Lies, Bias, and ESG in the finance function – Prof Alex Edmans

What role does bias play in the work of finance?

Alex Edmans is a professor of Finance, non-executive director, author, and TED speaker. He is regularly interviewed and writes for WSJ, Bloomberg, BBC, CNBC, CNN, ESPN, Fox, ITV, NPR, Reuters, Sky News, and Sky Sports. He was previously a tenured professor at Wharton and an investment banker at Morgan Stanley.

Glenn Hopper spoke to Alex about his new book “May Contain Lies: How Stories, Statistics, and Studies Exploit Our Biases – And What We Can Do About. ?(Edmans is also a co-author of the classic text book, Principles of Corporate Finance).

Edmans says: "We're always trying to do things that improve the financial performance of the companies that we run. And there's so many studies out there claiming X improves financial performance, so let's do more, more of X. But a lot of these studies are actually very, very weak. But because they prey on confirmation bias, they suggest doing good things like demographic diversity, that's something that helps you, then we accept it uncritically."

In this week's episode of FP&A Today :

• How CFOs and FP&A leaders can think about purpose?
• Is ESG a tick-box exercise for finance?
• How FP&A and finance leaders can check their biases?
• How you can control your addiction to bias in finance
• Silicon Valley Bank and why financial models were affected by bias?

Apple| Spotify|YouTube| Blog post and transcript

Inspiring CFO: Quote of the Week

CFO Jack Alexander found a Wall Street Article article in the late 1970s that laid out the secret to being the perfect CFO.

It has such an ongoing career impact he continues to refer back to it whenever assessing his impact as a CFO over the past 44 years.

The? article was entitled“ What is the secret to being a Top Gun CFO?”?

This quote informed his career success.

First as a CFO of companies, such as Mercury Computer systems, and EG&G and then as best-selling author of the FP&A handbook, Financial Planning & Analysis and Performance Management (Wiley Finance) .

“These four things are the only things you must master to be a top CFO.

1. The credibility of forecasts.?

2. Dispassionate hard-headed analysis.?

3. The third is a balanced focus between the cost model and growth?

4. kinship and teamwork. This has morphed into an expression we use as a business partner these days.?

“It is interesting that three of the four characteristics speak directly to FP&A. Throughout my 40‐year career, I have found that FP&A is one of the most important roles the finance team plays. I became a student of financial analysis early in my career and can directly attribute attaining my goal of becoming a CFO in large measure to a strong focus and emphasis on FP&A throughout my career."

Meme of the Week

My morning meeting