When considering investment of corporate profits, the best return for the lowest risk is always a favorable position. However, if faced with the decision to make an investment in computer software that is either a high-risk, potential high profit software or a low-risk, moderate profit software, there are several considerations to make before choosing the best investment strategy.

You're lucky! Use promo "samples20"
and get a custom paper on
"Diffusion in Business"
with 20% discount!
Order Now

The first consideration to asses is the current financial position of the company. High-risk investments should not be made unless the company can stand to lost the entire investment. Another factor that must be considered is the market for the investment product. If the market is strong, has a long history of accelerated growth or at the very least stable growth, then a higher risk can be tolerated. Additionally, if the investing company is a public one, due diligence must be adhered to in investing stockholder funds. Private companies must also consider shareholder positions.

That said, my choice of investment would be the low-risk, moderate profitability investment. Market positions of software can change quickly, and as CEO, the fiduciary responsibility I would carry for my employees, vendors, shareholders, and other stakeholders is great. I would not place the company’s financial position in peril for the sake of potential quick and lucrative profits and would garner moderate gains instead. Also, regulatory issues are less likely to crop up in moderate investing strategies over high-risk investment strategies. This is a good long-term strategy for corporate investment.

Younger employees and other stakeholders might be more willing to take the higher risk, higher profitability option, as they have a greater number of years to make up for any catastrophic losses and perhaps they do not have as much to lose, having not saved as much as older stakeholders. Investments such as the ones Google is currently making, $500 million toward “bold, bold new projects,” are attractive to millennials, because “now they have the money. But there are some companies that wouldn’t do that with the money, that wouldn’t take big, bold risks that could be big game changes (Chui, 2015). While society may view big business as having bottomless pockets, there is still a responsibility on the part of those charged with financial responsibility to accountably maintain the profitability of the company.  

  • Chui, M. (2015). How big companies can innovate. McKinsey & Company. Retrieved from http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-big-companies-can-innovate