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Interview: "Behavioral finance is here to stay"

February 12, 2019

Disruptive technologies and changing dynamics in the regional and global economy are among the many things a CFO has to keep track of to steer the finances of a company.

How will they affect the role of a financial executive? Why is behavioral finance in the future of a CFO’s decision-making?

Christian Costa, CFO at Paraguayan telecommunications firm Personal, a unit of Núcleo, explains these and other aspects of the constantly evolving work of a financial executive.

Q: What is Personal doing in terms of implementing new technologies to the financial department?

A: We are a technology company, and that’s why it is in our core to implement solutions that allow for better productivity of our shares. Because we are a telecom company, we have access to large amounts of data, and we use that to design microsegmentation policies for each cluster of clients aimed at offering the right products and optimizing our cash flow. Our handling of big data is focused on creating value, reducing operational risks, and leveraging growth. Those are the ultimate goals when implementing new technologies at Personal.

Q: What do you consider to be the main risks of implementing new technologies into a corporate financial department? What are the solutions to those risks?

A: The biggest risks for me have to do with so-called “change management,” changing the way you approach work, leaving a certain task to focus on another or doing it differently. That takes time and effort and can come at a cost of losing reputation with our stakeholders. Each solution goes through planning, development, and implementation stages in order to minimize those impacts.

Q: What do you think about blockchain for your company and in general for all industries?

A: I think it’s a disruptive technology, originating from programming, and it reached the financial world along with cryptocurrencies. In my opinion, it’s much more than that and it could be very useful for companies that require traceability. To be able to assign a unique blockchain identifier to a container or to a sport event ticket is a safe and efficient way to include technology into companies, and it gives financial departments more security and vision for operations.

Q: How has the role of a financial executive changed over the past five to 10 years, and how do you see the role evolving over the next decade?

A: The changes in the role of financial executives are taking place in the context of their specific industries, as well as domestic, regional, and international macroeconomic environments. I believe anyone in a financial department must have a great degree of versatility, a wide vision, and be able to easily adapt to all of the convergent and divergent scenarios we’re faced with.

In my case, over the past years, I’ve changed the way we analyze and define business, the investment horizons of technology cycles, and the way we finance those new cycles. For the following years, I see an important development in the way data is handled to better understand behavior patterns and be able to include some behavioral finance. Behavioral finance is here to stay. To continue to make decisions on the internal rate of return and current net worth, without understanding who the decision-makers are and how their behavior is affected by the scenarios they face, is to omit a very important part of better understanding reality and making better decisions.

This interview was conducted by Latin Trade for Council of the Americas.