FDs fail to gauge true cost of entering rapid-growth markets

FINANCE DIRECTORS are underestimating the cost and time involved in entering rapid-growth markets, according to an Ernst & Young study, which found that more than a third of FDs’ overall costs were higher than expected.

According to the report – based on a survey of 921 CFOs from 59 countries – 43% of respondents found that investment took more time than anticipated.

Operational costs were the biggest concern, with R&D investment the most likely area to result in costs over running. In addition, costs relating to recruitment in high-growth markets were also found to be an area of spending exceeding expectations.

In the area of political cost, management of risks and exposure to bribery and corruption are the leading reasons for unanticipated expense.

“The CFO has to strike the right balance between accelerating the investment in these markets, while monitoring and controlling the pace and method of investment,” said Jay Nibbe, Ernst & Young EMEA markets leader.