How Financial Myopia Increases Corporate Risk

Abstract

When certain kinds of financial behavior lead to unintended consequences, organizations are engaging in behavior that is myopic. The negative outcomes from financially myopic behavior are often subtle, thereby failing to capture the interest or attention of executives and others who study risk management. This analysis, which is supported by primary data, well-supported theory, and industry examples, explains how financially myopic behavior increases corporate risk. Specifically, the analysis defines financial myopia as a concept and identifies a set of undesirable outcomes that may result when practicing myopic behavior. Each of these outcomes has the potential to increase corporate risk.