Widgets or Trading?

Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com 

 

Many of the corporate managers that we talk to take the position that it is there job to forecast financial markets.  That may very well be if they are currency traders, or commodity brokers or derivative structurers.  The plain truth however is that most managers are responsible for some part of the process of making and selling widgets of some sort.  While the making and selling of widgets probably involves elements of the financial markets, that is not the main goal of the corporation.  For instance – does Kellogg’s sell Corn Flakes because they speculate that the price of corn is going to fall?  Of course not!  Thus why do manufacturing managers still think it makes sense to try to time the market with their purchases and their hedging strategies?  If they had that skill they should be hedge fund mangers!

 

When project completion is in sight; negativity is not

by Michael Arbow MBA

Partner, RSD Solutions Inc.

www.rsdsolutions.com

info@rsdsolutions.com

 

According to a study conducted at George Washington University by Jaclyn M. Jensen entitled “The Consequences of Completion: How Level of Completion Influences Information Concealment by Decision Makers”, the closer a project is to completion the less likely knowledge of a significant problem is to effect the action of decision makers. In fact even when the test project was barely off the ground with only 10% complete, 37.5% of the test subjects said they would not bring forward negative news. This simple experiment helps support the need for a independent risk management team working directly with C-level or senior management and at the same time being involved, and in contact with, all significant operations of the company. 

How independent is your risk team and how are they keeping their finger on the daily corporate pulse? The other issue here is how does your firm and its staff deal with adverse occurrences that could jeopardize a much touted project and how can they not fall into mode of behaviour seen in the above experiment?  Finally, just how approachable is the risk team? Does your staff feel that the risk team is working with them or for C-level?