Contributors Archives

My internship experience at HSBC

December 9, 2025 by Lang Chin SHIU

In this article, SHIU Lang Chin (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2024-2026) shares her professional experience at HSBC in Hong Kong.

About the company

HSBC (The Hongkong and Shanghai Banking Corporation) is one of the world’s largest banking and financial services organisations, serving millions of customers through Retail Banking, Wealth Management, Commercial Banking, Global Banking and Markets, and other specialised businesses.

In Hong Kong, HSBC plays a key role as a leading provider of corporate and investment banking, trade finance, and wealth management products, making it a central player in the regional and global financial system.

Logo of HSBC.

Source: the company.

My internship

During my internship in the Wealth and Personal Banking team in Hong Kong, I assisted with daily operations supporting client relationship managers and investment advisors. My work involved preparing client onboarding documents, updating records in the bank’s management system, and ensuring compliance with Know Your Customer (KYC) and internal policy requirements. I also helped compile client portfolio summaries, draft investment proposals, and conduct market research to support financial planning and investment recommendations.

Beyond these tasks, I gained exposure to a wide range of wealth management products including mutual funds, equity and bonds, structured products, and insurance solutions. I participated in internal meetings to observe how product specialists, compliance officers, and relationship managers collaborate to deliver integrated services for clients. Additionally, I contributed to the preparation of client presentations and market updates, which strengthened my understanding of how macroeconomic trends influence individual investment strategies.

My missions

My missions included supporting relationship managers and product managers with the preparation of client materials, such as simple financial summaries and presentation slides for internal and external meetings. I also assisted with internal reports, helped update client information in our internal systems, and observed calls and meetings to understand client needs and identify follow-up actions.

Required skills and knowledge

This internship required strong analytical skills, attention to detail and a solid foundation in finance and banking concepts, such as understanding financial statements, basic risk metrics and common banking products. At the same time, soft skills such as communication, time management, and professionalism were crucial, as I had to collaborate with different team members, handle confidential information carefully, and deliver work under tight deadlines.

What I learned

Through this experience, I learned how front-office and support teams interact to serve clients and manage risks within a large universal bank. I developed a more concrete understanding of how theoretical concepts from corporate finance and financial markets are applied in real transactions and client discussions, and I improved my ability to structure quantitative information clearly in reports.

Financial concepts related to my internship

Three financial concepts related to my internship: relationship banking, risk-return and capital allocation, and regulation and compliance. These concepts help explain how my daily tasks fit into the broader functioning of the bank.

Relationship banking

Relationship banking refers to building long-term relationships with clients rather than focusing only on individual transactions. In practice, this means understanding clients’ businesses, industries and strategic priorities to provide tailored solutions over time. By helping prepare client materials and following up on information requests, I contributed to the relationship-building process that supports client retention and opportunities.

Risk-return and capital allocation

Banks constantly balance risk and return when they grant loans, underwrite deals or hold assets on their balance sheet, subject to capital and liquidity constraints. Internal analyses, credit information, and financial ratios are used to assess whether the expected return of a client or transaction justifies the associated risk and capital consumption. My exposure to simple financial analysis and internal reporting showed how data and models support these risk-return decisions.

Regulation and compliance

Banking is a highly regulated industry, with strict rules on capital, liquidity, anti-money laundering (AML), know-your-customer (KYC) and conduct. Many processes in the bank, from onboarding to reporting and product approval, are shaped by these regulatory requirements. During my internship, I observed how documentation, data accuracy, and internal controls are integrated into daily workflows to ensure that business growth aligns with regulatory expectations and internal risk appetite.

Why should I be interested in this post?

An internship at HSBC offers exposure to a global banking environment, sophisticated financial products and real client situations. It also provides a strong platform to develop quantitative skills, professional communication and an understanding of how large financial institutions create value while managing complex risks—skills that are highly transferable to careers in banking, consulting, corporate finance and risk management.

Useful resources

HSBC – Official website

HSBC Internships for students and graduates

HSBC Financial Regulation

About the author

The article was written in December 2025 by SHIU Lang Chin (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2024-2026).

▶ Read all articles by SHIU Lang Chin.

My Apprenticeship Experience at Capgemini Invent

December 9, 2025 by Zineb ARAQI

In this article, Zineb ARAQI (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2025) shares her experience as an apprentice at Capgemini Invent within the Data & AI practice for Financial Services, where she contributed to major digital transformation programs across global banking institutions.

About the company

Capgemini Invent is the digital innovation, design and transformation brand of the Capgemini Group. Created in 2018, it combines strategy, technology, data, and creative design to help organizations reinvent their business models. Capgemini Invent operates in more than 30 countries and brings together over 10,000 consultants, data scientists, designers, and industry experts.

Capgemini Invent works at the intersection of strategy and execution, supporting clients through their end-to-end transformation journeys. Its expertise spans digital transformation, artificial intelligence, cloud modernization, sustainability strategy, customer experience, and data-driven operating models.

Within the wider Capgemini Group (over 340,000 employees worldwide), Invent plays a critical role in bridging management consulting with advanced technological execution. This unique positioning allows consultants to work on strategic topics while staying close to the technical realities of implementation, particularly in fast-evolving domains like AI, data governance, and digital banking.

Logo of Capgemini.
Logo Capgemini
Source: Capgemini Invent

About the department: Data & AI for Financial Services

I completed my apprenticeship within the Data & AI Financial Services practice, the division supporting major French and international banks in their data strategy and AI-driven transformation. This department works closely with Chief Data Officers (CDOs), Chief Analytics Officers, and executive committees to design, deploy, and govern enterprise-wide data architectures and AI solutions.

During my apprenticeship, I worked on strategic missions covering Europe, Middle East, and Africa, the Americas, and Asia-Pacific. Our team addressed high-impact topics such as data governance, regulatory compliance and Environmental, Social, and Governance reporting, customer intelligence, risk modelling, AI use-case acceleration, cloud migration, and the operationalization of large-scale data platforms. The practice serves flagship clients across retail banking, corporate & investment banking, insurance, and payments.

My apprenticeship experience at Capgemini Invent

My Missions

Throughout my apprenticeship, I contributed to large digital transformation programs for top French banks. My work spanned across all regions, EMEA, the Americas, and Asia reflecting the global scale of modern banking operations and the cross-regional governance challenges faced by CDOs.

My missions included:

Supporting Chief Data Officers in defining and implementing enterprise-wide data governance frameworks (metadata, lineage, quality, operating models).
Designing AI use-case portfolios, including prioritization matrices, feasibility assessments, and Return on Investment evaluations for retail and corporate banking.
Analyzing cross-regional data issues across APAC, the Americas, and EMEA to harmonize data standards and reporting structures.
Contributing to ESG & sustainable finance reporting, helping banks adapt to emerging CSRD (the EU’s new mandatory sustainability reporting directive), TNFD (the global framework for nature-related risk disclosures) and ESRS (the detailed European sustainability reporting standards) requirements using improved data pipelines.
Supporting cloud transformation initiatives by assessing data migration readiness and defining new operating models for data platforms.
Supporting cloud transformation initiatives by assessing data migration readiness and defining new operating models for data platforms.
Building dashboards and analytics tools using SQL, PowerBI, and Python to transform raw data into clear insights that support risk, compliance, and business teams in their decision-making.

These projects exposed me to the complexity of financial data ecosystems, the challenges of legacy infrastructures, and the role of AI in reshaping operational models at scale.

Required skills and knowledge

Working at the intersection of consulting, data governance, and financial services required a combination of analytical, technical, and communication skills. On the technical side, I relied on knowledge of banking business lines (retail, Corporate & Investment Banking, payments), data modelling fundamentals, SQL, cloud concepts, and AI/ML logic. Understanding regulatory frameworks and risk data aggregation standards was essential, especially when advising CDOs on compliance or data lineage workflows.

Soft skills were equally important: client communication, structured problem-solving, stakeholder management, and the ability to translate complex data topics into actionable recommendations. Working across multiple regions strengthened my adaptability and cross-cultural communication, as I collaborated with teams in Europe, the U.S., and Asia.

What I learned

This apprenticeship taught me how central data has become to the competitiveness and resilience of financial institutions. I learned how banks leverage data to enhance customer experience, reduce risk, improve compliance, and accelerate digital transformation. I also gained firsthand exposure to how global banks structure their operating models, from governance to platforms to analytics, and how AI can be responsibly integrated into decision-making processes.

Most importantly, working with CDO organizations helped me understand the strategic importance of data leadership and the challenges of transforming legacy institutions into data-driven organizations. This experience reinforced my interest in financial technology, analytics, and sustainable finance.

Business concepts related to my internship

I present below three financial, economic, and management concepts related to my apprenticeship. These concepts illustrate how data strategy, regulatory expectations, and AI-driven transformation shape the operating models of large financial institutions and how my work experience aligned with these challenges.

Data Governance and Regulatory Compliance (BCBS 239, CSRD, ESRS)

During my missions, the concept of data governance was central. Financial institutions operate under strict regulatory expectations such as BCBS 239 (risk data aggregation), CSRD (corporate sustainability reporting), and ESRS (European sustainability standards). These frameworks require banks to demonstrate full control of their data including lineage, quality, documentation, accessibility in order to produce reliable regulatory reports. My role consisted in helping banking groups structure governance models, build data quality controls, and harmonize data definitions across regions. This concept is at the heart of banking transformation, as regulatory pressure and data modernization are now inseparable.

AI Use-Case Prioritization and ROI Evaluation

A second concept I applied throughout my apprenticeship is the prioritization of AI use-cases based on business value, feasibility, and risk. Banks often have dozens of potential AI initiatives, but only a fraction deliver measurable Return on Investment (ROI). My work involved constructing prioritization matrices, evaluating data readiness, estimating financial impact, and supporting executive committees in building realistic AI roadmaps. This required balancing quantitative evaluation (cost savings, efficiency gains) with qualitative factors (regulatory risk, bias mitigation, ethical constraints). This concept is fundamental to ensuring that AI programs are scalable, responsible, and aligned with strategic objectives.

Operating Model Transformation for Data Platforms and Cloud Migration

The third concept closely linked to my missions is the transformation of operating models for data platforms migrating to the cloud. Banks are progressively replacing legacy infrastructure with modern cloud-based architectures to improve scalability, reduce costs, and accelerate analytics capabilities. My work consisted in assessing migration readiness, defining roles and responsibilities, and designing new governance processes adapted to cloud environments. This concept is essential because technology alone cannot transform an organization, it must be accompanied by clear processes, change management, and redesigned workflows.

About the author

This article was written in December 2025 by Zineb ARAQI (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021–2025).

▶ Read all articles by Zineb ARAQI.

My apprenticeship experience as a Junior Financial Auditor at EY

December 9, 2025 by Iris ORHAND

In this article, Iris ORHAND (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2026) shares her professional experience as a Junior Financial Auditor at Ernst & Young.

About the company

EY (Ernst & Young) is one of the “Big Four” professional services firms, supporting companies across audit, consulting, strategy, tax, and transactions. In audit, EY’s mission is to provide reasonable assurance on financial statements, bringing together financial analysis, an understanding of risks, internal control review, and clear, structured documentation to back audit opinions and reinforce stakeholder trust. Today, the firm brings together nearly 400,000 professionals across more than 150 countries and generated around USD 51.2 billion in revenue in its 2024 fiscal year.

Logo of EY

Source: the company.

My internship

In 2024, I joined EY in Paris La Défense as a Junior Financial Auditor on a 12-month apprenticeship. This experience gave me hands-on exposure to the audit cycle, from planning to fieldwork to final deliverables, and helped me understand how auditors balance technical rigor, deadlines, and client interaction.

My missions

Over the year, I worked on the financial analysis of seven companies, ranging from €10 million to €1.5 billion in revenue. I was part of a business unit focused on associations and the public sector, which allowed me to discover organizations with very different missions and financial setups. My largest and longest engagement was with Universal, where I really had the chance to follow a full audit cycle and understand how such a large structure operates. On a daily basis, I reviewed financial statements like the P&L, balance sheet and cash flow, identified unusual trends, dug into variances, and tried to understand the story behind the numbers. I also prepared financial analyses and draft audit conclusions for internal teams as well as for client discussions.

Even though my main focus was on the non-profit and public sector, EY gives motivated juniors the chance to work with other business units from time to time, and I really wanted to take advantage of that. Thanks to this, I was able to join a mission in the defense sector for Thalès, which was a completely different environment and pushed me to adapt quickly and broaden my understanding of industry specific risks.

Throughout the year, I relied a lot on audit tools and automation, using audit software, macros and advanced Excel to structure testing, make our work more traceable, and gain efficiency during busy periods. I was also involved in internal control assessments and risk management topics, which helped me understand how processes and day to day workflows can directly impact the reliability of financial reporting. I also participated in reviewing management forecasts, comparing them with historical results, challenging assumptions and pointing out areas where further evidence was needed. Overall, this experience helped me build a strong analytical mindset and gave me a much clearer view of how different types of organizations operate behind their financial statements.

Required skills and knowledge

This role required a combination of both hard and soft skills, and I quickly realized how important it was to balance the two. On the technical side, I relied a lot on advanced Excel, basic automation and macro logic, and a structured approach to financial analysis. A solid understanding of accounting fundamentals was essential, as well as developing strong documentation habits to keep our work clear, traceable, and easy for reviewers to follow. But beyond the technical knowledge, soft skills mattered just as much, if not more. Attention to detail was key, as was maintaining a sense of professional skepticism without falling into mistrust. Clear and calm communication helped a lot, especially when dealing with tight deadlines or last-minute requests during busy periods. I also learned how important it is to be pedagogical and professional with clients. Sometimes, audit questions can make clients feel like they are being challenged or judged, even when that’s not the intention. Taking the time to explain why we need certain information, reassuring them, and keeping the conversation constructive made the whole process smoother and helped build trust. Overall, this mix of technical rigor and human sensitivity was at the core of the role.

What I learned

This apprenticeship strengthened my ability to turn raw financial data into meaningful audit insights. Over time, I became much more comfortable linking business reality to accounting outcomes, understanding why a number moved, what it implied, and what kind of evidence was needed to support it. I also learned to think with a risk-based mindset, focusing my attention on the areas that had the greatest impact on the reliability of the financial statements. Finally, working under tight deadlines taught me how to stay organized and efficient while still maintaining high quality standards and keeping my work clear and ready for review. This combination of technical understanding, prioritization, and discipline is something I really developed throughout the year.

Financial concepts related to my internship

I present below three financial concepts related to my internship: financial statement analysis, internal control and audit risk, and forecasts, assumptions and professional skepticism.

Financial statement analysis

Audit work involves understanding not only the numbers, but also the story behind them and the operational reality that drives financial performance. Financial statement analysis played a central role throughout my apprenticeship. Trend analysis, ratio analysis, and variance explanations were essential tools to detect anomalies, identify risks, and guide the direction of our testing. By comparing periods, analyzing shifts in key indicators, and questioning unusual movements, I learned to form a more accurate picture of how an organisation truly operates.

This analytical process goes far beyond reading figures. It requires understanding the client’s business model, the context behind certain decisions, and the internal processes that ultimately shape the financial statements. Through this approach, I learned to prioritize the most sensitive areas, challenge assumptions that did not align with expectations, and connect accounting outcomes to the real functioning of the organisation. This ability to translate raw numbers into meaningful insights became one of the most valuable skills I developed during the apprenticeship.

Internal control and audit risk

Internal control quality plays a key role in shaping audit strategy. Throughout my apprenticeship, I saw how understanding a client’s processes, identifying where the risks lie, and evaluating the controls in place helps determine the likelihood of misstatements. When controls are strong and consistently applied, the risk is lower, which allows auditors to adjust their testing. When controls are weak or not operating as intended, the audit must be more detailed and rely on additional evidence.

In practice, this involved mapping processes, speaking with client teams, and observing how transactions were handled on a daily basis. It also required professional judgment to identify the areas where real vulnerabilities might exist. This experience helped me understand how internal control and audit risk are linked, and how this relationship influences the entire audit approach.

Forecasts, assumptions and professional skepticism

Comparing forecasts with historical figures is a practical way to assess the reasonableness of management’s assumptions, whether they relate to growth, margins, or cash generation. This exercise helps identify when projections are aligned with past performance and market dynamics, and when they seem overly optimistic or require stronger supporting evidence. It is also a direct application of professional skepticism, since the auditor must question the logic behind the assumptions without falling into mistrust. Over time, this analysis strengthens judgment and helps determine what is reasonable, what needs to be challenged, and where additional documentation or explanations are necessary.

Why should I be interested in this post?

This experience is especially valuable for anyone interested in audit, accounting, corporate finance, risk, or advisory. It gave me a strong understanding of financial statements, but also taught me discipline, structure, and a more analytical way of thinking. Throughout the year, I learned how to interpret numbers in a real-life context, how to stay organised under pressure, and how to communicate clearly with both clients and team members. What I liked is that these skills are not limited to audit. They can be applied in many areas such as transaction services, FP&A, or even banking. Being able to analyze financial data, understand risks, and form a well-reasoned judgment is useful in almost any finance role, which makes this apprenticeship a great foundation for whatever comes next in a finance-related career.

Useful resources

EY Official website

L’Expert-comptable.com La méthodologie d’audit : Les assertions

Wikipedia EY (entreprise)

Wikipedia Big Four (audit et conseil)

About the author

The article was written in December 2025 by Iris ORHAND (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2026).

▶ Read all articles by Iris ORHAND

The four most dangerous words in investing are, it’s different this time.

December 9, 2025 by Hadrien PUCHE

Financial markets are filled with stories of bubbles, crashes, and periods of extreme optimism or pessimism. Yet human nature remains surprisingly constant, as we are prone to believe that “this time is different.” Sir John Templeton’s famous quote reminds investors that historical patterns, lessons, and cautionary tales are often ignored in the face of conviction, novelty, or excitement.

In this article, Hadrien Puche (ESSEC, Grande École, Master in Management, 2023 / 2027) comments on this quote, exploring why believing that history will not repeat itself can be one of the most dangerous biases in investing.

About Sir John Templeton

Sir John Templeton

Source: John Templeton Foundation

Sir John Templeton was a legendary investor and philanthropist, renowned for his disciplined approach to value investing, a strategy that involves seeking out companies, markets or assets that are deeply undervalued compared to their true long term potential. Rather than following the crowds, value investors analyze the fundamentals of companies (earnings, balance sheets, management…) to make investment decisions.

Born in 1912 in the United States, he built a global investment career by seeking opportunities where others saw only risk. In 1939, at the outbreak of WW2, he borrowed money to buy shares when the market was at its lowest, including shares in 34 bankrupted companies, only 4 of which turned out to be worthless. In 1954, he founded the Templeton Growth Fund, a diversified mutual fund that sought bargains in depressed markets around the world.

Although the exact origin of this quote is unclear, it reflects Templeton’s belief that market cycles tend to repeat themselves. Investors often dismiss historical lessons when conditions seem unprecedented. In periods of optimism, they believe innovation or policy changes make downturns impossible. But Templeton argued this mindset is even more dangerous during crises: each time recession, war or financial turmoil hits, people insist the situation is entirely different from past downturns and ignore proven patterns of recovery. This leads to panic selling and missed opportunities at the moment of greatest long term value. Markets may change, but human psychology and systemic risks tend to repeat in predictable ways.

Analysis of the quote

At the heart of Templeton’s statement lies a timeless observation about human behavior. Investors frequently convince themselves that new technologies, policies, or financial instruments render past risks irrelevant. They see bubbles in real time but rationalize them as unique and unrepeatable events.

This attitude is perilous. By assuming “it is different this time,” investors often take excessive risk, neglect proper analysis, and overvalue assets. History shows that the same patterns, including leverage, speculation, overconfidence, and panic, tend to recur regardless of the era or instrument. The global financial crisis of 2008, the dot com bubble of 2000, and the 1929 crash illustrate the consequences of ignoring these lessons.

Templeton’s advice is simple yet profound. Treat each investment with humility, respect historical precedents, and avoid the hubris of believing novelty exempts you from risk. Recognizing that “this time” may not be different is not a rejection of innovation or change. It is an acknowledgment of patterns, limits, and the laws of risk.

Economic and financial concepts related to the quote

Let’s go into more details over three interesting financial concepts that are linked to this quote.

Market cyclicity

Financial markets naturally tend to move in cycles. Bull markets are followed by corrections; recessions are followed by recoveries. This inherent cyclicity explains why Templeton’s warning is so critical: periods of euphoria are often followed by downturns regardless of how unique the circumstances appear.

This cyclical pattern is most vividly illustrated by the formation of financial bubbles; situations where asset prices rise far above their intrinsic value due to speculation and excessive optimism. Investors frequently underestimate these cycles when past trends have been unusually profitable. For example, during the dot com boom, many believed that technology’s growth would render traditional valuation metrics irrelevant. The result was a speculative bubble followed by a sharp market correction.

As documented by economist Charles P. Kindleberger in his classic work, Manias, Panics, and Crashes: A History of Financial Crises, these bubbles follow a predictable, recurring pattern.

Stages of a market bubble

He argued that financial crises typically progress through phases of displacement, boom, euphoria, and eventually distress and panic. By ignoring history and assuming that novelty exempts them from these fundamental laws, investors risk participating in the formation and painful bursting of the bubble.

Understanding market cyclicity encourages investors to remain vigilant, diversify their holdings, and respect the natural flow of markets even when conditions seem unprecedented.

The Tranquility Paradox and Minsky’s Hypothesis

The tranquility paradox describes a simple but dangerous human habit: when the economy feels stable for long enough, we start believing that this stability will last forever. Rising markets, low volatility, and strong indicators give investors a sense of comfort. They begin to assume that risk has disappeared, that the system is safer than ever, and that the future will look just like the present.

This mindset is exactly what Templeton warned against, and it sits at the center of economist Hyman P. Minsky’s Financial Instability Hypothesis. Minsky’s core idea is counterintuitive: periods of stability create the conditions for instability. In other words, stability is not the end of risk, it’s the beginning of the next one.

The graph below illustrates this dynamic. When things look calm for long enough, investors slowly shift from safe financing to riskier forms, without even realizing it.

Graph of the Minsky moment

Minsky identified three stages:

Hedge financing, the safe zone: Cash flow covers both interest and principal.
Speculative financing, the risky zone: Cash flow covers interest only; principal is rolled over.
Ponzi financing, the danger zone: Cash flow covers neither interest nor principal. Survival depends on continuous borrowing or rising asset prices.

Over time, more and more activity moves into those speculative and Ponzi stages, pushing the system closer to what Minsky called a Minsky Moment, the sudden realization that debts can’t be serviced, asset values drop, confidence collapses, and panic selling begins.

This is the heart of the paradox: calm markets create overconfidence, overconfidence leads to excessive risk taking, and excessive risk taking triggers the crisis. Understanding this pattern helps investors maintain discipline, stay cautious during good times, and avoid falling for the seductive idea that “this time is different.”

Historical bias in personal finance

Templeton’s warning is not limited to market professionals; personal finance and long term investing are equally susceptible to the belief that history will not repeat itself. This risk is rooted in historical bias, a cognitive shortcut where many individuals assume that high past returns on stock indexes, real estate, or other assets will continue indefinitely, often ignoring the possibility of lower future growth or structural changes in the economy.

This bias, a form of extrapolation bias, can be highly dangerous in retirement planning, risk allocation, and portfolio construction. Relying solely on historical equity returns may lead to severe overestimation of future wealth and underestimation of risks during periods of low growth or inflation.

As articulated by economist Burton Malkiel in A Random Walk Down Wall Street, the historical record provides valuable context, but it must not be treated as a definitive forecast. Malkiel’s work supports the idea that, in an efficient market, all available information is already reflected in current prices, meaning past price movements hold no predictive power for the future.

Therefore, Templeton encourages reflection: a disciplined investor balances cautious optimism about the future with a realistic understanding of historical realities, recognizing that past performance of market indexes does not guarantee future results.

My opinion about this quote

Templeton’s insight is essential for both students and seasoned professionals. It serves as a reminder that neither euphoria nor fear should dictate investment decisions. Markets will always fluctuate, and history often rhymes if it does not repeat exactly.

However, it is also true that sometimes conditions are different, and excessive caution can prevent individuals from capitalizing on genuine opportunities. Innovation, technological change, and macroeconomic shifts can justify deviations from historical trends. The challenge lies in distinguishing between real novelty and wishful thinking.

In personal finance, this principle is particularly relevant. Many investors assume that past returns on broad indexes such as the S&P 500 are a reliable guide for the future. Structural changes, low interest rates, and demographic shifts may produce different outcomes.

Market performance of the SP500 over 30 years and different crises

Although global stock markets have historically recovered after crises, this cannot be taken as definitive evidence that they will always do so in the future.

Balancing historical awareness with flexibility and critical thinking is the essence of sound investing.

Why should you be interested in this post?

Templeton’s warning is not only a lesson in investing. It is a lesson of humility, discipline, and critical thinking. Believing “this time is different” can blind both students and professionals to risks, patterns, and opportunities. Studying history, understanding cycles, and acknowledging psychological biases improves decision making in finance and beyond.

Whether you are building a portfolio, analyzing market trends, or planning for the future, this insight encourages you to respect the lessons of the past while remaining vigilant and adaptable.

Useful resources

Investment Wisdom & Discipline

These resources provide practical advice on long term, non emotional investing and avoiding market fads.

Templeton, John. The Templeton Plan.
Malkiel, Burton G. A Random Walk Down Wall Street.

History of Financial Crises

These essential books and papers explain why markets crash and the patterns those crises follow.

Kindleberger, Charles P. (1978). Manias, Panics, and Crashes: A History of Financial Crises.
Minsky, Hyman P. (1992). The Financial Instability Hypothesis, Working Paper No. 74, Jerome Levy Economics Institute.

Market Psychology & Valuation

These sources examine the role of human behavior, psychology, and valuation issues in speculative bubbles.

Shiller, Robert. Irrational Exuberance.
Blanchard, Olivier J., and Mark W. Watson. (1982). “Bubbles, Rational Expectations and Financial Markets.”
Tirole, Jean. (1982). On the Possibility of Speculation under Rational Expectations, Econometrica, 50(5) 1163–1181.

About the Author

This article was written in 2025 by Hadrien Puche (ESSEC, Grande École, Master in Management 2023 / 2027)

My apprenticeship experience as an Executive Assistant in Internal Audit (Inspection Générale) at Bpifrance

December 8, 2025December 8, 2025 by Iris ORHAND

In this article, Iris ORHAND (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2026) shares her professional experience as an Executive Assistant in Internal Audit (Inspection Générale) at Bpifrance (January – December 2025).

About the company

Bpifrance is France’s public investment bank, created in 2012 through the merger of several state-backed institutions, and today it plays a central role in financing and supporting French companies at every stage of their development. With around €60 billion deployed in 2024 and a workforce of roughly 2,300 employees, Bpifrance combines public policy objectives with financial expertise to help businesses innovate, grow, and expand internationally. Its mission goes far beyond lending, as it also provides guarantees, equity investments, innovation funding, export support, and advisory services, making it a one-stop partner for entrepreneurs. Because it operates at the intersection of public funds and financial markets, strong governance and a solid control environment are essential, which is why functions such as Risk, Compliance, Internal Control and Internal Audit play a crucial role in ensuring responsible decision-making, transparency and the long-term protection of public interests.

Logo of Bpifrance

Source: the company.

My internship

In 2025, I completed a 12-month apprenticeship as an Executive Assistant in the Internal Audit Department, known at Bpifrance as “Inspection Générale”. This department is responsible for independently assessing the quality of the bank’s processes, controls and risk management, and for providing recommendations to strengthen the organization’s overall governance. My role combined operational coordination, process improvement and analytical support, which gave me practical exposure to how an internal audit function prepares and delivers missions, follows strict methodologies and ensures the consistency and quality of its work. Through this experience, I had the opportunity to see how internal auditors challenge processes, analyze risks, and help the organization operate more securely and efficiently.

My missions

During my apprenticeship, I contributed to the strategic optimization of internal audit processes, participated in internal audit missions, developed indicators and reporting tools, and implemented and executed a new internal audit quality review process, which is now used to assess the work of more than 30 internal auditors at each end-of-mission review period.

Required skills and knowledge

What I learned

During the year, I contributed to several projects aimed at improving both efficiency and audit quality within the Internal Audit Department. I worked on initiatives that strengthened the organization and standardization of internal audit processes, which helped teams work more consistently across missions. I also took part in internal audit assignments, supporting the different steps of the mission lifecycle and helping prepare and structure the deliverables. Another part of my work involved developing indicators and reporting tools to give management better visibility over activity levels, deadlines and key metrics. Finally, I helped implement and run a new internal audit quality review process, now used by more than thirty internal auditors, which significantly improved consistency, clarity and review readiness across the department.

Financial concepts related to my internship

I present below three financial concepts related to my internship: credit risk and portfolio quality, liquidity risk, and market risk.

Credit risk and portfolio quality

Credit risk refers to the possibility that a borrower may be unable to meet its obligations, which makes it one of the core risks for any bank. In internal audit, the objective is not to take or challenge credit decisions, but to assess whether the credit process itself is robust and well controlled. This involves reviewing how credit approvals are granted, whether delegation levels are respected, and whether all required documentation is complete, coherent and properly justified. Internal Audit also examines how exposures are monitored over time, looking at the quality of follow-up procedures, the detection of early warning indicators and the responsiveness of teams when a situation starts to deteriorate. Together, these elements help determine whether the bank’s credit processes provide a reliable framework for managing risk and maintaining a healthy loan portfolio.

Liquidity risk

Liquidity risk refers to the possibility that a financial institution may not be able to meet its short-term obligations when they fall due. In traditional banks, this risk is often linked to customer deposits, which can fluctuate and create sudden funding pressures. At Bpifrance, liquidity risk exists as well, but in a different form. The organisation does not rely on retail deposits and instead operates with stable funding sources such as the State, the Caisse des Dépôts or long-term market issuances. This structure makes liquidity risk generally less acute than in commercial banks. However, it remains a critical area because Bpifrance must still manage significant cash outflows related to loans, guarantees and investment operations, and must ensure that its funding plans and liquidity buffers remain robust and aligned with its long-term missions.

Market risk

Market risk is the risk of losses arising from changes in market variables such as interest rates, exchange rates or the value of financial assets. In many banks, it is closely linked to trading activities and exposure to volatile financial markets. At Bpifrance, market risk is present but within a much narrower scope. The institution does not operate trading desks and does not take speculative positions. Instead, its exposure comes from treasury management, the valuation of certain financial instruments and, more importantly, the evolution of the value of its equity investments. For this reason, market risk at Bpifrance is less about short-term volatility and more about the prudent management of long-term financial assets and the stability of the institution’s balance sheet over time.

Why should I be interested in this post ?

This role is highly relevant for students interested in risk, governance, internal control, compliance, audit or operational excellence. It provides a concrete view of how financial institutions identify vulnerabilities, strengthen their control environment and improve resilience over time. Working at Bpifrance also adds a meaningful dimension to the experience, because the organisation supports the french economy and operates with a clear public mission. It is also known as a responsible employer with strong working conditions and a culture that values collaboration, learning and employee wellbeing. Altogether, this makes the experience both professionally valuable and personally rewarding.

Useful resources

Bpifrance Official website

About the author

The article was written in December 2025 by Iris ORHAND (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2026).

▶ Read all articles by Iris ORHAND

My internship experience at HKTDC

December 8, 2025December 8, 2025 by Lang Chin SHIU

In this article, SHIU Lang Chin (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2024-2026) shares her professional experience as a summer intern in the Exhibition and Digital Business Department at the Hong Kong Trade Development Council (HKTDC) in Hong Kong, China.

About the company

The Hong Kong Trade Development Council (HKTDC) is a statutory body established in 1966 to promote, assist and develop Hong Kong’s trade. It serves as the international marketing arm for Hong Kong-based traders, manufacturers and service providers, with a strong focus on supporting small and medium-sized enterprises.

HKTDC operates a global network of around 50 offices, including multiple offices in Mainland China, to position Hong Kong as a two-way global investment and business hub. Through international exhibitions, conferences and business missions, it creates business opportunities for companies by connecting them with partners and buyers worldwide.

Logo of HKTDC.

Source: the company.

My internship

I joined HKTDC as a summer intern in the Exhibition and Digital Business Department in Hong Kong, which is responsible for organising large-scale trade fairs and public exhibitions. During my internship at the Hong Kong Trade Development Council (HKTDC), I joined the Exhibition and Digital Business Department, which is responsible for organising large-scale trade fairs and public exhibitions connecting global enterprises and Hong Kong’s business community. The HKTDC is a statutory body that promotes Hong Kong as an international business hub, with over 30,000 exhibitors and 400,000 trade buyers participating in its annual exhibitions.

The department I served in manages both B2B and B2C events, such as the Hong Kong Book Fair, Sports and Leisure Expo, and World of Snacks, which together attracted over 1 million visitors in 2024. These fairs not only generate significant foot traffic and publicity but also foster cross-sector collaboration and cultural exchange. For instance, the Hong Kong Book Fair alone featured more than 760 exhibitors from 30 countries and regions, drawing over 990,000 visitors across seven days at the Hong Kong Convention and Exhibition Centre (HKCEC), with estimated sales revenue exceeding HK$50 million in direct transactions and book sales.

My missions

My main missions were to assist in organising three of HKTDC’s public exhibitions — the Hong Kong Book Fair, World of Snacks, and the Hong Kong Sports & Leisure Expo. I supported the planning, coordination, and on-site execution of these events, including exhibitor liaison, logistics management, and handling visitor enquiries. My responsibilities also involved preparing fair materials, checking booth setups, coordinating with contractors and internal teams, and ensuring each exhibition zone operated smoothly throughout the event period.

In addition to operational tasks, I assisted in marketing and promotional efforts, such as preparing sponsorship materials for the Book Fair Lucky Draw and helping the marketing team create social media posts and reels to attract younger visitors. I also served as an emcee for public seminars and workshops, enhancing event engagement and communication between speakers and the audience. Through these assignments, I gained valuable exposure to event management processes, from preparation to live execution, and developed a deeper understanding of how the HKTDC integrates marketing, logistics, and stakeholder relations to deliver large-scale exhibitions.

Working at an exhibition

Required skills and knowledge

This internship required a combination of soft and hard skills. On the soft-skills side, communication, teamwork, adaptability, and customer orientation were essential, as I interacted with colleagues from different units, exhibitors from diverse backgrounds, and a high volume of visitors within tight time constraints. On the hard skills side, I benefited from having a basic knowledge of marketing and event management, as well as an understanding of how trade fairs support business development and branding.

What I learned

During the internship, I learned how large exhibitions are structured from planning stages to on-site execution and post-event follow-up. I also gained confidence in handling operational issues under pressure, prioritising tasks and communicating clearly with stakeholders who have different expectations and constraints. Ultimately, the experience deepened my interest in marketing, events, and digital business by demonstrating how well-designed exhibitions can create value for both companies and the general public.

Business and economic concepts related to my internship

I present below three business and economic concepts related to my internship: market matching and platforms, experiential marketing, and capacity/operations management. Each helps to understand how HKTDC create value for participants and how my daily tasks are connected to broader economic mechanisms.

Market matching and platforms

HKTDC is a platform that facilitates matching between buyers and sellers, particularly for SMEs looking to reach new markets. Trade fairs reduce search and transaction costs by concentrating information, products and potential partners in one place. In my missions, supporting exhibitor coordination and visitor flow contributed to making this matching process smoother and more efficient.

Experiential marketing

The Hong Kong Book Fair, World of Snacks and the Hong Kong Sports & Leisure Expo are strong examples of experiential marketing in practice. These fairs are not only about selling products; they create immersive experiences through themed zones, demonstrations, workshops and special programmes that engage visitors emotionally and physically. By helping with on-site operations and visitor interactions, I saw how layout, signage, activities and staff behaviour influence the customer journey and can strengthen brand perception and purchase intention.

Capacity and operations management

Large exhibitions require careful capacity and operations management to handle fluctuating visitor numbers while maintaining safety and service quality. Concepts such as peak-load management, queuing, crowd control, and resource allocation are evident in the way entrances, halls, and activity zones are organised. My tasks related to monitoring visitor traffic, guiding flows and coordinating with different teams were directly linked to these operational decisions, which ultimately affect exhibitors’ satisfaction and the overall performance of the event.

Why should I be interested in this post?

For a business student interested in careers related to marketing, events, consulting or trade promotion, an internship at an organisation like HKTDC offers a unique combination of public and private sector exposure. You can observe how strategic objectives are translated into concrete event formats and marketing actions, while developing practical skills in project management, communication, and data-driven decision-making. This type of experience can be a strong asset when applying for roles in event management, business development, corporate marketing or international trade-related positions.

Useful resources

Hong Kong Trade Development Council

HKTDC Hong Kong Book Fair

HKTDC World of Snacks

HKTDC Hong Kong Sports & Leisure Expo

About the author

The article was written in December 2025 by SHIU Lang Chin (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2024-2026).

▶ Read all articles by SHIU Lang Chin.

My Internship as a Junior Consultant in Marketing & Finance Studies at Eres Gestion

December 7, 2025 by Emmanuel CYROT

In this article, Emmanuel CYROT (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2026) shares his professional experience as Junior Consultant in Marketing & Finance Studies at Eres Gestion.

About the company

Eres Gestion is a leading independent player in the French employee savings (épargne salariale) and retirement savings (épargne retraite) markets. The company is part of the Eres Group, which offers a unique open-architecture approach, allowing them to select and combine the best investment funds from various management companies. With over €7 billion in assets under management (as of 12/31/2024), Eres is known for its expertise in designing and implementing profit-sharing schemes, employee share ownership plans, and individual retirement solutions (Plan Epargne Retraite or PER). Eres Gestion places a strong emphasis on socially responsible investing (SRI) and solidarity funds.

Logo of Eres Gestion

Source: the company.

My internship

I worked as a Junior Consultant in charge of Marketing & Finance Studies at Eres Gestion from September 2024 to February 2025 in Paris. I was within the company’s dual-focused research team, bridging the gap between deep financial analysis and market strategy. My role involved quantitative modeling, competitive benchmarking, and the creation of strategic content aimed at supporting sales and marketing efforts. I was reporting to Mirela Stoeva, Head of Studies and Offer at Eres Gestion.

My missions

My primary technical mission involved comprehensive Regulatory Intelligence and Data Analysis, specifically leading the update of the L’Observatoire Européen des Retraites study. This required consolidating data to quantify the evolution of retirement savings assets focusing on the post-Loi Pacte growth of the PER (Plan d’Épargne Retraite). I also conducted crucial Competitive Benchmarking by analyzing various third-party funds based on their retrocession rates to optimize Eres’s offerings. Finally, I supported the firm’s thought leadership on Employee Share Ownership (SBF 120 companies) by drafting expert articles and maintaining all key analytical supports, including the Le panorama de l’actionnariat salarié. I was tasked by the Marketing Director to conduct an internal study on the Retail’s Structured Product Environment in France.

Required skills and knowledge

My experience as a Junior Consultant in Marketing & Finance Studies at Eres Gestion was characterized by a high degree of autonomy and a constant curiosity, which were essential for navigating the complex sector of employee savings (épargne salariale) and employee share ownership. The role required me to conduct in-depth studies on the Pacte Law (Loi Pacte), fund performance analysis, and the valuation of unlisted companies. The intensive work on Excel to model these assets and flows cultivated methodical rigor and discipline, enabling me to become perfectly fluid with numbers and ensure the accuracy of strategic deliverables for the teams.

What I learned

This experience provided me with a comprehensive understanding of the French employee savings and retirement ecosystem, particularly the strategic implications of the Loi Pacte and the development of value-sharing initiatives. I significantly enhanced my skills in quantitative market analysis, competitive benchmarking, and translating complex financial information into accessible, strategic content for both internal and external stakeholders. Working closely with both the finance and marketing teams offered invaluable insight into the product life cycle, from regulatory impact assessment to market positioning.

Business and financial concepts related to my internship

I present below three business and financial concepts related to my internship: The French Retirement Savings Reform (Loi Pacte), Employee Share Ownership Plans (ESOPs), and Structured Products.

The French Retirement Savings Reform (Loi Pacte)

The 2019 Pacte Law (Plan d’Action pour la Croissance et la Transformation des Entreprises) is a major French reform aimed at simplifying the country’s complex retirement savings landscape. Its main component is the creation of the Retirement Savings Plan (Plan d’Épargne Retraite or PER), a unified and portable product replacing previous schemes. The law aimed to channel more of the French population’s savings into long-term investments, including unlisted assets like private equity, to support corporate financing and economic growth.

Employee Share Ownership Plans (ESOPs)

Employee Share Ownership Plans (ESOPs) are incentive programs that allow employees to acquire shares in their company. In France, this is a key component of the employee savings system (épargne salariale). The benefits include aligning the interests of employees and shareholders, increasing organizational commitment, and strengthening the company’s capital structure. Recent French legislation also focuses on developing and simplifying various value-sharing and profit-sharing schemes.

Structured Products

Structured products are complex financial instruments whose performance is linked to an underlying asset, index, or basket of assets. They are typically issued by banks and are essentially a combination of a “riskless” bond (to provide capital protection) and one or more derivative instruments (like options) (to provide market exposure and enhance return). They are customized to offer a specific risk/return profile, but their complexity necessitates thorough internal analysis, which was a core part of my mission.

Why should I be interested in this post?

The experience provides unique Business Intelligence training: you won’t just be supporting one study but rather working on at least two of the four major annual publications, such as the L’observatoire Européen des Retraites or the Le panorama de l’actionnariat salarié. This direct involvement gives you a unique, 360-degree insight into the strategic data, market trends, and competitive landscape of French employee savings and share ownership that few junior roles offer. Furthermore, the requirement for high autonomy and rigorous Excel work on fund benchmarking and asset modeling forces the development of methodical discipline and fluency with numbers necessary for demanding quantitative roles after graduation.

Useful resources

Blog Eres Gestion

H24 Finance

About the author

The article was written in December 2025 by Emmanuel CYROT (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2026).

▶ Read all articles by Emmanuel CYROT.

My Internship as a Product Development Specialist at Amundi ARA

December 7, 2025December 4, 2025 by Emmanuel CYROT

In this article, Emmanuel CYROT (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2026) shares his professional experience as a Product Development Specialist within the marketing team at Amundi ARA under the Senior Product Development Specialist and the Director of Marketing and Communication.

About the company

Amundi Alternative & Real Assets (ARA) is a specialized business line within the Amundi Group dedicated to private market investment solutions, managing approximately €66.1 billion in assets as of late 2025. Formally established in 2016 to consolidate the group’s capabilities, ARA employs a team of roughly 330 professionals operating across eight European investment hubs (including Paris, London, Milan, and Zurich). The division provides institutional and retail investors with access to the real economy through a diverse range of products, including real estate (its largest segment), private debt, private equity, and infrastructure, as well as fund of funds strategies and Hedge Funds UCITS (Undertakings for Collective Investment in Transferable Securities) which are a liquid versions of hedge fund strategies to a broad base of retail investors in Europe.

Logo of Amundi Investment Solutions.

Source: the company.

The Marketing team at Amundi ARA, comprising approximately 15 members (including a robust cohort of interns and apprentices), acts as a specialized bridge connecting Clients with the Sales team. Their primary mandate is to translate complex private market strategies into commercially viable investment solutions tailored for both institutional and retail investors. The team utilizes a highly structured support model where every specific area of expertise is represented by a dedicated “Investment Specialist,” each of whom is directly supported by an assigned intern.

My internship

The internship lasted 6 months between March and August 2025 and was reporting directly mostly reporting to the Senior Product Development Specialist in the team and monitoring new fund launches across to all teams within ARA: Sales, structuring, Investments Teams, Business Development, etc.

My missions

My primary mission was to participate in the conception, structuring, and launch of two new funds within the ARA range. To support this, I conducted detailed market analyses and competitive studies, specifically benchmarking French and Luxembourgish evergreen funds using professional terminals like Preqin, Pitchbook, and Bloomberg, which provided access to crucial data on performance, management fees, Assets under management, redemption gates, lock-up periods, etc.

I was also responsible for the collection, analysis, and dissemination of sectoral Business Intelligence data. I produced reports designed for the Sales, Marketing, Management teams to aid in decision-making for meetings internally and externally.

Another major part of my mission was the creation and updating of marketing materials, including pitchbooks, brochures, and product sheets. This ensured that the sales teams had accurate and compelling documentation to promote the funds to investors.

Required skills and knowledge

This role required strong communication and organizational skills to coordinate effectively across diverse teams and manage product launch deadlines. Intellectual curiosity and discipline were essential for synthesizing complex market studies without external AI assistance, alongside the ability to filter relevant business intelligence from general noise. Finally, technical proficiency in Excel and data providers (Bloomberg, Preqin, Pitchbook) was critical, coupled with a rapid understanding of the specificities of Private Assets vehicles.

What I learned

Through the benchmarking and product launch support, I gained a systematic understanding of how private asset funds are structured and positioned in a competitive market. I developed the ability to assess market needs and translate them into product features.

My contribution helped streamline the flow of Business Intelligence between the structuring and sales teams. I also deepened my understanding of the regulatory and commercial requirements for launching funds in the European market. Overall, this internship strengthened my skills in market analysis, product marketing, and strategic communication.

Financial concepts related to my internship

I present below three financial concepts related to my internship: Evergreen funds, UCITS hedge funds, and Private Equity funds.

Evergreen Funds

Unlike traditional closed-ended Private Equity or Private Debt funds with finite terms and J-curve effects, evergreen funds function as semi-liquid open-ended vehicles allowing for continuous capital recycling. My work focused on benchmarking the liquidity management mechanisms of French and Luxembourgish vehicles such as ELTIF 2.0, which is the European Long-Term Investment Fund regulation designed to increase retail and institutional investor participation in long-term, illiquid assets. I analyzed key technical features including NAV (Net asset Value) calculation frequency, the calibration of redemption gates, notice periods, and the implementation of liquidity sleeves to mitigate the asset-liability mismatch inherent in offering liquidity on illiquid underlying assets.

UCITS Hedge Funds

Alternative UCITS (often referred to as “Liquid Alts”) democratize access to hedge fund strategies (e.g., Long/Short Equity, Global Macro) by wrapping them in a regulated UCITS framework. My benchmarking work involved analyzing how these funds offer weekly or daily liquidity and high transparency to investors, unlike their offshore Cayman or BVI counterparts which often impose lock-up periods and gates.

Private Equity Funds

A central part of this role involved the strategic overhaul and tailoring of investor pitchbooks and marketing materials. This required translating complex fund structures and performance data into clear, compelling narratives for both institutional and retail investors. In that context, I learned the key concepts of Private Equity Funds alongside helpful formations that were provided by Amundi. This allowed me to familiarize well with metrics used to analyze PE funds (DPI, TVPI, J-Curve…) and different strategies (Mid-market, Impact).

Why should I be interested in this post?

This post is for you if you want to be at the forefront of asset management, specializing in the growing world of Private Markets (Private Equity, Infrastructure, Impact). It’s an excellent chance to learn deeply about product structuring and the commercial lifecycle of funds, all within a honestly great, supportive environment that ensures you gain hands-on experience and valuable strategic insight.

Useful resources

Opalesque Alternative Market Briefing

Citywire

France Invest

About the author

The article was written in December 2025 by Emmanuel CYROT (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2026).

▶ Read all articles by Emmanuel CYROT.

Interest Rates and M&A: How Market Dynamics Shift When Rates Rise or Fall

December 3, 2025 by Emanuele BAROLI

In this article, Emanuele BAROLI (MiF 2025–2027, ESSEC Business School) examines how shifts in interest rates shape the M&A market, outlining how deal structures differ when central banks raise versus cut rates.

Context and objective

The purpose is to explain what interest rates are, how they interact with inflation and liquidity, and how these variables shape merger and acquisition (M&A) activity. The intended outcome is an operational lens you can use to read the current monetary cycle and translate it into cost of capital, valuation, financing structure, and execution windows for deals, distinguishing—when useful—between corporate acquirers and private-equity sponsors.

What are interest rates

Interest rates are the intertemporal price of funds. In economic terms they remunerate the deferral of consumption, insure against expected inflation, and compensate for risk. For real decisions the relevant object is the real rate because it governs the trade-off between investing or consuming today versus tomorrow.

Central banks anchor the very short end through the policy rate and the management of system liquidity (reserve remuneration, market operations, balance-sheet policies). Markets then map those signals into the entire yield curve via expectations about future policy settings and required term premia. When liquidity is ample and cheap, risk-free yields and credit spreads tend to compress; when liquidity becomes scarcer or dearer, yields and spreads widen even without a headline change in the policy rate. This transmission, with its usual lags, is the bridge from monetary conditions to firms’ investment choices.

M&A industry — a definition

The M&A industry comprises mergers and acquisitions undertaken by strategic (corporate) acquirers and by financial sponsors. Activity is the joint outcome of several blocks: the cost and elasticity of capital (both debt and equity), expectations about sectoral cash flows, absolute and relative valuations for public and private assets, regulatory and antitrust constraints, and the degree of managerial confidence. Interest rates sit at the center because they enter the denominator of valuation models—through the discount rate—and they shape bankability constraints through the debt service burden. In other words, rates influence both the price a buyer can rationally pay and the feasibility of financing that price.

Use of leverage

Leverage translates a given cash-flow profile into equity returns. In leveraged acquisitions—especially LBOs—the all-in cost of debt is set by a market benchmark (in practice, Term SOFR at three or six months in the U.S., and Euribor in the euro area) plus a spread reflecting credit risk, liquidity, seniority, and the supply–demand balance across channels such as term loans, high-yield bonds, and private credit. That all-in cost determines sustainable leverage, shapes covenant design, and fixes the headroom on metrics like interest coverage and net leverage. It ultimately caps the bid a sponsor can submit while still meeting target returns. Corporate acquirers usually employ more modest leverage, yet remain rate-sensitive because medium-to-long risk-free yields and investment-grade spreads feed both fixed-rate borrowing costs and the WACC used in DCF and accretion tests, and they influence the value of stock consideration in mixed or stock-for-stock deals.

How interest rates impact the M&A industry

The connection from rates to M&A operates through three main channels. The first is valuation: holding cash flows constant, a higher risk-free rate or higher term premia lifts discount rates, lowers present values, and compresses multiples, thereby narrowing the economic room to pay a control premium. The second is bankability: higher benchmarks and wider spreads raise coupons and interest expense, reduce sustainable leverage, and shrink the set of financeable deals—most visibly for sponsors whose equity returns depend on the spread between debt cost and EBITDA growth. The third is market access: heightened rate volatility and tighter liquidity reduce underwriting depth and risk appetite in loans and bonds, delaying signings or closings; the mirror image under easing—lower rates, stable curves, and tighter spreads—reopens windows, enabling new-money term funding and refinancing of maturities. The net effect is a function of level, slope, and volatility of the curve: lower and calmer curves with steady spreads tend to support volumes; high or unstable curves, even with unchanged spreads, enforce selectivity.

Evidence from 2021–2024 and what the chart shows

M&A deals and interest rates (2021-2024).

Source: Fed.

The global pattern over 2021–2024 is consistent with this mechanism. In 2021, deal counts reached a cyclical peak in an environment of near-zero short-term rates, abundant liquidity, and elevated equity valuations; frictions on the cost of capital were minimal and access to debt markets was easy, so the economic threshold for completing transactions was lower. Between 2022 and 2024, monetary tightening lifted short-term benchmarks rapidly while spreads and uncertainty rose; global deal counts fell materially and the market became more selective, favoring higher-quality assets, resilient sectors, and transactions with stronger industrial logic. Over this period, global deal counts were 58,308 in 2021, 50,763 in 2022, 39,603 in 2023, and 36,067 in 2024, while U.S. short-term rates moved from roughly 0.14% to above 5%; the chart shows an inverse co-movement between the cost of money and activity. Correlation is not causation—antitrust enforcement, energy shocks, equity multiple swings, and the rise of private credit also mattered—but the macro signal aligns with monetary transmission.

What does academic research say

Academic research broadly confirms the mechanism sketched above: when policy rates rise and financing conditions tighten, both the volume and composition of M&A activity change. Using U.S. data, Adra, Barbopoulos, and Saunders (2020) show that increases in the federal funds rate raise expected financing costs, are followed by more negative acquirer announcement returns, and significantly increase the probability that deals are withdrawn, especially when monetary policy uncertainty is high. Fischer and Horn (2023) and Horn (2021) exploit high-frequency monetary-policy shocks and find that a contractionary shock leads to a persistent fall in aggregate deal numbers and values—on the order of 20–30%—with the effect concentrated among financially constrained bidders; at the same time, the average quality of completed deals improves because weaker acquirers are screened out. Work on leveraged buyouts links this to credit conditions: Axelson et al. (2013) document that cheap and abundant credit is associated with higher leverage and higher buyout prices relative to comparable public firms, while theoretical models such as Nicodano (2023) show how optimal LBO leverage and default risk respond systematically to the level of risk-free rates and credit spreads.

Useful resources

Academic articles

Adra, S., Barbopoulos, L., & Saunders, A. (2020). The impact of monetary policy on M&A outcomes. Journal of Corporate Finance, 62, 1-61.

Fischer, J. and Horn, C.-W. (2023), Monetary Policy and Mergers and Acquisitions, Working paper Available at SSRN

Horn, C.-W. (2021) Does Monetary Policy Affect Mergers and Acquisitions? Working paper.

Axelson, U., Jenkinson, T., Strömberg, P., & Weisbach, M. S. (2013) Borrow Cheap, Buy High? The Determinants of Leverage and Pricing in Buyouts, The Journal of Finance, 68(6), 2223-2267.

Financial data

Federal Reserve Bank of New York Effective Federal Funds Rate (EFFR): methodology and data

Federal Reserve Bank of St. Louis Effective Federal Funds Rate (FEDFUNDS)

OECD Data Long-term interest rates

About the author

The article was written in November 2025 by Emanuele BAROLI (ESSEC Business School, Master in Finance (MiF), 2025–2027).

▶ Read all articles by Emanuele BAROLI.

Drafting an Effective Sell-Side Information Memorandum: Insights from a Sell-Side Investment Banking Experience

December 3, 2025 by Emanuele BAROLI

In this article, Emanuele BAROLI (ESSEC Business School, Master in Finance (MiF), 2025–2027) explains how to draft an M&A Information Memorandum, translating sell-side investment-banking practice into a clear, evidence-based guide that buyers can use to progress from interest to a defensible bid.

What is an Info Memo

An information memorandum is a confidential, evidence-based sales document used in M&A processes to enable credible offers while safeguarding the sell-side process. It sets out what is being sold, why it is attractive, and how the deal is framed, and it is structured—consistently and without redundancy—around the following chapters: Executive Summary, Key Investment Highlights, Market Overview, Business Overview, Historical Financial Performance and Current-Year Budget, Business Plan, and Appendix. Each section builds on the previous one so that every claim in the narrative is traceable to data, definitions, and documents referenced in the appendix and the data room.

Executive summary

The executive summary is the gateway to the memorandum and must allow a prospective acquirer to grasp, within a few pages, what is being sold, why the asset is attractive, and how the transaction is framed. It should state the perimeter of the deal, the nature of the stake or assets included, and the essence of the equity story in language that is direct, verifiable, and consistent with the evidence presented later. The narrative should situate the company in its market, outline the recent trajectory of scale, profitability, and cash generation, and articulate—in plain terms—the reasons an informed buyer might assign strategic or financial value. Nothing here should rely on empty superlatives; every claim in the summary must be traceable to supporting material in subsequent sections and to documents made available in the data room. Clarity and internal consistency matter more than flourish: the reader should finish this section knowing what the asset is, why it matters, and what next steps the process anticipates.

Key investment highlights

This section filters the equity story into a small number of decisive arguments, each of which combines a clear assertion, hard evidence, and an explicit investor implication. The prose should explain, not advertise sustainable growth drivers, defensible competitive positioning, quality and predictability of revenue, conversion of earnings into cash, discipline in capital allocation, credible management execution, and identifiable avenues for organic expansion or bolt-on M&A. Each highlight should read as a self-contained reasoning chain—statement, proof, consequence—so that a buyer can connect operational facts to valuation logic.

Market overview

The market overview demonstrates that the asset operates within an addressable space that is sizeable, healthy, and legible. Begin by defining the market perimeter with precision so that later revenue segmentations align with it. Describe the current size and structure of demand, the expected growth over a three-to-five-year horizon, and the drivers that sustain or threaten that growth—technological shifts, regulatory trends, customer procurement cycles, and macro sensitivities. Map the competitive landscape in terms of concentration, barriers to entry, switching costs, and price dynamics across channels. Distinguish between the immediate market in which the company competes and the broader industry environment at national or international level, explaining how each influences pricing power, customer acquisition, and margin stability. All figures and characterizations should be sourced to independent references, allowing the reader to verify both methodology and magnitude.

Business overview

The business overview explains plainly how the company creates value. It should describe what is sold, to whom, and through which operating model, covering products and services, relevant intellectual property or certifications, customer segments and geographies served, and the logic of revenue generation and pricing. The text should make the differentiation intelligible—quality, reliability, speed, functionality, service levels, or total cost of ownership—and then connect that differentiation to commercial traction. Operations deserve a concise, concrete treatment: footprint, capacity and utilization, supply-chain architecture, service levels, and, where material, the technology stack and data security posture. The section should close with the people who actually run the company and are expected to remain post-closing, outlining roles, governance, and incentive alignment. The aim is not to impress with jargon but to let an investor see a coherent engine that turns inputs into outcomes.

Historical financial performance and budget

This chapter turns performance into an intelligible narrative. Present the historical income statement, balance sheet, and cash flow over a three-to-five-year window—preferably audited—and reconcile management accounts with statutory figures so that definitions, policies, and adjustments are transparent. Replace tables-for-tables’ sake with analysis: show where growth and margins come from by decomposing revenue into volume, price, and mix; explain EBITDA dynamics through efficiency, pricing, and non-recurring items; separate maintenance from growth capex; and trace how earnings convert into cash by discussing working-capital movements and seasonality. In a live process, the current-year budget should set out the explicit operating assumptions behind it, the key milestones and risks, and a brief intra-year read so a buyer can compare budget to year-to-date performance. If carve-outs, acquisitions, or other discontinuities exist, present clean pro forma views so the time series remains comparable.

Business plan

The business plan translates the equity story into forward-looking numbers and commitments that can withstand diligence. Build the plan from drivers rather than percentages: revenue as a function of volumes, pricing, mix, and retention; costs split between fixed and variable components with operational leverage and efficiency initiatives laid out; capital needs expressed through capex, working-capital discipline, and any anticipated financing structure. Provide a three-to-five-year view of P&L, cash flow, and balance-sheet implications, making explicit the capacity constraints, hiring requirements, and lead times that link initiatives to outcomes. A sound plan includes a base case and either sensitivities or alternative scenarios, together with risk mitigations that are actually within management control. If bolt-on M&A features in the strategy, describe the screening criteria, integration capability, and the nature of the synergies in a way that distinguishes aspiration from execution.

Appendix

The appendix holds detail without overloading the core narrative and preserves auditability. It should contain the full legal disclaimer and confidentiality terms, a glossary of definitions and KPIs to eliminate ambiguity, detailed financial schedules and reconciliation notes, methodological summaries and citations for market data, concise contractual information for key customers and suppliers where material, operational and ESG indicators that genuinely affect value, and a process note with timeline, bid instructions, Q&A protocols, and site-visit guidance. The organizing principle is traceability: any figure or claim in the memorandum should be traceable to a line item or document referenced here and made available in the data room.

Why should you be interested in this post?

For students interested in corporate finance and M&A, this post shows how to translate sell-side practice into a rigorous structure that investors can actually diligence—an essential skill for internships and analyst roles.

Useful resources

Corporate Finance Institute – (CFI) Confidential Information Memorandum (CIM)

DealRoom How to Write an M&A Information Memorandum

About the author

The article was written in December 2025 by Emanuele BAROLI (ESSEC Business School, Master in Finance (MiF), 2025–2027).

▶ Read all articles by Emanuele BAROLI.

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” – George Soros

December 3, 2025 by Hadrien PUCHE

In financial markets, everyone wants to be right. The temptation to make accurate predictions, about earnings, interest rates, recessions, or stock prices, is universal. But as George Soros reminds us, accuracy alone is meaningless. What truly matters is how much you profit when you’re right, and how much you lose when you’re wrong.

This quote challenges one of the deepest misconceptions in trading: the belief that success depends on predicting the future. In reality, trading success mostly depends on risk management, position sizing, and the discipline to adjust when the market proves you wrong.

About George Soros

George Soros
Warren Buffett

Source: EU

George Soros (born in 1930) is a Hungarian-American investor and philanthropist. He founded Soros Fund Management, a global macro hedge fund known for making large, directional bets across currencies, bonds, equities, and commodities.

Soros became globally famous in 1992 when he “broke the Bank of England” by shorting the British pound, a trade widely reported to have earned over $1 billion.

The European Exchange Rate Mechanism (ERM) was created to stabilize European currencies ahead of the future monetary union by keeping exchange rates within narrow fluctuation bands. When the UK joined, it agreed to maintain the pound within this band, but entered at a rate that many considered overvalued.

Seeing this imbalance, George Soros spent months building a large short position against the pound. On “Black Wednesday” in 1992, the British government failed to defend the currency through interest-rate hikes and interventions, forcing a devaluation. Soros reportedly earned over $1 billion and became known as “the man who broke the Bank of England.”

Not all of Soros’s trades were successful. In 2016, he reportedly lost close to $1 billion after wrongly predicting that markets would fall following Donald Trump’s election.

Beyond trading, Soros developed the theory of reflexivity, which argues that markets are shaped by feedback loops between perceptions and fundamentals. His philosophy emphasizes uncertainty, adaptability, and the psychological drivers behind market behavior.

The context behind this Quote

This quote is not actually from Soros. It comes from Stanley Druckenmiller—Soros’s former chief strategist—in The New Market Wizards (1994). Druckenmiller explains that the most important lesson he learned from Soros was not the importance of being right, but of structuring trades so that being right pays off and being wrong costs little.

Book cover of the new market wizards

The quote therefore reflects Soros’s investment philosophy: markets cannot be predicted with certainty, so success depends more on managing risk than on forecasting.

This mindset is foundational to modern risk management and a key reason Soros is considered one of the most influential investors of the past century.

Analysis of the Quote

The quote captures three essential ideas:

asymmetric returns
risk management
intelligent position sizing

Being right doesn’t matter unless it pays. For example, even if you forecast Nvidia’s earnings perfectly, you may still fail to profit because:

You may not have any position.
Your position may be too small.
The market may behave irrationally.
Losses on other trades may outweigh this one win.

This is the essence of risk management: structuring positions so that winners meaningfully contribute to performance while losers remain contained.

Let’s introduce three key financial ideas that relate to this quote.

1. Diversification and Position Timing

Even if your analysis is correct, the market might not react as expected, or not at the right time. This is where the distinction between trading and investing matters.

Soros’s quote speaks the language of trading: position sizing, timing, and controlling downside on each bet.

Investing, by contrast, relies less on precise timing and more on diversification, which reduces exposure to unpredictable events and smooths returns across different regimes.

Mathematically, diversification lowers portfolio variance because asset returns are imperfectly correlated. Even when individual positions behave unpredictably, a well-constructed portfolio can achieve far better risk-adjusted results than any single trade. In that sense, diversification plays a similar role for investors as stop-losses and disciplined position sizing do for traders: it manages the impact of being wrong.

The following graph illustrates how adding more independent positions reduces overall portfolio risk.

A graph representing the overall risk of a portfolio as a function of the number of positions

2. Avoid cutting winners to reinforce losers

This behavioral trap affects most investors. Soros’s approach is the opposite:

cut losing positions quickly
let winners run

Yet, due to loss aversion (as formalized by Kahneman & Tversky (1979) in Prospect Theory), investors often do the reverse:

sell winners too early
hold losers too long

This pattern is well-documented in the literature. Shefrin & Statman (1985) termed it the disposition effect: the systematic tendency to “sell winners too early and ride losers too long.” The emotional discomfort of realizing a loss often outweighs the rational need to exit a bad position.

Momentum works partly for this reason. Rising prices attract reluctant investors who delayed selling their winners, amplifying trends; meanwhile, stubbornly held losers can drift downward for longer than fundamentals alone would justify.

3. Quantitative trading: the power of averaging out

Quantitative trading is built on making many small, systematic bets with a positive expected value. The goal is not to win every trade, but to win more (or bigger) on average.

This is the practical application of the idea that:

being right occasionally with large wins
is more valuable than
being right frequently with small gains.

This also echoes Jesse Livermore’s famous line: “The market is never wrong, only opinions are.” (link)

My view on this quote

One limitation of Soros’s statement is that it implicitly assumes the reader is an active trader. In reality, today’s markets are dominated by algorithms, quantitative models, and high-frequency strategies, an environment in which most individuals are unlikely to outperform professional traders. For traders, Soros’s point is straightforward: you will often be wrong, so what matters is how you size positions and manage risk when you are.

At a literal level, the quote may also seem paradoxical: you cannot know in advance which trades will be winners or losers. But the message isn’t about prediction, it’s about discipline.

This distinction becomes especially clear when you contrast trading with investing.

Traders live in a world of short-term uncertainty and constant position adjustments, where the asymmetry between gains and losses determines survival.
Investors, on the other hand, think in years, not minutes. They rely less on timing and more on letting fundamentals and compounding work over time. For them, the “how much you lose when you’re wrong” part translates into diversification, staying invested, and avoiding irreversible mistakes rather than optimizing each individual decision.

Seen this way, Soros’s line applies to both groups, just at different scales: traders manage outcomes trade by trade; investors manage them across decades. Either way, the principle holds: success depends less on being right and more on controlling the cost of being wrong.

Why should you care about this quote ?

The lesson is not about predicting markets or mastering sophisticated position sizing. The deeper message is:

Don’t rely on being right.
Structure your trades so that mistakes are limited and successes compound.

A diversified ETF strategy naturally achieves this.
In cap-weighted indices:

winners grow in weight
losers shrink, limiting their impact
the portfolio trends with long-term market growth

This simple, robust approach aligns with Soros’s philosophy: control the downside, let the upside work.

Useful Resources

Soros, George (1987). The Alchemy of Finance. Soros explains reflexivity, asymmetry of payoff, and his macro-trading framework.
Schwager, Jack (1994). The New Market Wizards. Contains Stanley Druckenmiller’s interview where the famous quote originates.
The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence — Hersh Shefrin & Meir Statman (Journal of Finance, 1985, 40(3), 777–790).
Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263–291.

To learn more about Soros’s famous 1992 British pound trade:

Eichengreen, Barry & Wyplosz, Charles (1993). “The Unstable EMS.” A leading academic analysis of why the European Exchange Rate Mechanism (ERM) became vulnerable and how the 1992 crisis unfolded.
Bank of England (1993). Report on the Withdrawal of Sterling from the ERM. Official institutional account of the events surrounding Black Wednesday.

About the Author

This article was written in December 2025 by Hadrien Puche (ESSEC, Grande École Program, Master in Management – 2023–2027).

At what point does diversification becomes “Diworsification”?

December 1, 2025November 30, 2025 by Yann TANGUY

In this article, Yann TANGUY (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2023-2027) explains the concept of “diworsification” and shows how to avoid falling into its trap.

The Concept of Diworsification

The word “diworsification” was coined by famous portfolio manager Peter Lynch to denote the habit of supplementing a portfolio with investments which, instead of improving risk-adjusted return, add complexity. It demonstrates a common misconception of one of the fundamental pillars of the Modern Portfolio Theory (MPT): diversification.

Whereas the adage “don’t put all your eggs in one basket” exemplifies the foundation of prudent portfolio building, diworsification occurs when an investor adds too many baskets and thus loses sight of the quality and purpose of each one.

This mistake comes from a fundamental misunderstanding of what diversification actually is. Diversification is not a function of the quantity of assets owned by an investor but of the interconnections of assets. If an investor introduces assets highly correlated with assets owned to a portfolio, the diversification effect of risk is greatly reduced, and a portfolio’s possible return can be diluted.

Practical Example

Let’s assume there are two investors.

An investor who is interested in the tech industry may hold shares in 20 different software and hardware companies. This portfolio appears diversified on the surface. However, since all the companies are in the same industry, they are all subject to the same market forces and risks. In a decline of the tech industry, it is likely many of the stocks will decline at the same time due to their high correlation.

A second investor maintains a portfolio of three low-cost index funds: one dedicated to the total US stock market, another for the total international stock market, and a third focusing on the total bond market. Despite the simplicity of holding just these three positions, this investor enjoys a far more effective level of diversification in their portfolio. The assets, US stocks, international stocks, and bonds, have a low correlation with one another. Consequently, poor performance in one asset class is likely to be counterbalanced by stable or positive returns in another, resulting in a smoother return profile and a reduction in overall portfolio risk.

The portfolio of the first investor is a perfect case of diworsification. Increasing the number of technology stocks did not do any sort of risk diversification, but it introduced complexity and diluted the effect of performing stocks.

The point at which diversification began to operate to its own harm can be identified with several factors. Diversification’s initial goal is to improve the risk-adjusted return, a concept often evaluated using the Sharpe ratio. Diworsification begins when adding a new asset does not contribute to an improvement in the portfolio’s Sharpe ratio.

You can download the Excel below with a numerical example of the impact of correlation in diversification.

Here is a short summary of what is shown in the Excel spreadsheet.

We used two different portfolios, each with 2 assets and both portfolios having a similar expected return and average volatility of assets. The only difference is that the first portfolio has correlated assets, whereas the second portfolio has non-correlated assets.

Correlated portfolio returns over volatility

Non-Correlated portfolio returns over volatility

As you can see in these graphs, the diversification effect is much more potent for the non-correlated portfolio, leading to higher returns for a given volatility.

Target number of assets for a diversified portfolio

One of the most important considerations when assembling a portfolio is determining the optimal number of assets relative to which greater diversification can be realized prior to the onset of diworsification. Studies of equity markets had indicated that a portfolio of 20 to 30 stocks could diversify away unsystematic risk.

However, this number varies according to different asset classes and the complexity of the assets. In the world of alternative investments, a landmark study, “Hedge fund diversification: how much is enough?,” was published by authors François-Serge Lhabitant and Michelle Learned in 2002, for the Journal of Alternative Investments. The authors aimed to dispel the myth that ‘more is better’ in the complex world of hedge funds. They analyzed the effect of the size of the portfolio on risk and return, determining that although adding to the portfolio reduces risk, the marginal benefits of diversification diminished rapidly.

Importantly they found that adding too many funds could lead to a convergence toward average market returns, effectively eroding the “alpha” (excess return) that investors seek from active management. Furthermore, even when volatility is reduced, other forms of risks, such as skewness and kurtosis, can get worse. The significance of this research is that it offers empirical evidence for the phenomenon of ‘diworsification’—the idea that, after a certain point, adding assets to a portfolio worsens its efficiency.

Crossover from Diversification to Diworsification

The crossover from diversification to diworsification is normally marked by three main factors.

The first is diluted returns, as the number of assets increases, the performance of the portfolio starts to resemble that of a market index, albeit with elevated costs. The favorable influence of a handful of significant winners is offset by the poor performance of many other investments.

The second is an increase in costs as each asset, and particularly each asset owned through a managed fund, comes with some costs. These can be transaction costs, management fees, or costs of research. The more assets there are, the costs add up and ultimately impose a drag on final performance.

The third is unnecessary complexity as a portfolio with too many holdings becomes hard to keep tabs on, analyze, and rebalance. Which can confuse an investor about his or her asset allocation and expose the portfolio to unnecessary risk.

Causes of Diworsification

The causes for diworsification differ systematically between individual and institutional investors. For individual investors, this fundamental mistake arises from an incorrect understanding of genuine diversification, far too often leading to an emphasis on numbers rather than quality. Behavioral biases, such as familiarity bias, manifested in a preference for investing in well-known names of firms, or fear of missing out, which drives investors toward recently outperforming “hot” stocks, can generate portfolios concentrated in highly correlated securities.

The causes of diworsification for institutional investors are fundamentally different. The asset management business puts on a lot of strain that can lead to diworsification. Fund managers, measured against a comparator index, may prefer to build oversized funds whose portfolios are similar to the index, a process called “closet indexing.” Even if such a strategy reduces the risk of underperforming the comparator and thus losing clients, it also ensures that the fund will not show meaningful outperformance, all the time collecting fees for what is wrongly qualified as active management. In addition, the sale of complex product types like “funds of funds” adds further levels of fees and can mask the fact that the underlying assets are often far from unique.

How to avoid Diworsification

Diworsification doesn’t refer to an abandonment of diversification. Rather, it demands a more intelligent strategy. The emphasis should move from raw number of holdings to the correct asset allocation of the portfolio. The key is to mix asset classes with low or even adverse correlations to each other, for example, stocks, government securities, real estate, and commodities. This method allows for a more solid shelter from price fluctuations than keeping a long list of homogeneous stocks.

A low-cost and efficient means for many investors to achieve this goal is to utilize broad-market index funds and ETFs. These financial products give exposure to thousands of underlying securities representing full asset classes within a single holding, thus eliminating the difficulties and high costs of creating an equivalent portfolio of single assets.

Conclusion

Modern Portfolio Theory provides an intriguing framework for crafting portfolios for investments, and its essential concept of diversification still forms its basis. However, implementing this concept requires thoughtful consideration. Diworsification represents a misinterpretation of the objective, and not an objective to add assets simply in numbers, but to improve the risk-return of the portfolio as a whole.

A successful diversification strategy is built on a foundation of asset allocation to low-correlation assets. By focusing on the quality of diversification rather than the quantity of positions, investors can create portfolios that are closer to what they want, avoiding unnecessary costs and lower returns of a diworsified outcome.

Why should I be interested in this post?

Diworsification is a trap that should be avoided, and is really easy to avoid when you understand the mechanisms at work behind it.

Useful resources

Lhabitant, F.-S., M. Learned (2002) Hedge fund diversification: how much is enough? Journal of Alternative Investments, 5(3):23-49.

Lynch P., J. Rothchild (2000) One up on Wall Street. New York: Simon & Schuster.

Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77–91.

About the author

This article was written in November 2025 by Yann TANGUY (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2023-2027).

Understanding Snowball Products: Payoff Structure, Risks, and Market Behavior

November 29, 2025 by Tianyi WANG

In this article, Tianyi WANG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2022-2026) explains the structure, payoff, and risks of Snowball products — one of the most popular and complex structured products in Asian financial markets.

Introduction

Structured products can be positioned along a broad risk–return spectrum.

Snowball Structure Product .

Source: public market data.

As shown in the figure below, Snowball Notes belong to the category of yield-enhancement products, typically offering annualized returns of around 8% to 15%. These products sit between capital-protected structures—which provide lower but more stable returns—and high-risk leveraged instruments such as warrants. This placement highlights a key feature of Snowballs: while they provide attractive coupons under normal market conditions, they come with conditional downside risk once the knock-in barrier is breached. Understanding this relative positioning helps explain why Snowballs are widely marketed during stable or range-bound markets but may expose investors to significant losses when volatility spikes.

Snowball options have become widely traded structured products in Asian equity markets, especially in China, Korea, and Hong Kong. They appeal to investors seeking stable returns in range-bound markets. However, their path-dependent nature and embedded option risks make them highly sensitive to market volatility. During periods of rapid market decline, many Snowball products experience “knock-in” events or even large losses.

To be more specific, a knock-in event occurs when the underlying asset’s price falls below (or rises above, depending on the product design) a predetermined barrier level during the life of the product. Once this barrier is breached, the Snowball option “activates” the embedded option exposure—typically converting what was originally a principal-protected or coupon-paying structure into one that behaves like a short option position. As a result, the investor becomes directly exposed to downside risks of the underlying asset, often leading to significant mark-to-market losses.

This article explains how Snowball products work, their payoff structure, the embedded risks, and how market behavior affects investor outcomes.

Who buys Snowball products?

Snowball products are purchased mainly by:

Retail investors — especially in mainland China and Korea, attracted by high coupons and the perception of stability.
High-net-worth individuals (HNWI) — through private banking channels.
Institutional investors — such as securities firms and structured product funds, often using Snowballs for yield enhancement.

Because Snowballs involve complex embedded options, they are considered unsuitable for inexperienced retail investors. Nevertheless, retail participation has grown significantly in Asian markets.

What is a Snowball product?

A Snowball is a structured product linked to an equity index (e.g., CSI 500, HSCEI) or a single stock. It provides a fixed coupon if the underlying asset stays within certain price barriers. The product contains three key components:

Autocall (Knock-out) — product terminates early at a profit if the underlying rises above a set level.
Knock-in — if the underlying falls below a certain barrier, the investor becomes exposed to downside risk.
Coupon payment — paid periodically as long as knock-in does not occur and knock-out does not trigger.

Snowballs earn steady income in stable markets, but losses can become severe when markets experience sharp declines.

The name “Snowball” comes from the idea of a snowball rolling downhill: it grows larger over time. In structured products, the coupon accumulates (or “rolls”) as long as the product does not knock-in or knock-out. As the months go by, the investor receives a growing stream of accrued coupons — similar to a snowball becoming bigger. However, like a snowball that can suddenly break apart if it hits an obstacle, the product can suffer significant losses once the knock-in barrier is breached.

Market behavior: what does it mean?

In the context of Snowball pricing and risk, “market behavior” refers to two dimensions:

Financial market behavior (price dynamics) — movements of the underlying index or stock, volatility levels, liquidity conditions, and short-term shocks. This includes trends such as rallies, range-bound phases, or sharp sell-offs that affect knock-in and knock-out probabilities.
Investor behavior — how different market participants react: hedging flows from issuers, panic selling during downturns, retail speculation, institutional risk reduction, and shifts in investor sentiment. These behaviors can reinforce price moves and alter Snowball risk.

Together, these elements form “market behavior”: the interaction between market movements and investor actions. For Snowballs, this directly affects whether the product pays coupons, knocks out early, or falls into knock-in and creates losses.

Key barriers in Snowball products

Knock-out (Autocall) barrier

If at any observation date the price exceeds the knock-out barrier (e.g., 103%), the product terminates early and investors receive principal plus accumulated coupons.

Knock-in barrier

If the price falls below the knock-in barrier (e.g., 80%), the product enters a risk state. If at maturity the price remains below the strike, the investor bears the underlying’s loss.

How Snowball payoffs work

The payoff of a Snowball is path-dependent, meaning it depends on the entire trajectory of the underlying index, not just the final price at maturity.

There are three typical outcomes:

Knock-out outcome (early exit)

If the underlying exceeds the knock-out level early, the investor receives:
Principal + accumulated coupons

No knock-in, no knock-out (maturity coupon)

If the underlying never crosses either barrier:
Principal + full coupons

Knock-in triggered (risky outcome)

If knock-in occurs and the final price ends below strike:
The investor bears the underlying loss

Thus, Snowballs deliver strong returns in stable or mildly rising markets but carry significant losses in bear markets.

Why Snowball products are risky

Although marketed as “income products,” Snowballs are essentially short-volatility strategies. The issuer sells downside protection to the investor in exchange for coupons.

Key risks include:

High volatility increases knock-in probability
Sharp declines lead to principal losses
Liquidity risk
Complex payoff makes risks hard to evaluate for retail investors

Case study: Why many Snowballs were hit in 2022–2023

During 2022–2023, Chinese equity markets — especially the CSI 500 and CSI 1000 — experienced large drawdowns due to geopolitical tensions, policy uncertainty, and weak economic recovery. Volatility spiked, and mid-cap indices saw rapid declines.

As a result:

Many Snowballs hit knock-in levels
Investors faced large mark-to-market losses
Issuers reduced new Snowball supply due to elevated volatility

This period highlights how market sentiment and volatility regimes directly impact structured product outcomes.

According to Bloomberg (January 2024), more than $13 billion worth of Chinese Snowball products were approaching knock-in triggers. A rapid decline in the CSI 1000 index pushed many products close to their 80% knock-in barrier.

Some investors experienced immediate 15–25% losses as the embedded short-put exposure was activated.

This real-world case demonstrates how quickly Snowball risk materializes when market volatility rises.

Snowball Take Out.

Source: public market data.

How market behavior affects Snowball performance

Volatility

High volatility increases the likelihood of crossing both barriers.

Trend direction

Upward trends → more knock-outs
Range-bound markets → steady coupon income
Downward trends → knock-in risk and principal loss

Liquidity and investor flows

During sell-offs, Snowball hedging can amplify downward pressure, creating feedback loops.

Snowball knock-in chart.

Source: public market data.

Explanation: The chart illustrates a steep market decline where the underlying index falls below its knock-in barrier. When such drawdowns occur rapidly, Snowball products transition into risk mode, immediately exposing investors to the underlying’s downside. This visualizes how market volatility and negative sentiment can activate the hidden risks in Snowball structures.

Conclusion

Snowball products are appealing due to their attractive coupons, but they involve significant downside risks during volatile markets. Understanding the path-dependent nature of their payoff, barrier mechanics, and market behavior is crucial for investors and product designers.

By analyzing Snowball structures, investors gain deeper insight into how derivative products are created, priced, and risk-managed in real financial markets.

About the author

The article was written in November 2025 by Tianyi WANG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2022-2026).

My internship Experience at Bloomberg

December 8, 2025November 28, 2025 by Zineb ARAQI

In this article, Zineb ARAQI (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2025) shares her professional experience as a Summer Intern at Bloomberg LP within the Sales & Analytics department

About the company

Bloomberg L.P. is a leading global provider of financial data, analytics, media and software services. The firm was co-founded on October 1, 1981 by Michael Bloomberg along with Thomas Secunda, Duncan MacMillan and Charles Zegar. Headquartered in the Bloomberg Tower at 731 Lexington Avenue, New York, the company has expanded massively since its founding, as of 2025, it operates globally with over 26,000 employees across roughly 159 offices in more than 69 countries.

One unique aspect of Bloomberg L.P. is that it is a privately held company. It has never gone through an IPO and remains majority-owned by Michael Bloomberg. Being non-public allows Bloomberg to focus on long-term strategic goals rather than quarterly earnings pressure, reinvesting heavily in data innovation, infrastructure, and client service.

Bloomberg’s flagship product is the Bloomberg Terminal, a real-time financial data and analytics platform that remains central to the workflows of banks, asset managers, hedge funds, and other institutional investors worldwide. The Terminal enables users to access live market data, historical price series, fixed-income yield curves, equity and credit analytics, news feeds, messaging.

Fun fact: The Bloomberg terminal pioneered real-time communication in financial markets with the launch of IB Chats.

Over time, Bloomberg has diversified beyond terminals. The group now encompasses a broad media and information-services ecosystem: a global news agency, television and radio networks, newsletters, and research & analytics services for legal, tax, government, and energy sectors.

Financially, Bloomberg remains a powerhouse in its industry. The company’s main competitors in the financial information & analytics industry include Refinitiv, FactSet Research Systems, Dow Jones & Company, and other specialized vendors such as Capital IQ. However, the terminal has been deeply embedded in financial institutions for decades. It’s breadth of data, analytics, and real-time functionality make it the most comprehensive and indispensable platform in the industry

Thanks to its combination of real-time data services, analytics platforms, global media reach, and multi-asset coverage, Bloomberg L.P. occupies a central place in financial markets infrastructure powering investment decisions, regulatory research, corporate finance, media coverage and more.

Beyond its core business, Bloomberg is also recognized for its major contribution to global philanthropy through Bloomberg Philanthropies. Founded by Michael Bloomberg, the foundation donates billions of dollars to public health, climate action, education, the arts, and government innovation. It is one of the largest philanthropic organizations in the world. In 2024, Bloomberg Philantropies invested $3.7 billion around the world. Over his lifetime, Mike has so far given $21.1 billion to philanthropy.

Logo of Bloomberg.

Source: the company.

I completed a 10-week internship in Bloomberg’s Sales & Analytics department, at the very heart of global capital markets. Sales & Analytics departments, are often called the bread and butter of the company

This division sits at the heart of Bloomberg’s business model, as it supports clients using the Bloomberg Terminal and ensures they can fully leverage its data, analytics, and market intelligence. During my internship, I rotated between the Sales and Analytics teams, which allowed me to understand both the technical problem-solving side and the commercial relationship-building side of the job. We also followed intensive finance and product courses, giving all interns, regardless of previous background, a strong foundation. One of the aspects I loved most was the diversity of profiles in the cohort: many interns came from humanities or non-quantitative degrees and had never touched a terminal before, yet the team valued curiosity, communication, and adaptability just as much as financial knowledge. This made the experience dynamic, collaborative, and intellectually stimulating.

My internship experience as a summer intern at Bloomberg HQ, London

My Missions

From day one, I was immersed in a fast-paced, data-driven environment where real-time information, market microstructure, and client strategy intersect. The internship, ranked among Glassdoor’s Best Internships for 2025, gave me direct exposure to the workflows of traders, portfolio managers, and investment strategists across multiple asset classes.

Throughout the summer, I supported clients across Fixed Income, Equities, and FX, analysing their use cases to optimise workflows on the Bloomberg Terminal. I handled incoming requests, troubleshot data discrepancies, mapped liquidity fragmentation across venues, and helped clients interpret complex analytics such as yield curve construction, fair-value curves, relative-value screens, and multi-factor equity models. Working in real time with market participants strengthened my ability to think fast, communicate clearly, and translate technical concepts into actionable insights for users.

I also worked on several technical initiatives. I placed second in the BQuant project by engineering a Python model to forecast dividend behaviour using historical regimes, percentile-based distributions, volatility clustering patterns, and price-dividend spread diagnostics. With my team, I also developed a UN SDGs portfolio alignment tool, building a scoring engine that maps holdings to SDG targets using company-level disclosures, sector baselines, and ESG controversy filters helping portfolio managers assess the sustainability profile of their books.

On the product side, I pitched a feature enhancement for the Terminal: an audio-pronunciation function for client names to support global coverage teams and reduce communication friction. The proposal was selected for implementation after technical feasibility review. I additionally explored workflow gaps between Sales and Enterprise Solutions, analysing how data pipelines, entitlement systems, and API usage influence client onboarding and retention.

Beyond the technical work, the internship offered unforgettable moments: meeting Mike Bloomberg, attending senior leadership sessions on data, AI, and market evolution, and joining client visits to observe how relationships are built at scale in a highly competitive industry. This experience placed me at the intersection of analytics, markets, and client strategy, sharpening both my technical capabilities and my commercial intuition.

Required skills and knowledge

My role required a combination of hard and soft skills. On the technical side, a strong understanding of capital markets was essential particularly yield curve mechanics, equity valuation logic, and the functioning of foreign exchange markets. I relied heavily on analytical skills to diagnose client issues, read market diagnostics, and navigate complex datasets across functions like YAS (bond pricing), EQS (equity screening), and FXFM (FX forwards). In parallel, I needed strong communication skills to articulate solutions clearly, ask precise diagnostic questions, and adapt technical explanations to traders, PMs, or analysts under time pressure. The role also required resilience, curiosity, and the ability to build trust quickly with clients. This combination of market knowledge, fast problem-solving, and client-centric communication was central to succeeding in Sales & Analytics.

What I learned

The internship taught me the importance of deep technical knowledge when speaking to clients, especially traders who rely on speed and accuracy. I learned how the Bloomberg Terminal integrates data, analytics, and market infrastructure into a seamless workflow, and how small optimizations can materially improve a client’s decision-making process. I also discovered the strategic role of Sales & Analytics in connecting client needs with product development, which reinforced my interest in financial technology and market analytics.

Financial concepts related to my internship

I present below three financial concepts related to my internship. These concepts reflect the analytical tools and market mechanisms I interacted with daily, and demonstrate how my work required understanding both financial theory and real-world applications.

Yield Curves and Term Structure of Interest Rates

A major part of supporting Fixed Income clients involved helping them analyse the term structure of interest rates. I frequently used the Bloomberg function YCRV, which constructs and visualizes sovereign yield curves using benchmark bonds or swaps. Understanding the shape of the curve upward sloping, flat, or inverted allowed clients to assess market expectations for inflation, monetary policy, and recession risk. My role was to explain how yield curves are calibrated, why certain instruments are used as pillars, and how shifts in the curve affect duration, convexity, and bond valuation. This concept was central to my interactions with rates traders and portfolio managers.

Relative Value Analysis in Equities

Equity clients often asked about screening methods to identify mispriced securities. I worked extensively with EQRV (Equity Relative Value), which compares companies across valuation metrics such as EV/EBITDA, P/E ratios, or free-cash-flow yield. Mastering this concept was essential to explain how traders and analysts use relative value strategies to detect pricing discrepancies within a sector or region. My work involved guiding clients through constructing peer sets, interpreting valuation z-scores, and integrating forward earnings revisions into their screens, illustrating how quantitative equity analysis informs investment decisions.

FX Forward Pricing and Interest Rate Parity

In FX, one of the most frequent topics was the pricing of forward contracts. Using functions like FXFW and FXFM, I helped clients compute forward points, measure carry, and understand deviations from covered interest rate parity. The concept links interest rate differentials to expected currency movements and determines the fair value of forward exchange rates. My role required explaining how forward curves are built, how central bank rate expectations feed into pricing, and why liquidity varies across tenors. This concept was crucial when assisting FX traders and corporate clients in hedging currency exposures.

Useful resources

About the author

The article was written in November 2025 by Zineb ARAQI (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2025).

▶ Read all articles by Zineb ARAQI.

My Internship Experience at ISTA Italia as an In-House M&A Intern

November 26, 2025 by Ian DI MUZIO

In this article, Ian DI MUZIO (ESSEC Business School, Master in Finance (MiF), 2025–2027) shares his professional experience as an In-House M&A Intern within the Corporate Development team at ISTA Italia in Milan (May–July 2025).

Introduction

Joining ISTA Italia placed me at the intersection of energy efficiency, smart metering, and consolidation strategy in a sector undergoing deep regulatory and technological transformation. Over twelve demanding weeks, I supported live buy-and-build workstreams — screening targets, reconstructing trial balances, reclassifying financials, building valuation files, and drafting investment notes for the CEO and Board. The mandate was clear yet challenging: sharpen our thesis on distributed energy services and translate market complexity into clear, numbers-backed recommendations. This post recaps the journey — how we framed the Italian energy-efficiency landscape, which analytical approaches proved most useful, what I built and learned, and why in-house M&A provides a uniquely entrepreneurial vantage point within an operating company.

About ISTA

ISTA is a leading provider of sub-metering, heat cost allocation, and building-level energy services. The company equips multi-apartment and commercial buildings with systems and data platforms that measure and manage consumption of heat, water, and electricity, enabling fair billing, reduced waste, and compliance with European directives. In Italy, ISTA collaborates with condominium administrators, facility managers, and energy service companies (ESCOs) to modernize metering infrastructure and digitalize building operations.

Logo of ISTA Italia.

Source: the company.

Industry Context: Energy Efficiency, Data, and Regulation in Italy

Italy’s building stock is among the oldest in Europe, making energy efficiency a national priority. European initiatives such as the “Fit for 55” package and the recast of the Energy Performance of Buildings Directive drive the transition toward sub-metering, remote reading, and transparent billing. At the same time, municipalities are deploying smart-city technologies using NB-IoT and LoRaWAN networks to collect real-time data. To analyze this complex environment, I applied a PESTEL framework — mapping Political, Economic, Social, Technological, Environmental, and Legal forces. Success in this market depends on combining reliable hardware, user-friendly software, and strong financial discipline — integrating technology with capital efficiency.

From Thesis to Pipeline: Market Research and Strategic Filters

Within this context, I helped refresh ISTA’s acquisition thesis around smart metering and energy analytics. Together with a senior manager, I developed a structured screening funnel to evaluate nearly 180 potential acquisition targets across Italy. We then shortlisted 24 firms based on governance, service mix, and integration potential. Each company profile became a strategic decision tool, anticipating negotiation levers such as margin structure, contractual terms, and capital requirements. This process taught me how strategy, finance, and market intelligence converge during the earliest stages of M&A execution.

Hands-On Experience

My tasks were diverse and highly practical. I reclassified over one hundred sets of financial statements into a standardized format to achieve comparability across targets. I reconstructed several trial balances from incomplete ledgers, validated earnings adjustments, and built valuation models including discounted cash flow (DCF) analyses, trading and transaction multiples, and scenario testing. I also produced concise investment notes for management, synthesizing quantitative findings into strategic insights — identifying the drivers of return, integration pain points, and KPIs for potential earn-out mechanisms. This hands-on exposure to data reconstruction and financial storytelling strengthened my ability to produce decision-grade analysis under time constraints.

Analytical Tools and Live Workstreams

During my internship, I developed several analytical frameworks that improved the rigor of our evaluations. A churn-adjusted DCF captured contract decay and renewal patterns, while a working-capital flywheel model clarified how billing and collection cycles affected liquidity. I designed route density metrics to measure field efficiency, translating operational realities into quantitative signals of profitability. Finally, risk normalization models allowed us to calibrate warranty provisions in small-sample contexts. These frameworks converged in a live acquisition project — internally called “Project Hydra” — which involved a Northern Italian operator with 120,000 meters and a strong service base. I built revenue bridges, synergy trees, and preliminary integration plans, directly contributing to the non-binding offer and subsequent strategic blueprint.

Competitive Landscape

The competitive landscape combined OEM-affiliated service providers, ESCOs and facility managers, and regional “hidden champions”. Our benchmarking highlighted that long-term advantage stems less from product design than from operational density, data integration, and disciplined capital allocation. ISTA’s hybrid model — combining hardware-agnostic technology with robust field operations — positions it strongly within a fragmented yet consolidating market.

Beyond the Model: Stakeholders and Storytelling

In-house M&A is not a spectator role but an immersive process in which numbers must meet narratives. I joined vendor calls, prepared Q&A scripts, and defended assumptions before operational leaders. Two insights stood out. First, translating finance into field terms matters: a two-point margin improvement only gains meaning when expressed as time saved or service calls avoided. Second, stakeholder empathy is critical: condominium administrators prioritize reliability and transparency as much as pricing. Learning to align financial rationale with human incentives was among the most valuable aspects of the experience.

What I Learned

The internship taught me to build financial models that withstand operational scrutiny and to integrate compliance, interoperability, and human factors into acquisition planning. I learned that synergies materialize not in spreadsheets but in coordinated execution and communication. Ultimately, working within an operating company reshaped my understanding of M&A: the challenge is not merely valuing an asset but ensuring it thrives after acquisition.

Conclusion

My time at ISTA Italia deepened my appreciation for how valuation, strategy, and integration interlock in practice. I left with a sharper eye for recurring-revenue quality, a stronger grasp of energy-efficiency economics, and a greater respect for the intersection between regulation, technology, and field execution. Above all, I learned how to transform complex, fragmented data into clear, actionable insights that drive real-world decisions.

Why should I be interested in this post?

This post offers business students a concrete view of how corporate development operates within a dynamic, regulated industry. It demonstrates how in-house M&A blends strategy, operations, and finance, and how analytical precision translates into strategic advantage. For students interested in corporate finance, private equity, or industrial strategy, it illustrates the value of bridging numbers with narrative, and modeling with execution.

Useful resources

ISTA Official Website

European Commission Fit for 55 Package

ARERA – Italian Regulatory Authority for Energy

Initial Learn With Me (2024) Understanding Advanced Metering Infrastructure (AMI) in Smart Grid System

About the author

The article was written in November 2025 by Ian DI MUZIO (ESSEC Business School, Master in Finance (MiF), 2025–2027).

Managing Corporate Risk: How Consulting and Export Finance Complement Each Other

November 25, 2025 by Julien MAUROY

In this article, Julien MAUROY (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2025) shares technical knowledge on risk management in the business world based on his experiences. The concepts of financial risk in business, risk management, and risk analysis will be presented. All of this information is drawn from my experiences and supported by literature on the subject.

Risk as a strategic lever

This topic aims to explore how companies manage risk and transform it into a lever for decision-making and value creation. It ties in with my academic background at ESSEC Business School and my professional experience in two complementary environments: finance and risk consulting at BearingPoint and export financing at Bpifrance. Today, risk-related issues are omnipresent in business. Whether it is competitiveness, investment decisions or international expansion, every strategy involves a degree of uncertainty.

Risk is no longer just a threat, it is anticipated, studied, calculated and has a market price: the cost of seeking advice, the cost of insurance, etc. It therefore becomes a key management factor for companies that can identify, measure and integrate it into their strategic thinking. This is why understanding risk management means understanding how organisations balance growth, stability and performance. It is this dual approach : consulting (risk reduction) and insurance and export financing (risk assessment and pricing), that I would like to share with you.

Reducing and structuring risk with consulting

During my internship at BearingPoint, I discovered how consulting could help companies reduce and structure their strategic, financial and operational risks. Consultants bring an external perspective to a company’s activities. They use an analytical, neutral approach to identify organisational weaknesses and make more informed decisions.

Within the Finance & Risk department, my assignments consisted of improving the financial performance and financial management of the company’s activities. The main topics were data reliability, reporting automation, and optimisation of budgeting and forecasting processes.

By improving the quality of financial information and its analysis, we helped companies become more agile and better able to manage their business. Companies gained visibility and the ability to anticipate future developments. Consulting is therefore the ideal way to transform uncertainty into a structured and effective methodology for addressing the challenges facing these sectors.

It helps companies adopt rigorous governance, allocate resources and budgets more effectively to each activity, and avoid costly strategic errors.

Finally, consulting helps reduce companies’ exposure to risk by providing support at all levels. It makes decision-making more rational, measurable and aligned with long-term strategy in light of competition and industry challenges.

Measuring and pricing risk with export insurance and financing

My experience in Bpifrance’s Export Insurance department gave me a different perspective on risk, this time more quantitative and institutional.

In this organisation, risk is not borne solely by the customer seeking insurance, but also by Bpifrance, which insures French exporters against risk arising from foreign buyers. The risk is therefore shared between the lending bank, the insurer and the French exporter.

In export insurance, risk is not abstract: it is analysed, measured and valued. The accuracy of the analysis is paramount, involving financial, extra-financial and geopolitical analysis. An in-depth study of exporting companies and their international counterparties makes it possible to assess their solidity and their ability to honour their financial commitments.

Each project is subject to a detailed risk assessment: counterparty risk, country risk, sectoral or political risk. These factors have an immediate impact on the premium rate applied to the export guarantee. In other words, the higher the risk of loss, the higher the cost of coverage. This approach, based on collaboration with the French Treasury and the OECD, has enabled me to understand how institutions can price risk on a global scale.

In comparison, consulting helps to anticipate, explore solutions and reduce risk, while insurance seeks to assess and price risk. At that point, risk is not avoidable, but is an integral part of the economic model.

Understanding risk in order to leverage it

These two experiences taught me that risk management is not just about protecting yourself from risk, but understanding it so you can use it as a lever for growth.

In consulting, risk is controlled through better organisation, reliable information and a clear strategy. In finance, risk becomes a measurable parameter, integrated into decision-making models and valued according to its potential impact.

These two approaches are therefore complementary: one aims to make the company more resilient, the other enables it to grow despite uncertainty.

These two perspectives show that risk, far from being a constraint, can become a strategic management tool, a driver of adaptation and a source of sustainable competitiveness.

Conclusion: the strategic value of risk management

Through these experiences, I have understood that risk management is at the heart of finance and strategy.

At BearingPoint, I acquired analytical rigour and the ability to structure my thinking, at Bpifrance I gained a macroeconomic vision and a concrete understanding of the link between risk and financial performance.

This dual perspective on qualitative and quantitative risk convinced me that knowing how to assess, integrate and explain risk is a key skill for the future of business.

In an uncertain world, managing risk means managing the relevance of decisions: this is what distinguishes companies that are able to anticipate the future from those that simply react to it.

Opening the topic with the vision of Frank Knight and Nassim Taleb

The study of risk in business has been the subject of earlier studies and research, notably initiated by Frank Knight in 1921 in Risk, Uncertainty and Profit. Knight distinguishes between two essential realities: risk, which can be quantified and insured against, and uncertainty, which cannot be quantified.

This distinction is further developed by Nassim Taleb in The Black Swan (2007), where he shows that certain extreme disruptions, known as ‘black swans’, cannot be predicted or incorporated into traditional models. Examples include pandemics, political shocks and sectoral collapses. For Taleb, the issue is not only one of prediction, but of building resilient organisations capable of absorbing unexpected shocks.

These two perspectives are directly reflected in corporate risk management. I have observed how consulting helps organisations reduce their exposure to ‘measurable’ risk, and conversely, my experience at Bpifrance immersed me in an approach where risk is quantified and priced. But neither consulting nor finance can eliminate uncertainty in Knight’s sense or Taleb’s ‘black swans’. Their role is to help the company better prepare for them by strengthening strategic robustness and adaptability.

That is why risk is no longer just a threat: it becomes a management tool and a lever for structuring action, in order to build organisations that are resilient in the face of the unexpected.

Useful resources

BearingPoint

Didier Louro (25/09/2024) Le risk management au service de la croissance Bearing Point x Sellia (podcast).

Bpifrance

OECD

Treasury department

Academic articles and books

Cohen E. (1991) Gestion financière de l’entreprise et développement financier, AUF / EDICEF.

Hassid O. (2011) Le management des risques et des crises Dunod.

Knight, F. H. (1921) Risk, Uncertainty and Profit Houghton Mifflin Company.

Mefteh S. (2005) Les déterminants de la gestion des risques financiers des entreprises non financières : une synthèse de la littérature, CEREG Université Paris Dauphine, Cahier de recherche n°2005-03.

Taleb N.N. (2008) The Black Swan Penguin Group.

About the author

The article was written in November 2025 by Julien MAUROY (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2021-2025).

BCapital Fund at Bocconi: building a student-run investment fund

November 25, 2025 by Roberto RESTELLI

In this article, Roberto RESTELLI (ESSEC Business School, Master in Finance (MiF), 2025–2026) explains how he founded BCapital Fund at Bocconi University—a student‑run, global‑equity investment student association—and what it taught him about markets, leadership, and teamwork.

Founding BCapital Fund (2022)

During my final semester at Bocconi University in Milan in 2022, driven by passion for financial markets and curiosity, I founded a student society called BCapital Fund. The aim was to bring together friends with the same enthusiasm and replicate— as closely as possible— the functions of an investment fund focused exclusively on global equities, rather than a typical university club centered on articles. It became the first student‑run investment fund in Italy and among the first in Europe.

BCapital Fund – Student Investment Society at Bocconi University.
Logo of BCapital Fund
Source: BCapital Fund.

Concept & investment approach

Using various online brokers, we simulated investments with US$1,000,000 in demo capital. Each month, we published a detailed report explaining our investment theses—supported by deep company research and macro analysis—modeled on the style of hedge‑fund letters. Report after report, we improved visuals, explanations, and content to make our publications as professional as possible.

We began with eight members (first‑year BSc students in Management, Finance, and Law). At the university society fair in September, the idea resonated immediately: we received 120+ applications and grew to 25 members by October, representing countries such as Russia, India, China, Italy, and the UK.

How we structured the fund

Portfolio Department: junior analysts, senior analysts, and portfolio managers responsible for investment decisions.
Macroeconomic Department: focused on inflation, central‑bank policy (e.g., Fed rate moves), and broader trends.
Data & Reporting: charts, report layout, and document production using Word and Excel.
Legal & Communications: documentation plus LinkedIn and Instagram pages.

For six months, a crypto sleeve—run by several passionate members—delivered a +33% return, contributing positively to the main equity portfolio’s performance over the period. Over time, our approach narrowed into a global‑equity and macro strategy. We also hosted campus events to share insights and engaged the broader student body, while steadily building a simulated‑portfolio track record.

Personal reflection

Now that I’m no longer a Bocconi student, I’m not involved operationally. I handed the society over to younger bachelor students who continue to add value and deliver performance, carrying the project forward as most of the original eight members have moved on.

This was the highlight of my bachelor’s degree: pursuing a passion with friends, learning continuously, and being recognized as one of the most innovative student initiatives in Italy. Most gratifying is seeing the project thrive beyond my tenure.

What I learned

I learned a great deal from a diverse team with complementary skills. Exposure to different departments let me explore portfolio construction and valuation, macro analysis and central‑bank actions, and the technical side of modeling and reporting.

Personally, I learned the importance of organisation and clarity. To execute and lead effectively, you need rigorous structure and precision—from sequencing investment ideas and valuation frameworks to standardising report templates and social‑media posts.

Teamwork was another key skill. Working in larger groups helped me collaborate, deliver projects in teams of five or more, recognise when others’ ideas are better, adapt the final outcome, and stay open to different viewpoints—well‑suited to my extroverted personality. Finally, mutual help matters: with the right people, everything becomes easier than going solo.

Concepts related to my society

Follow your passion: the project began organically with friends who shared a genuine interest—learning more and preparing beyond what university offers.
Just do it: step outside your comfort zone, take initiative, and build—without overthinking everything that could go wrong.
Keep learning: learning never stops; hands‑on practice is often more engaging than lectures, because you work directly with the topics.

Why should I be interested in this post?

If you are an ESSEC student curious about launching student initiatives or pursuing public‑markets roles, this post offers a practical blueprint: how to design a student investment fund, structure departments, recruit and scale, and publish professional‑grade research—skills that translate directly to internships and entry‑level roles.

Conclusion

BCapital Fund was more than a student initiative—it was a proving ground for disciplined investing, collaborative leadership, and continuous learning. Building a multi‑department team, publishing research, and iterating our process taught me how to set a clear vision, structure execution, and raise the bar. Handing the project to the next cohort—and seeing it grow—confirmed the value of creating something that endures. I carry forward stronger analytical judgment, sharper communication, and a practical sense of how strategy, macro context, and rigorous reporting come together in public markets.

Useful resources

Bocconi University

Bocconi Student Finance Society LinkedIn page

SEC EDGAR company filings

European Securities and Markets Authority (ESMA)

Bloomberg Markets

About the author

The article was written in November 2025 by Roberto RESTELLI (ESSEC Business School, Master in Finance (MiF), 2025–2026).

The role of DCF in valuation

December 7, 2025November 25, 2025 by Roberto RESTELLI

In this article, Roberto RESTELLI (ESSEC Business School, Master in Finance (MiF), 2025–2026) explains the role of discounted cash flow (DCF) within the broader toolkit of company valuation—when to use it, how to build it, and where its limits lie.

Introduction to company valuation

Valuation is the process of determining the value of any asset, whether financial (for example, shares, bonds or options) or real (for example, factories, office buildings or land). It is fundamental in many economic and financial contexts and provides a crucial input for decision-making. In particular, the importance of proper company valuation emerges in the preparation of corporate strategic plans, during restructuring or liquidation phases, and in extraordinary transactions such as mergers and acquisitions (M&As). Company valuations are also useful in regulatory and tax contexts (for example, transfers of ownership stakes or determining value for tax purposes). Entrepreneurs and investors can evaluate the economic attractiveness of strategic options, including selling or acquiring corporate assets.

The need for a company valuation typically arises to answer three questions: Who needs a valuation? When is it necessary? Why is it useful?

Users and uses of company valuation

Different categories rely on valuation. In investment banks, Equity Capital Markets use it for IPO research and coverage (including fairness opinions), while M&A teams analyze transactions and prepare fairness opinions to inform deal decisions. In Private Equity and Venture Capital, valuation supports majority/minority acquisitions, startup assessments, and LBOs. Strategic investors use it for acquisitions or divestitures, stock‑option plans, and financial reporting. Accountants and appraisal experts (CPAs) prepare fairness opinions, tax valuations, technical appraisals in legal disputes, and arbitration advisory.

Beyond these, regulators and supervisory bodies (e.g., the SEC in the U.S., CONSOB in Italy) require precise valuations to ensure market transparency and investor protection. Corporate directors and managers need valuations to define growth strategies, allocate capital, and monitor performance. Courts and arbitrators request valuations in disputes involving contract breaches, expropriations, asset divisions, or shareholder conflicts. Owners of SMEs—backbone of the Italian economy—use valuations to set sale prices, manage generational transfers, or attract investors.

Examples of valuation

Valuations appear in equity research (e.g., a UBS report on Netflix indicating a short‑ to medium‑term target price based on public information), in M&A deal analyses (including subsidiary valuations and group structure changes), and in fairness opinions (e.g., Volkswagen’s acquisition of Scania). They are central in IPOs to set offer prices and expectations. Banks also rely on valuations in lending decisions to assess enterprise value and credit risk, clarifying the allocation of requested capital.

Core competencies in valuation

High‑quality valuation requires business and strategy foundations (industry analysis, competitive context, business‑model strength), theoretical and technical finance (NPV, pricing models, corporate cash‑flow modeling), and economic theory (uncertainty vs. value and limits of standard models). Valuation is not just technique: it balances modeling choices with empirical evidence and fit‑for‑purpose estimates.

A fundamental principle is that a firm’s value is driven by its ability to generate future cash flows, which must be estimated realistically and paired with an appropriate risk assessment. Higher uncertainty in cash‑flow estimates implies a higher discount rate and a lower present value. Discount‑rate choice depends on the model (e.g., CAPM for systematic risk via beta). Sustainability also matters: modern practice increasingly integrates environmental, social, and governance (ESG) factors—climate risk, regulation, and reputation—into valuation.

General approaches and specific methods

Income Approach. Present value of future benefits, risk‑adjusted and long‑term (e.g., discounted cash flows).
Market Approach. Value estimated by comparing to similar, already‑traded assets.
Cost (Asset‑Based) Approach. Value derived by remeasuring assets/liabilities to current condition.

Within these, DCF is among the most studied and used. It can be computed from the asset perspective via free cash flow to the firm (FCFF) or from the equity perspective via free cash flow to equity (FCFE). Under the asset‑based approach, other methods include net asset value and liquidation value. Additional families include economic profit (e.g., EVA, residual income) and market‑based analyses: trading multiples (e.g., P/E, EV/EBITDA), deal multiples, and premium analysis (control premia). Four further techniques often considered are current market value (market capitalisation), real options (valuing flexible investment opportunities), broker/analyst consensus, and LBO analysis (value supported by leveraged acquisition capacity).

Critical aspects and limits of valuation models

Each method has strengths and limits. In DCF, accuracy depends on projection quality; macro cycles can render forecasts unreliable. In market‑multiple analysis, industry/geography differences and poor comparables can distort results. Real options are powerful for uncertainty but require subjective parameters (e.g., volatility), introducing error bands.

Practical applications of company valuation

Firms use valuation to plan growth, allocate capital, and budget projects. In disputes and restructurings, it informs liquidation values and creditor negotiations. It also supports governance and incentives (e.g., option plans) that align managers with shareholders. In short, valuation enables both day‑to‑day management and extraordinary decisions.

Discounted Cash Flow (DCF)

What is a DCF?

The discounted cash flow (DCF) method values a company by forecasting and discounting future cash flows. Originating with John Burr Williams (The Theory of Investment Value), DCF seeks intrinsic value by projecting cash flows and applying the time value of money: one euro today is worth more than one euro tomorrow because it can be invested.

Advantages include accuracy (when inputs are sound) and flexibility (applicable across firms/projects). Risks include reliance on uncertain projections and difficulty estimating both discount rates and cash flows; hence outputs are estimates and should be complemented with other methods.

Uses of DCF

DCF is widely applied to value companies, analyse investments in public firms, and support financial planning. The five fundamental steps are:

Estimate expected future cash flows.
Determine the growth rate of those cash flows.
Calculate the terminal value.
Define the discount rate.
Discount future cash flows and the terminal value to the present.

DCF components.

Source: author.

Discounted cash flow formula (with a perpetuity‑growth terminal value):

DCF = CF₁ / (1 + r)¹ + CF₂ / (1 + r)² + … + CF_T / (1 + r)^T + (CF_T+1 / (r – g)) · 1 / (1 + r)^T

Where CF_t are cash flows in year t, r is the discount rate, and g is the long‑term growth rate.

Building a DCF

Start from operating cash flow (cash‑flow statement) and typically move to free cash flow (FCF) by subtracting capital expenditures. Example: if operating cash flow is €30m and capex is €5m, FCF = €25m. Project future FCF using growth assumptions (e.g., if 2020 FCF was €22.5m and 2021 FCF €25m, growth is ~11.1%). Use near‑term high‑growth and longer‑term fade assumptions to reflect maturation.

Determining the terminal value

The terminal value represents long‑term growth beyond the explicit forecast. A common formula is:

Terminal Value = CF_T+1 / (r – g)

Ensure g is consistent with long‑run economic growth and the firm’s reinvestment needs.

Defining the discount rate

The discount rate reflects risk. Common choices include the risk‑free government yield, the opportunity cost of capital, and the WACC (weighted average cost of capital). In equity‑side models, CAPM is often used to estimate the cost of equity via beta (systematic risk).

Discounting the cash flows

Finally, discount projected cash flows and terminal value at the chosen rate to obtain present value. Sensitivity analysis (varying r, g, margins, capex) and scenario analysis (bull/base/bear) are essential to understand valuation drivers.

Example

You can download below an Excel file with an example of DCF. It deals with Maire Tecnimont, which is an Italian engineering and consulting company specializing in the fields of chemistry and petrochemicals, oil and gas, energy and civil engineering.

Why should I be interested in this post?

If you are an ESSEC student aiming for roles in investment banking, private equity, or equity research, mastering DCF is table‑stakes. This post distills how DCF fits among valuation approaches, the exact steps to build one, and the pitfalls you must stress‑test before using your number in IPOs, M&A, or buy‑side models.

Useful resources

Damodaran online New York University (NYU).

SEC EDGAR company filings

European Central Bank (ECB) statistics

Maire Tecnimont

About the author

The article was written in November 2025 by Roberto RESTELLI (ESSEC Business School, Master in Finance (MiF), 2025–2026).

“In investing, what is comfortable is rarely profitable.” – Robert Arnott

December 1, 2025November 25, 2025 by Hadrien PUCHE

In this article, Hadrien PUCHE (ESSEC Business School, Grande École Program, Master in Management, 2023-2027) comments on Robert Arnott’s famous quote, exploring how it relates to risk-taking, behavioral biases, and the mindset required to achieve consistent, long-term performance.

About Robert Arnott

Robert Arnott

Source: Research Affiliates

Robert D. Arnott (born 1954) is an American investor, researcher, and entrepreneur. He is the founder and chairman of Research Affiliates, a firm known for its pioneering work on smart beta and alternative indexing strategies. Arnott has written extensively on asset allocation, portfolio construction, and factor investing, often challenging traditional assumptions about market efficiency.

Throughout his career, Arnott has emphasized that the best investment opportunities emerge when investors are willing to leave their comfort zone, particularly when markets are volatile, sentiment is negative, and uncertainty dominates.

Analysis of the quote

When Arnott says, “In investing, what is comfortable is rarely profitable,” he highlights a fundamental paradox of financial markets: comfort and profit rarely coexist.

Comfort comes from stability, familiarity, and consensus. Yet, markets reward those who act rationally in uncomfortable moments; those who buy when others sell and remain calm when others panic. Profitable investing often requires doing what feels counterintuitive.

However, this quote does not promote reckless risk-taking. Instead, it reminds us that genuine investment opportunities often arise in periods of uncertainty and fear, when prices deviate from intrinsic value. Success lies in maintaining discipline and conviction when others lose theirs.

Moreover, this insight resonates with Frank Knight’s distinction between risk and uncertainty. While risk can be measured and priced, true uncertainty is unknowable and unpredictable. Investing in moments of discomfort often means confronting this unmeasurable uncertainty, and taking opportunities when most investors hesitate.

Case study: March 2020 – Investing during the Covid crisis

Between February and March 2020, the S&P 500 index fell by more than 30% as investors panicked and rushed to sell their holdings. However, those who bought stocks during the downturn (or even simply stayed invested) saw the market recover to new highs within just a few months. The real losses came not from the crash itself, but from panic selling at the worst possible moment.

To better understand why the market reaction was so violent during this period, it is useful to look at the VIX index, often referred to as the “fear gauge” of financial markets. The VIX measures expected volatility based on S&P 500 option pricing, and it tends to spike when uncertainty and investor anxiety rise.

In the graph below, which compares the performance of the S&P 500 and the VIX over the 2020 Covid market crash, we can clearly see how moments of market stress correspond to sharp increases in the VIX.

The S&P 500 declines at the same time the VIX surges, illustrating the sharp rise in market fear and uncertainty.
Source: TradingView

Financial concepts related to the quote

I present below three financial concepts: the risk–return tradeoff, the psychology behind discomfort, and contrarian investing and market cycles.

The risk–return tradeoff

Arnott’s quote connects directly to the risk–return tradeoff, a cornerstone of modern portfolio theory (Harry Markowitz, 1952). The principle is simple but powerful: higher expected returns are only possible when investors accept higher levels of risk.

In quantitative terms, risk is often measured by metrics such as volatility (the standard deviation of returns) or the Value at Risk (the expected maximum loss that could occur on a given period). Assets with higher volatility tend to offer higher average returns to compensate investors for the uncertainty they bear.

This relationship is evident across asset classes: equities have historically outperformed bonds, and small-cap or emerging market stocks have outperformed large, stable firms, precisely because they are riskier and therefore less “comfortable” to hold.

	Money Markets	Bonds (20Y TB)	Equities (S&P 500)
Historical returns	3.3%	5.7%	10.3%
Historical volatility	0.1 to 1%	10%	15 to 20%

These are the average historical returns and volatility of the main asset classes over the past century.
Source: “Long-Term Performance”, Martin Capital, and CFA Institute.

Those who prioritize comfort, by investing in stable, low-volatility assets such as government bonds or blue-chip stocks, may achieve safety but at the cost of limited upside. In contrast, investors willing to face volatility intelligently, through diversification, disciplined portfolio construction, and long-term perspective, can capture higher returns over time.

Ultimately, discomfort is not a flaw of investing, but rather the price of better returns. As every investor learns sooner or later, there is no reward without risk, and no performance without volatility.

This relationship between risk and return is often illustrated by the efficient frontier: as investors take on more risk (measured by the volatility of returns), the expected long-term return increases. The graph below shows this fundamental tradeoff, highlighting how low-risk assets typically offer modest returns, while higher-risk assets provide the potential for superior performance.

Graph of performance against risk

The psychology behind discomfort

Arnott’s insight aligns closely with behavioral finance, particularly Daniel Kahneman and Amos Tversky’s concept of loss aversion. The idea is that the pain of losing is psychologically about twice as powerful as the pleasure of gaining.

The chart below illustrates this asymmetry: while gains produce only a moderate rise in satisfaction, losses trigger a disproportionately strong emotional reaction, shaping many irrational investment decisions.

Losses hurt people more than gains make them feel good

This bias makes investors instinctively avoid risk, even when it offers potential rewards.

In financial markets, this aversion to loss often translates into herd behavior: investors seek comfort in doing what others do, buying overvalued assets during booms and selling undervalued ones during downturns. While this may feel safe in the short term, it systematically destroys value over time.

Legendary investors such as Warren Buffett and Howard Marks have long warned against this mindset: “Be fearful when others are greedy, and greedy when others are fearful.” True comfort in markets is often a sign of danger, not safety.

A good example is the dot-com bubble of 2000. At the time, investing in fast-growing tech stocks felt like the comfortable and obvious choice, as prices seemed to rise endlessly. Yet when the bubble burst, it became clear that this comfort had been an illusion, and that discomfort, not consensus, is where opportunity truly lies.

Contrarian investing and market cycles

Arnott’s quote also resonates with the philosophy of contrarian investing: the art of going against prevailing market sentiment. It means buying when fear dominates and selling when euphoria prevails.

As Minsky explains in his Financial Instability Hypothesis, periods of stability paradoxically encourage increasing risk-taking, as market participants move from hedge finance to speculative and then Ponzi finance. This endogenous dynamic inevitably leads to points of fragility where confidence collapses. Kindleberger, in Manias, Panics, and Crashes, provides empirical illustration: markets swing from euphoria to distress, from boom to bust, before stability gradually returns and the cycle begins anew.

The chart below visually maps this emotional cycle, highlighting how investor psychology typically evolves from euphoria to panic and back to optimism.

Market emotions cycles graph

The most profitable opportunities often emerge during moments of maximum discomfort: recessions, crises, or market panics, when prices are depressed but fundamentals remain sound. As Sir John Templeton famously said, “The time of maximum pessimism is the best time to buy.”

However, acting against the crowd is far from easy. It requires not only analytical conviction but also emotional discipline, the ability to stay rational when everyone else reacts emotionally. This mental resilience is what separates long-term investors from speculators driven by short-term noise.

My opinion about this quote

I find Arnott’s statement particularly relevant, at a time when social media and short-term performance metrics dominate investor psychology. Platforms such as X (Twitter), Reddit, or TikTok amplify herd behavior by rewarding consensual views rather than conviction. True investment success requires patience, analytical thinking, and the ability to tolerate discomfort.

To me, this quote extends beyond finance: it reflects a mindset of resilience and independence, valuable in career decisions, entrepreneurship, and life in general, because growth rarely happens in comfort zones.

Why should you be interested in this post?

This quote provides a timeless reminder for students and young professionals: comfort is the enemy of progress.

The rise of AI-driven trading, quantitative strategies, and passive investing has made markets appear more predictable and automated. This can create new forms of comfort, a belief that algorithms or index funds can replace human judgment. However, Arnott’s message reminds us that critical thinking, curiosity are still needed to outperform others.

As Arnott’s principle suggests, growth rarely happens in comfort zones. Whether in markets, careers, or personal development, long-term success comes from embracing uncertainty intelligently, and finding opportunity where others see discomfort.

Useful Resources

Ackert, L. F., & Deaves, R. (2010). Behavioral Finance: Psychology, Decision-Making, and Markets. South-Western Cengage Learning.
Research Affiliates. (n.d.). Official Website.
Martin Capital. (2020). Long-Term Performance. Retrieved from https://www.martincapital.com/wp-content/uploads/2021/04/Long-Term-Performance-Presentation-2020.pdf

Business Books

Graham, B. (1949). The Intelligent Investor: A Book of Practical Counsel (Rev. ed.). Harper & Brothers.

Academic Articles

Arnott, R. D. (2003). The Fundamental Index: A Better Way to Invest. Financial Analysts Journal, 59.

Arnott, R. D. (2005). The Most Dangerous Equation. Financial Analysts Journal, 61.

Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263–291.

Markowitz, H. (1952). Portfolio Selection. The Journal of Finance(1), 7:77–91.

Classic Economic & Finance Works

Kindleberger, C. P. (1978). Manias, Panics, and Crashes: A History of Financial Crises. New York: Basic Books.

Minsky, H. P. (1992). The Financial Instability Hypothesis. Working Paper No. 74, Jerome Levy Economics Institute.

About the Author

This article was written in November 2025 by Hadrien PUCHE (ESSEC, Grande École Program, Master in Management – 2023–2027).

Valuing Aerospace & Defence: multiples—read through the backlog and the contract

December 3, 2025November 23, 2025 by Emanuele BAROLI

In this article, Emanuele BAROLI (ESSEC Business School, Master in Finance (MiF), 2025–2027) explains how to value Aerospace & Defence (A&D) companies by combining the right multiples with a clear view of backlog quality and contract risk. The aim is a practical lens you can apply to comps (comparables), models, and deal work.

What “Aerospace & Defence” is (and how public companies are usually organized)

A&D is the cluster of businesses that design, certify, manufacture and support aircraft and spacecraft, military platforms and mission systems, plus the electronics, software and services that make them work in the field. Public companies tend to report along economically distinct pillars—platforms, defence electronics/sensors, space, and services—with some firms also disclosing a cyber arm. This segmentation matters because revenue recognition (delivery vs over-time), margin stability and cash conversion differ meaningfully across these buckets.

Two concrete blueprints help set the map. Boeing organizes reporting into Commercial Airplanes (BCA), Defense, Space & Security (BDS) and Global Services (BGS). Its notes clarify that most BCA revenue is recognized at the point of aircraft delivery, whereas a substantial portion of BDS and some BGS contracts are long-term and recognized over time.

Leonardo discloses six sectors—Helicopters, Defence Electronics & Security, Cyber & Security Solutions, Aircraft, Aerostructures and Space—and reports orders, backlog, revenues and EBITA by sector, a structure that lends itself naturally to “sum-of-the-parts (SOTP)” and mix analysis.

The multiples: why EV/EBIT is the workhorse in A&D

In A&D, EV/EBIT typically describes the economics better than EV/EBITDA (Enterprise Value / Earnings Before Interest, Taxes, Depreciation and Amortization). The reason is accounting, not fashion. Under IFRS (International Financial Reporting Standards), development costs that meet recognition criteria are often capitalized and then amortized, (qualifying development expenditure is recognised as an intangible asset and is therefore amortised rather than depreciated: depreciation is reserved for tangible property, plant and equipment, whereas amortisation is the systematic allocation of the cost of intangibles (such as capitalised development) over their useful lives). While under US GAAP (United States Generally Accepted Accounting Principles), development is more frequently expensed. Amortization is an economic cost of prior engineering and industrialization. EBITDA ignores it; EBIT does not. Comparing peers with different R&D capitalization policies on EV/EBITDA makes heavy capitalizers look artificially “cheap.”

Example:

In the 2024 financial year, Leonardo reports revenues of €17,763 million, EBITDA of €2,219 million and EBIT of €1,271 million. In management terms, EBITDA is obtained by adding back depreciation and amortisation to EBIT, which implies depreciation and amortisation of about €948 million (2,219 − 1,271). In formula form, EBITDA = EBIT + Depreciation + Amortisation = 1,271 + 948 ≈ 2,219. All figures are in millions of euros, with minor differences due to rounding. EBIT already includes the economic cost of depreciation and amortisation (including, for example, the amortisation of capitalised development costs), while EBITDA adds it back and therefore does not “see” this cost, which is why EV/EBIT often provides a more meaningful economic comparison than EV/EBITDA when analysing A&D companies like Leonardo.

A pocket example makes the point. Suppose revenue is 1,000 and cash operating costs are 800: EBITDA equals 200. Add 40 of industrial D&A and 100 of amortized, capitalized R&D: EBIT is 60. An 8× EV/EBITDA screen implies EV of 1,600; a 12× EV/EBIT anchor implies 720. The optics diverge because EBITDA suppresses an economically meaningful charge. In practice, anchor on EV/EBIT; if you must use EBITDA for market convention, normalize it by re-expensing capitalized R&D or by separating “maintenance-like” D&A from program amortization.

Always cross-check with EV/FCF (or FCF yield). In long-cycle industries, the acid test is whether booked economics pass through working capital and reach free cash once advances unwind, inventories build for rate ramps, milestones slip and remediation spending intrudes. EV/FCF disciplines any narrative derived from headline EBIT.

Backlog: quantity is the headline; quality drives value

Backlog is tomorrow’s revenue promise—but investors price what kind of promise it is. Start from a clean definition. Boeing defines total backlog as unsatisfied or partially satisfied performance obligations for which collection is probable and no customer-controlled contingencies remain; it excludes options, announced deals without definitive contracts, orders customers can unilaterally terminate, and unfunded government amounts.

Scale and coverage provide context, not answers. At 31 December 2024, Boeing reported $521.3bn of total backlog, comprising $498.8bn contractual and $22.5bn unobligated, while cautioning that delivery delays, production disruptions or “entry-into-service (EIS)” slippage can reduce backlog.

Leonardo closed 2024 with book-to-bill of ~1.2×, backlog above €44bn and roughly 2.5 years of production coverage—solid starting points if the mix is funded and executable.

Quality is the determinant. Judge the funded share (appropriated vs contingent), the margin mix by program, concentration by customer or platform, and—critically—executability against industrial capacity, certification gates and supplier health. A smaller, well-funded, high-margin and diversified backlog with credible executability justifies stronger multiples than a larger book that is lightly funded, concentrated or operationally brittle.

Revenue and Backlog diversification.

Source: Leonardo S.p.A. — FY 2024 Preliminary Results Presentation (PDF).

The chart shows the percentage distribution of Leonardo’s backlog in relation to its product portfolio, highlighting the weight of the various business lines and geographical areas.

Leonardo DRS Backlog.

Source: Leonardo DRS — Q3 2024 results article (StockStory).

Over time, the chart shows new orders increasingly outpacing those delivered: after an initial phase of balance (stable backlog), from late 2022 incoming orders rise and expand the order book. The jump between Q3 and Q4 2023 points to one or more major contracts, while in 2024 the order flow remains strong enough to keep the backlog at high levels.

Contract risk: the paper your revenue sits on

Two nominally similar contracts can encode very different economics. Firm-fixed-price development places cost risk squarely on the contractor; technical uncertainty and learning-curve effects can generate catch-up losses and re-time cash. Cost-type contracts reimburse allowable costs plus a fee, limiting downside but capping upside and typically improving visibility. Milestone/performance-based structures align incentives but increase timing volatility. IDIQ/framework arrangements set a ceiling but do not become firm until orders are called.

For valuation, portfolio contract mix is a prior on both the dispersion of outcomes and the discount you apply: heavy fixed-price development warrants more conservative multiples and scenario ranges; cost-type and service-heavy portfolios support tighter distributions of cash outcomes.

Execution and supply chain: where backlog becomes (or does not become) cash

A&D manufacturing is materials- and certification-intensive. Boeing highlights reliance on aluminium, titanium and composites, and the prevalence of sole-source components whose qualification can take a year or more; failure of suppliers to meet standards or schedules can affect quality, deliveries and program profitability.

Airworthiness oversight also constrains timing: in 2024 the FAA communicated it would not approve 737 production-rate increases beyond 38/month or additional lines until quality and safety standards are met.

In models, these realities alter revenue phasing, inventory (often rising when rates slip), the sustainability of customer advances, and, where remediation is required, the cadence of capex and engineering spend. The practical consequence is straightforward: multiples are a consequence of cash reliability. EV/EBIT (or normalized EBITDA) captures the economic load; backlog quality and contract mix explain whether those economics are repeatable; factory and supply chain determine the when of revenue and free cash.

Typical business mix—why it matters for valuation

Commercial platforms (e.g., BCA) recognize revenue largely at delivery, with program accounting and rate decisions driving cash swings; 2024 disclosures explicitly tie BCA results to deliveries, rate disruptions and quality actions.

Defence and space portfolios (e.g., BDS; Leonardo Defence Electronics & Space) contain more over-time revenue and often greater visibility when cost-type work dominates, yet fixed-price development can be painful, as the program notes above illustrate.

Services/MRO and training (e.g., BGS; Leonardo’s cyber and service activities) usually provide steadier margins and higher cash conversion, acting as stabilizers in a SOTP.

A compact playbook you can actually use

Start with EV/EBIT—or, if you must use EBITDA, normalize for capitalized development. Then check EV/FCF to interrogate cash conversion through advances, inventory and milestone timing.

Qualify the order book before you underwrite it: insist on firm definitions (exclude options and unilateral cancellations), isolate the funded share, examine program-level margins and concentration, and test executability against rate plans, certification gates and supplier health. Boeing’s split between contractual ($498.8bn) and unobligated ($22.5bn) backlog is a clean template; Leonardo’s book-to-bill (~1.2×) and ~2.5-year coverage are strong if the mix converts.

Read the contract. Fixed-price development deserves a discount for volatility; cost-type merits a premium for visibility; IDIQ ceilings are not orders until called. Boeing’s fixed-price development programs provide a cautionary case. Underwrite execution with a materials and supplier map (Al/Ti/composites; sole-source exposure) and with regulatory gates (FAA/EASA) that can cap rates irrespective of demand.

Why should I be interested in this post?

As an ESSEC finance student focused on valuation and transactions, you will frequently compare A&D peers and screen targets. This guide helps you avoid EBITDA traps, read backlog quality, and translate contract structures into realistic cash and multiple assumptions that travel well into comps, equity research, and M&A models.

Useful resources

The Boeing Company — Official website

Leonardo S.p.A. — Official website

Leonardo DRS — Q3 2024 results article (StockStory)

Leonardo S.p.A. — FY 2024 Preliminary Results Presentation (PDF)

Leonardo S.p.A. — Integrated Annual Report 2024 (PDF)

The Boeing Company — Form 10-K (Year Ended Dec 31, 2024) — EDGAR

About the author

The article was written in November 2025 by Emanuele BAROLI (ESSEC Business School, Master in Finance (MiF), 2025–2027).

▶ Read all articles by Emanuele BAROLI.

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