Shift needed in teaching Entrepreneurial Finance

With the growing demand for and supply of entrepreneurial talent in the country, management colleges have taken this newer responsibility to equip the budding entrepreneurs with managerial talent. One of the key areas entrepreneurs are found to be struggling is the way they manage their finances. Through this article, I am attempting to address the status quo of financial management teaching in B-Schools and the modular shift that may be needed to teach entrepreneurial finance.

Currently, a typical management course in India is structured on a Core and Specialist model. Few core management topics are learnt by every budding manager, typically during a one year span, whereas, he also specialises in a specific management area like finance or marketing in the second year. Most of the institutes in India follow outcome based teaching and learning process. Hence, use of experiential and case study methodologies are common. Of late, there is an increased focus on training towards entrepreneurial skills as well over and above a dedicated specialisation.

The focus area of this article is the area of finance, where the structure of a typical management graduation with finance as specialisation is two-dimensional – Corporate Finance and Investment Finance. The corporate finance subjects generally include subjects Like Working Capital Management, Capital Structure Theories, Project Appraisal, Strategic Finance and Multinational Finance. As can be noticed, these topics mostly train the budding finance managers to build in the competency to run the finance function in the employer organisation. The investment finance subjects generally aim to build the skillset required to be part of the financial markets, which is an outsider perspective towards corporate management. These subjects include, Security Analysis, Financial Research, Portfolio Management, Derivatives, Alternative Investments, Corporate Valuation, Investment Banking, Financial Services and Risk Management.

In addition to these, there are few courses that either lie between or create a connect between corporate finance and investment finance. These are courses like Mergers & Acquisitions, Financial Analytics, and Behavioural Finance. There are also industry specific courses introduced by few B-Schools like Insurance Management. There are also thematic finance course like Entrepreneurial finance offered by very few institutes.

Given this context, the following discussions list the prominent changes that needs immediate attention of curriculum developers of finance courses in management institutes:

1.      Enhanced Focus on Corporate Finance

Most of the management graduates were lacking on their corporate finance tools and techniques knowledge. There is a tendency to be fancied towards careers in financial markets, especially capital markets. Skillsets like conducting a cost-benefit analysis, project appraisal were mostly learnt by the students more as numerical problem-solving activities rather than a real business problem solving enabler.

2.      International Finance as a theme

The curriculum of most Universities and B-Schools, does have international finance as a business. (In some cases, it can be found that International Business is a Specialisation). And the above are not covered in-depth (especially in MBA curriculum) with a practical approach. Students do learn about parity theories and arbitrage concept, but, they fail to see the practical application of the same.The suggested way would be to ensure the theme of international as part of every course in the curriculum.

3.      Compliance Knowledge

One of the key risk that entrepreneurs operate in is regulatory risk. The very fact that multinational corporations operate in multiple countries, invariably their preference is not to involve in regulatory tiff to the least. The current curriculum in many Indian Universities and business schools do offer courses like Business Laws, but the coverage is limited to Indian regulations. Finance students also study tax laws in addition.

4.      The State of Global Economy

The knowledge of current affairs at world level is still a gap area. There are instances where corporates have given feedback to institutes from where they recruited about the students, who could were not aware of events like BREXIT, let aside the knowledge of its impacts on the specific industries and companies.

5.      Ability to take research and data analytics based decisions

Investors, when screen ideas from entrepreneurs, wish to see proposals that are based on factual data, rigorously analysed and research based. The management education today is mostly book and case based.  Currently, management students’ exposure to research is only through few subjects like Quantitative Techniques and Research Methodology. A special training for financial research is missing largely from the management curriculums. Curriculum may include course like financial engineering, financial research and financial analytics.

6.      Higher attention to ethical finance

One of the key area where modern age businesses need to be very sensitive about would be the issue of ethics. The institutes do teach ethics as part of the management curriculum, in most cases, as a subject. An increases importance to be given in each of the finance course on the ethical issues that might creep in while managing an international business. The ethics can be an added complexity in the case studies administered in the different finance course.

Thus, upping the competency of budding entrepreneurs through above changes made in the curriculum and pedagogy, management schools, can make the students entrepreneurship-ready.

At International School of management Excellence (ISME), Bangalore many of the above recommendations have been incorporated. Entrepreneurship eco system along with various activities involving entrepreneurial knowledge is an integral part of the ISME program.

 

Authored By:

KIRAN KUMAR K V, Faculty – Finance

International School of Management Excellence (ISME), Bangalore

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