The realm of business is in a perpetual state of transformation, constantly giving rise to opportunities and challenges that were scarcely imaginable just 5 to 10 years ago. In today’s era of rapid technological advancement, the business landscape is shaped by new concepts, methods, and processes, demanding adaptability and innovation from today’s leaders. In this ever-evolving environment, change remains the only constant.
This article takes you on a journey through the ever-changing landscape of business today, focusing on finance and its impact on crafting sustainable solutions and dynamic leadership within management education. These considerations have become pivotal in the finance world, altering its landscape and calling for a reassessment of conventional approaches.
Our guest for this interview is none other than Dr Sandeep Rao, a distinguished figure who straddles both the financial sector and academia with remarkable expertise. Dr. Rao is currently the programme chair of the MSC in Finance at AACSB and AMBA-accredited DCU Business School, Ireland, where his contributions have left an indelible mark on the world of finance. His insights and research have been instrumental in redefining how we perceive the intricate intersection of finance, sustainability, and the profound impact of climate change.
Join us as we delve into the profound transformations underway in the financial realm and gain unique insights from Dr. Sandeep Rao, a thought leader at the forefront of this exciting journey where finance meets sustainability and climate change and what roles b-school have to play in creating innovative financial leaders for the future of business needs.
Q1. Could you share with us what led you to choose a career in academia, particularly in the field of finance?
I developed a keen interest in finance quite some time ago while managing two companies as their CEO in India. During that period, I was responsible for overseeing the financial aspects of both companies. This experience sparked my fascination with corporate finance, particularly in terms of devising investment strategies to enhance the firms’ value and tackling the challenges associated with raising capital for expansion.
Being a young entrepreneur, securing new capital for growth and other ventures was always a daunting task. My enthusiasm for stock market trading also played a significant role, and I owe it to one of my uncles, who introduced me to it. As I dabbled in stock trading, I became captivated by the various factors influencing stock movements. It became evident that sometimes, stock prices fluctuated without apparent reason, despite our attempts to analyse economic factors and various criteria that might have an impact. The phenomenon of herding behaviour and market sentiment fascinated me, as they could sway stock prices to extremes.
All these experiences provided me with the motivation to fully immerse myself in the field of finance. Teaching had been my passion even while running my company, and after a few years, I made the decision to transition into academia full-time. That’s when I pursued my PhD at the University of Strathclyde in the UK and eventually arrived here in Ireland at DCU. Currently, I have the privilege of serving as the programme chair for the MSc in Finance.
Q2: What inspired your focus on the intersection of finance and sustainability, and how do you believe this niche area can drive positive change in the world?
When we discuss sustainability, or the increasingly popular acronym ESG (Environmental, Social, and Governance), our focus often gravitates towards climate-related concerns. However, the scope of these terms extends far beyond just climate issues.
In finance, we typically emphasise a capitalistic approach centred on profit-making and decisions aimed at maximising a firm’s wealth and profit. Yet, it’s crucial to remember that the resources a company uses originate from external sources. This encompasses natural resources as inputs for production, waste disposal into the environment, and the employment of people under labour contracts. Creating a conducive work environment that avoids discrimination based on ethnicity or gender is also vital. Sustainability encompasses all these facets, going beyond climate considerations.
In the past, many businesses primarily pursued profit maximisation, often neglecting these elements. For instance, some sought to hire fewer employees and overwork them for less pay, which raises questions about sustainability and ethical business practises.
Regulators are responding with mandatory reforms that compel corporations to adopt sustainable practises and disclose relevant information. Today’s MBA and postgraduate programmes must address these challenges, equipping students not only with technical skills but also with an understanding of sustainability and climate change’s implications for business.
Investors, when assessing firms, consider various risk factors, including external influences like extreme weather events, disrupted supply chains, or production processes. For instance, wineries may face issues with grape crop yield due to extreme climatic conditions, impacting wine production.
Moreover, neglecting equal opportunities for labour can lead to legal consequences and liabilities under labour laws. Therefore, it’s essential to evaluate material impacts, and sustainability education aims to provide future managers with the skills to effectively address these challenges in running their organisations. Today, therefore, the focus has shifted to the triple-bottom-line (Planet, People, Profit).
Q3: As climate considerations become increasingly critical for financial institutions, what are the significant challenges and opportunities that will affect the finance community globally in the coming years?
If I simply look at the challenge of climate change, I’ve noticed that over the past few years, climate events such as extreme temperatures, heavy rainfall, and precipitation have become much more frequent. For instance, in India, we experience frequent and severe monsoons that cause significant damage to infrastructure due to flooding. When companies face this kind of physical risk to their assets, they must make additional investments each year. This includes higher insurance premiums because these events are occurring more often, leading to increased operational costs. This can significantly affect a company’s finances, disrupting cash flows and requiring them to raise additional capital through debt or equity issuances, which can be costly. One of my research papers published in the Journal of Corporate Finance highlights this issue (see When Rain Matters! Investments and Value Relevance). Financial institutions, like commercial banks and insurance companies, take note of such risks, increasing the cost of capital for these corporations. As a result, the company’s valuation drops, affecting mutual funds that hold these stocks in their portfolios. This, in turn, impacts the returns for retail investors, creating a domino effect and potentially one of the most significant risks we face.
On a positive note, these challenges also present opportunities to adopt sustainable investment strategies. Financial firms are now assessing various types of risk, including climate risk. They conduct stress tests and evaluate risk exposure within their portfolios. They can reduce risk exposure, implement hedging strategies to protect capital or generate additional returns based on potential events.
As a result, new job profiles are emerging, requiring individuals in finance and MBA programmes to acquire new skills to navigate the challenges of sustainability and climate risk.
Q4: How are business schools equipping themselves to be more adaptable to the evolving financial needs of a changing business environment, particularly in light of sustainability?
Yes, technology integration into our curriculum is a significant strength of our programmes at DCU. A recent market survey conducted by the CFA Institute highlighted the growing demand for specific skills among upcoming finance graduates. These skills include ESG, data visualisation, AI/ML, data analytics, and coding – all of which are in short supply within the finance community and among fresh graduates. We’ve made a concerted effort to address this within our programme.
We’re incorporating technical skills into our curriculum, teaching students how to use contemporary data analysis tools such as Python, and also traditional ones such as R and STATA. Additionally, we’ve integrated the requirement to use these tools into their dissertations, where students use them for their research.
Our virtual reality lab is another unique feature, allowing students to immerse themselves in virtual reality experiences. We’ve used this technology to teach financial ethics. VR labs provide immense potential to deliver a superior learning experience.
Collaborations with industry players like Amplify provide trading platform training, enhancing our students’ technical skills and preparing them for their careers. A significant component of our programme is financial technology (Fintech), one of the fastest-growing areas in finance. It’s witnessing automation and technological advancements, including the use of AI like Chat GPT. This presents both challenges and opportunities for academics to create innovative assessments that either incorporate AI or exclude it.
In our MSc in Finance programme, we offer a specific module on financial technology, exposing students to emerging areas like crowdfunding, blockchain, crypto and other aspects of fintech. Furthermore, we are actively promoting a new postgraduate MSc programme that focuses exclusively on financial technology and data science. Our business school is dedicated to equipping students with these essential skill sets to meet the demands of the evolving finance sector landscape.
Q5: In your opinion, what new skills will be crucial for finance enthusiasts as they prepare for careers in the finance industry, considering the changing landscape?
As a finance enthusiast, I understand that the financial landscape is undergoing a significant transformation. It’s no longer just about the traditional approach of analysing risk and returns. Sustainability has emerged as a crucial third dimension in finance. Without a grasp of sustainability concepts, your opportunities in the market may diminish over time.
The financial industry is experiencing increased regulatory mandates regarding sustainability related disclosures. For instance, SEBI in India and regulatory bodies in Europe have introduced guidelines on ESG disclosures. As a financial analyst, acquiring skills in this area is essential.
Within DCU’s MSc in Finance programme, we have a dedicated module on Sustainable Finance. In this module, we provide students with theoretical knowledge and practical skills to assess portfolios based on ESG and climate-related risk. We also teach them how to build green portfolios, a dimension not typically covered in traditional portfolio management.
We delve into various aspects of sustainability, including the United Nations’ 17 Sustainable Development Goals (SDGs) and the databases available for ESG assessment, such as Bloomberg, KLD, and Definitive Icon. We also address the challenges posed by academic papers that question the consistency of ESG scores from different databases.
Apart from our MSC Finance programme, sustainability is integrated into many of our other programmes at DCU Business School, including the MBA and specialised programmes like sustainable aviation finance and green technologies. Students with their climate/sustainability risk modelling, ESG investment and sustainable portfolio management skills acquired through this module also find career opportunities in sustainable and green finance areas.
We strongly encourage our finance students to pursue professional certifications, such as ACCA, CFA, and GARP, which offer certifications in climate risk, sustainability, and ESG. We are the academic partners ofGARP and provide scholarships to support our students in taking FRM level 1exams, including the SCR certification.
Additionally, we invite industry experts to discuss sustainability and climate change issues, and our research centres, such as the DCU Centre for Climate and Society and The Irish Institute for Digital Business, offer opportunities for students interested in research-focused paths alongside traditional industry roles.
Q6: Can you share a few examples of the types of profiles that you believe will be in demand in the next 3-4 years?
Referring to the CFA survey, significant skill gaps have been identified, notably in AI and machine learning (ML) at 61%, sustainability, DeFi, blockchain, and climate risk. These top skills are in high demand, yet there’s a scarcity of graduates possessing them. This presents a tremendous opportunity for our students to acquire these skills, making them attractive candidates for companies seeking these proficiencies.
In the sustainability realm, skills related to TCFD, GRI, and other regulatory frameworks are essential. We encourage students to pursue certifications because many companies are transitioning to net zero and face new regulations, such as the corporate sustainability reporting directive (CSRD), starting in 2024. Graduates, including MBA holders, must understand these evolving laws to effectively manage businesses.
Another critical skill graduates should cultivate, which cannot be taught directly, is foresight. They should be attuned to market cues and innovations, anticipating future challenges. For instance, automation in industries like IT poses a threat to certain job roles. Understanding the capital and innovation needed to stay competitive is crucial. As innovation accelerates, product life cycles shorten, potentially increasing operational costs.
Whether aspiring entrepreneurs or job seekers, acquiring in-demand skill sets is vital. These include sustainability and ESG risk, AI and ML, and technology-focused areas like DeFi and blockchain. These skills are sought after in both the corporate and finance sectors, with companies like Microsoft offering substantial pay packages for AI experts. Adapting to these changing dynamics by acquiring these skill sets will keep individuals competitive in the evolving job market.
Q7: Could you highlight any specific trends or areas within finance that you believe will see significant growth and innovation shortly?
Several specific trends and areas within finance are expected to experience significant growth and innovation shortly. These are:
- Sustainability and ESG
- Defi (Decentralised finance) and blockchain
- Climate Risk and TCFD
- RegTech (Regulatory technology)
- Digital currencies and central bank digital currencies (CBDCs)
- Cybersecurity
- Data Analytics
- Fintech startups
- Remote work and digital transformation
- Artificial Intelligence (AI) and machine learning (ML)
Q8: From your experience, what are the three core qualities that you believe a leader, particularly in the finance sector, should possess to navigate the complexities of the modern world successfully?
One of the most crucial qualities is foresight. Teaching someone how to look ahead to the future is challenging, but module lecturers, professors, and mentors can assist in identifying various cues and guiding you through understanding the current world. They can help you recognise which cues are significant and which require ongoing monitoring to gauge their evolution. Developing this macro-level understanding is essential for effective leadership. Once you grasp what the future may hold, your strategic decisions will align with that vision. Leaders must take calculated risks, as innovation and value creation depend on them. To innovate and create value, you must anticipate future demands and challenges. Understanding these future cues allows you to navigate organisational challenges and opportunities, elevating the organisation to greater heights.
The second most important skill for a leader, in my opinion, is employee management. Whether leading a small team or managing a department, getting the best out of your people is crucial. Creating a conducive work environment encourages individuals to go the extra mile for the team or organisation’s success. When managing a department, ensuring adequate resources and recognising ambitious individuals are vital. A good leader fosters more leaders, leveraging the available resources for the organisation’s benefit.
Other skills, like being social, possessing negotiation skills, managing stress, and having emotional intelligence, are common and also essential for effective leadership. During candidate evaluation, academic achievements are considered, but we also value additional skills and market exposure. We encourage students who may not excel academically but showcase their strengths through their CVs, SOPs, extracurricular activities, or prior job experiences. We evaluate all these dimensions before granting admission.
Q9: What advice would you offer to young finance enthusiasts who are aspiring to build successful careers in finance in 2023 and beyond?
At DCU, our MBA programme is an executive MBA, typically requiring 3 years of minimum experience. As advice on this programme, I’d recommend reaching out to the programme chair of the MBA, Prof. John McMackin, as he would be better equipped to provide insights. However, if you’re considering the MSc in Finance, which is an excellent choice, especially in Ireland’s robust financial market, I can offer some advice.
Ireland offers numerous job opportunities in the finance sector, whether you pursue an MBA in Finance or a specialised finance degree. One crucial piece of advice I’d like to share is the importance of technical proficiency. Completing a degree is just the beginning; the key is to become a specialist in a specific area by the end of your programme. While finance and MBA programmes cover a wide range of topics, specialising in a particular skill set will set you apart from other candidates. This specialisation is a valuable asset that can begin even before you join a programme, so keep that in mind as you consider your educational path.
Q10. Are there any key strategies or steps they should consider to thrive in the ever-evolving financial landscape, especially in light of sustainability and climate change concerns?
Thriving in the ever-evolving financial landscape, particularly in the context of sustainability and climate change concerns, requires a combination of strategic approaches and continuous learning. Such as:
- Acquiring relevant skills and knowledge
- Networking and collaborating
- Staying informed about regulatory changes
- Integrating sustainability into investment strategies
- Embracing innovation
- Promoting responsible finance
- Assessing climate risks and opportunities
- Adapting to changing work environments etc.
Our interview with Dr Sandeep Rao has shed light on the evolving financial landscape, with a particular emphasis on the crucial intersection of finance, sustainability, and climate change. Dr Rao’s insights into his career journey, the impact of climate change on financial institutions, and the challenges and opportunities facing the finance community in the coming years have provided valuable perspectives for finance enthusiasts and professionals.
To learn more about the MSc in Finance programme at DCU Business School – Dublin City University, visit HERE.
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