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February 19, 2019

Atypical fields in the finance area

Building on Harvard University campus with green grass
During their US residency, the class of the MBA Finance visit Harvard University and learn about the currently trending topics in finance.

Knowledge not everyone has: In order to be successful in the financial sector, comprehensive competencies in classic areas such as corporate finance, risk management or company valuation are considered hygiene factors today. Those who would like to stand out of the crowd are well advised to specialize in rather atypical occupational fields off the mainstream, for which there will be ever greater demand in the future.

Prof. Manfred Frühwirth presents three "Hot Topics" for which he is currently sensitizing his international MBA students.

1. Islamic finance

Financial products without interest? That was a rarity in the western world until then. With the increasing demand from Muslim customers, Islam-compliant financial products have found their way into the financial landscape. According to Sharia law, the Islamic law, interest - i.e. earning money through money investments or money lending - is prohibited. Instead, there are Islam-compliant bonds, so-called "Sukuk". However, it is possible to buy a house with a loan in accordance with Sharia law: the bank itself acts as the buyer of the house and sells it on to the customer, who in turn pays the bank a higher price in the form of instalments.

Bawag P.S.K., for example, was the first Austrian bank to introduce an Islamic bank account in 2016: The bank does not demand debit interest, nor does it pay credit interest to the customer. Instead, the customer pays a monthly fee, the amount of which depends on the account package selected and includes an account card and an overdraft facility.

2. Entrepreneurial finance

No newly created company can survive in the long run without relevant financial knowledge. Entrepreneurial finance therefore deals with the advantages and disadvantages of venture capital, bootstrapping, i.e. the largely profitable management of a company without external investors, and the work of business angels, who contribute up to three times more capital to start-ups than investors do. Crowdfunding/crowdfinancing is also an area that is playing an increasingly important role in the financing of start-ups. The question of the right timeing for the search for investors or the exit is just as important as the optimal planning for capital acquisition or the knowledge of which type of investment is required for which stage of development. A study conducted by KfW Research in 2015 shows that even if you only look at the first three years, every sixth (17 per cent) of the approximately 2.5 million start-ups in Germany disappears from the market. Those who have financial knowledge are more successful: only 12 percent fail. With a lack of financial knowledge, however, the figure is 21 percent.

3. Ethics in finance

Accounting fraud, corruption, insider trading, consumer fraud: In recent years, corruption scandals have shaken various corporations. VW's diesel scandal ("Diesel-Gate") with its associated alleged cover-ups at management level was only one in a long series of cases. Ethical behavior is considered increasingly important in investment practice - also in order to avoid reputational and economic damage to the company. Many people still see ethics as a contrast to the financial world, where it plays an increasingly central role within the financial sector. The orientation towards short-term profit maximization can favor unethical behavior. When it reaches the public, it usually comes at a high price for companies or investors: Customers lose their trust, brand value falls, share prices go down, capital costs rise. For this reason, compliance and corporate governance regulations have recently been installed on a large scale, as have environmental, economic and social criteria, such as the expansion of corporate social responsibility. Corruption in companies, in the financial markets, but also within governments not only damages customers, creditors and voters, but can also destabilize the global economic system.

Read the exciting career story of Tanja Spennlingwimmer, alumna of the program

Career Story: Tanja Spennlingwimmer, Kapsch TrafficCom IVHS Inc.

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