This model assumes the preservation of complete independence of the operating activities of subsidiaries. The management company exercises control over subordinate structures by analyzing financial indicators and acts as an investor, making decisions on preserving assets in its portfolio or selling them. This model of holding management is similar to the investment fund scheme, where the growth of shareholder profitability is achieved not through direct management of the activities of subsidiaries in order to increase their efficiency (as in previous options), but through restructuring existing assets in the fund's portfolio.
This model of financial teacher data package management of a holding company is primarily aimed at companies with various types of business united within a single ownership structure. In such conditions, the management company cannot, in principle, undertake the performance of even a part of the operational functions of subsidiaries due to their high degree of diversity.
The main source of information for the parent company is the results of analytical processing of reporting data on the activities of subsidiaries, with an emphasis on the indicators that are most important for investors (for example, return on capital, earnings per share, etc.).
However, there are key limitations associated with the use of this holding management model: the parent company is deprived of the opportunity to influence the operating results of its subsidiaries, limiting itself to monitoring them. Management measures that can be taken by the management company in response to unsatisfactory results of its subordinate firms (business restructuring, change of management, change of the motivation system, etc.) are a reaction to events that have already occurred and can, at best, prevent a negative impact on shareholders in the future, but not in the present.
Financial Management Model