By Associate Professor Nigel Finch
One of the fundamental skills required by any business leader is the ability to make decisions. Tough calls on major decisions can turn out to be the defining moments of a successful career – or they can be milestones along the road to failure, depending on how those decisions have been reached.
That’s why, behind every big decision, there needs to be a solid business case – one that identifies and assesses the key elements of the choices faced by the company.
In developing a solid business case, there are two very important concepts that underpin almost every major business decision a CEO is likely to have to make: risk, and value creation. Without a solid grounding in these two areas, business leaders can find themselves on very uncertain ground, especially in a volatile economic climate.
Understanding risk is paramount in terms of decision-making. It’s not always easy to see the potential downsides of a business decision, but even when the pitfalls are obvious, a solid understanding of the likelihood of a negative outcome can make the risks worth taking.
By learning how to identify and evaluate risk, without simply focusing on the dangers themselves, business leaders are able to make far more informed choices about how they can achieve their goals.
Value creation, on the other hand, allows leaders to focus on particular priorities in business. The creation of value, whether through acquisition or innovation, is very much the underpinning of all business success.
These two key points are the reason behind the financial management component that forms part the University of Sydney Business School MBA.
The speed with which the industry landscape is changing around the world means that today’s business leaders need to be able to rapidly spot value-creating opportunities. They must have the knowledge and skills to evaluate the risks involved, and make the right call when the moment arrives.
That is why we are focusing on these two crucial elements in strategy development, and how they can be used to construct the kind of rock-solid business case that is the foundation of all successful decision-making.
A sign of a great business leader is the consistent delivery of high-quality results to the company, its customers and shareholders – and those success milestones are very difficult to achieve without the proper preparation, diligent research and a solid understanding of the principles of financial management.