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CFOs with CPAs Skimp in Growth Industries

In an article in the WSJ by Richard Teitelbaum, the premise is stated that CFO's in high-growth industries invest less due to risk avoidance learned in public accounting.

This according to a study to be published in the Journal for Accounting and Economics.

Without reading the study, would you agree or disagree?

 

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Answers

Topic Expert
Jim Quinlan
Title: CFO, Managing Director
Company: Trinity Group, BlueGold, Genergy, Wellco..
LinkedIn Profile
(CFO, Managing Director, Trinity Group, BlueGold, Genergy, Wellcount) |

Have to agree. Risks are avoided in the accounting profession since it loses if a risk turns out bad. One needs experience in risk taking to be able to evaluate the likelihood of success.

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Without reading the article, I would have to disagree.

If an industry is considered high-growth then the only way to keep up with growth is to invest in risky opportunities. Taking on riskier opportunities to keep up with growth will cost more due to the amount time and money due to the due diligence process of evaluation.

My assumption may be incorrect, though.

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Proformative just happens to have a great line-up of free CPE webinars coming up in May that speak to growth, strategy, leadership, risk and the CFO role:

https://www.proformative.com/free-cpe-webinars

Best... Sarah

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I actually agree.

There are few "accounting and finance" professionals that have a RISK MANAGEMENT (as opposed to RISK AVOIDANCE) paradigm and an even rarer breed to roll with the likes of Jeff Bezos. It is the training, it is the education, it is the perspective. EXPOSURE (to the mentality/perspective) is a good equalizer.

I especially like Jeff Besos' (Amazon) views on risks, failures and investments:

“I’ve made billions of dollars of failures at amazon.com. Literally, None of those things are fun, but they also don’t matter, What really matters is that companies that don’t continue to experiment – companies that don’t embrace failure – they eventually get into a desperate position, where the only thing they can do is make a ‘Hail Mary’ bet at the very end of their corporate existence. I don’t believe in bet-the-company bets.”

http://www.businessinsider.com/amazons-jeff-bezos-on-profits-failure-succession-big-bets-2014-12

https://www.theguardian.com/technology/2014/dec/03/jeff-bezos-billions-dollars-failures-amazon

http://business.time.com/2013/08/14/jeff-bezos-risk-averse-rebel/

https://youtu.be/KenKuaMkIcA

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

What he leaves out from the quote is that he has the resources to absorb "...billions of dollars of failures..."

That's not to say that companies shouldn't experiment, but everything must be in perspective....

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EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Wayne,

This has been Bezos' way of thinking since his $300k initial funding from his parents/relatives for Amazon. The only thing different now is the size of the bets.

Another quote from one of the articles..." “If you place enough of those bets, and if you place them early enough, none of them are ever betting the company,” he explained. “If you invent frequently and are willing to fail, then you never get to that point where you really need to bet the whole company” on any single initiative. By the time you are betting the company,” Bezos added, “it means you haven’t invented for too long.”

Aaron Packeys
Title: General Manager - Finance (CFO)
Company: NSIA Insurance
(General Manager - Finance (CFO), NSIA Insurance) |

Hi All,
I think that is too extreme and think otherwise. Whatever activity an entity seeks to engage in has in it an inherent risk. Whether we want to post profit and therefore must grow the topline and and keep the cost watertight has risk. Inherent in profit and loss is risk, therefore management of it is key.

By the disposition of Accountants, we are tempted to be conservative but that is not to say we will avoid taking risk.

The mere acceptance to be CFO and the responsibilities required is risk in itself.
High-growth industries have potential risk that need tactfulness in managing it.

PADMANABHAN SITARAMAN
Title: CA
Company: OWN
(CA, OWN) |

The clear differentiation between risks and gambling is yet to come. The line is thin and the opinions hazy on this differentiation. What appears to be taking risk for some one, is to others, gambling. The risk taker in his passion to succeed fails to realise where it turns into more of a gamble than a risk; the risk averse guy on the other hand, feels venturing into the unknown is a major gamble and here even risks are considered to be a gamble. That way, Finance pros (those who rely more on spreadsheets and assumptions) and the Accountants (those who study risks) differ - this is the difference between the MBAs and Professional accountants - and this may continue for generations to come.

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