakker, COO at Norges Bank Investment Management (NBIM)

Journal: How do you integrate different nationalities into the global organization and ensure that the values of NBIM are understood and lived across geographical borders – despite differences in cultural dimensions?

Age Bakker: It is true that we have many different nationalities working for us, but these are not concentrated to certain offices. In fact, only in the Oslo office, we have over 20 different nationalities represented, and we most certainly also have a good mix in the other offices. This mix of people with different backgrounds is a great asset to us and we encourage everyone to use their diversities in discussions, meetings, and decision-making. Of course, the common Code of Conduct and the mandates given to each group or role ensure that all is done within NBIM’s overall mandate and framework.

All new employees are obliged to go through one day of introductions. This includes compliance rules (personal trading, handling insider information, whistleblowing, etc.), NBIM overall mandate and setup, as well as the history of the fund. The management team of NBIM takes an active part in this introductory course.

Journal: Globalization is clearly a trend, which has gotten a firm grip in the investment management industry as a means to create alpha. What would be your main recommendations for those of your peers who are contemplating or have just initiated a global strategy?

Age Bakker: Globalization is no longer just a trend; it is a fact. Technology and connectivity have given us great opportunities to connect with the whole world and expand our business. Our mandate is to invest globally, and in order to facilitate global investment, we must build operations infrastructure to support it.  You can have vendors serving you all over the globe, but in the end, it comes down to people – and the willingness to adapt both as an organization and as an individual.

Journal: Thank you very much for sharing your insights. To continue the dialogue, whom would you like to hand over the relay to in the next CXO Corner?

Age Bakker: I would like to hand over the relay to Claudio-Peter Prutz, Head of IT and Organizational Development of MEAG. I’m sure he, with his considerable professional experience, will have some interesting things to say about what he views as the biggest challenges and opportunities in our industry going forward.