Review: "fi-eng. & corporate-strategy " (1996)

Tu96 is an HBR article, about financial-engineering - with example strategies.

The biography of the author, Prof. Peter Tufano (Nov. 2001), at Harvard Business School referred to this 1996 article, as "the framework unifying the course (Corporate Financial Engineering)" - and that, the course material is used in HBS, and elsewhere. Therefore, in a review-and-refusal of "fi-eng as a management-tool," the paper is this.

why fi-eng, at all?

Two case-studies presented by Prof. Tufano, appear to fit fi-eng, in a special way.

• Enron, as a gas bank, juggled with fi-eng - per transaction, with a customer
• the Cemex case is idiosyncratic - if only to circumvent a law of Mexico.

The other two case-studies, are tangential. To dump fi-eng away, would help.

• Rhone-Poulenc is affine to moo-duh-ruh-buh, to motivate the employee
• TVA is affine with RRRR. (i.e: Relay. No buy-and-sell.)

of history

This was the case-study. I had read and refused it - at a time, when Enron was still considered a positive case. Although I postponed to communicate it, Enron was fast enough to get in trouble. So, I resumed the case, and (later) published what I think.

By the time Tu96 was published, some speculative [ab]uses of fi-eng were known as massive bankruptcies (e.g:Orange County, December 1994, had lost US$ 1.7 billion).

In his article, Prof. Tufano compares those collapsed schemes to (paraphrasing) "other branches of" engineering, like civil engineering where bridges can collapse under excessive conditions like major earthquakes. I would argue, though, whether fi-eng is to build the bridge, or the fault-line. The chaos is the "engineered" (or, gambled).

Tu96 is an attempt to relate fi-eng to the corporate-strategy - not to gamble. I was not convinced, though. I was to offer more intuitive, non-fi-eng

I read the paper, around 2000. There was no Enron explosion, yet.

In 2001, Enron was bad news.

In 2003, I was into publishing about finance & Enron, too.