Financial Management 2025: Key Syllabus Updates

Chapter 3: Risk and Decision-Making

The 2025 syllabus adds new content on several concepts in Chapter 3, focusing on data analytics and its role in risk management and decision-making.

• Data analytics: The process of collecting, organising, and analysing large data sets to uncover patterns and information for future business decisions.
• Big data: Datasets whose size exceeds the capacity of typical database software to capture, store, manage, and analyse.
• Data mining: The analysis of large datasets to discover patterns, relationships, and insights using AI and statistical algorithms.

The Workbook emphasises the importance of aligning a company's data analytics activities with their risk management strategy. It introduces predictive analytics, which uses historical and current data to create predictions about the future and support risk management.

Section 3.10.1 addresses data bias, which occurs when the analysed data is not representative of the intended population. This bias can be introduced during data collection or analysis.

Technological concepts covered include:

• Machine Learning: Computer systems' ability to learn from and make predictions based on large volumes of data without explicit programming.
• Blockchain: A type of distributed ledger technology that records data in a decentralised, immutable manner across multiple nodes.
• Distributed ledger: Decentralised databases recording transactions across multiple sites, enhancing transparency and reducing the need for audits.

Chapter 4: Sources of Finance

Chapter 4 provides content on several emerging technologies reshaping the business landscape and opening access to new financing platforms.

1. Financial Technology (FinTech):
   • Transforming financial services globally
   • Advancements include crowdfunding, peer-to-peer lending, cryptocurrency apps, digital wallets, and algorithm-driven financial advice
2. Crowdfunding:
   • Digital platforms enabling companies to raise equity finance by pitching to investors online
   • Advantages for startups with limited access to traditional financing
   • Costs include platform fees, legal and advisory costs, and administrative overheads
3. Initial Coin Offering (ICO):
   • Similar to an IPO but based on cryptocurrency
   • Raises finance through blockchain crowd sales
   • Tokens might give shareholders product/service access
   • Increasing regulatory scrutiny
4. Revenue-based finance (RBF):
   • Allows businesses to raise short-to-medium-term capital in exchange for investors receiving a percentage of ongoing revenues
   • Repayment period typically 1 to 5 years
   • Payments tied to performance
5. Artificial Intelligence in financing decisions:
   • AI risk assessment and credit scoring
   • Loan approval and automation
   • Matching lenders and borrowers
   • Fraud prevention
   • Real-time financial analysis
   • Predictions and forecasting

The Workbook also introduces the concept of cryptocurrency, defined as a digital asset functioning as a medium of exchange and store of value, operating through decentralised computer networks.

Chapter 5: Cost of Capital

Chapter 5 discusses the concept of revenue-based finance in relation to cost of capital calculations. The Workbook notes that the cost of revenue-based finance can be calculated using the IRR (Internal Rate of Return) spreadsheet function.

Chapter 8: Business Valuation

Chapter 8 incorporates new content on digital assets and their valuation:

• Definition of digital assets as electronically stored content that adds value to the company
• Types of digital assets, including digital photos, audio-visual media, spreadsheets, word documents, websites, blockchain technology, cryptocurrencies, initial coin offerings, and big data
• Ways data as a digital asset can add value to a company, such as targeted marketing, product and service improvement, operational efficiencies, and risk management
• Challenges in valuing intangible and digital assets

The chapter also introduces customer-based metrics for valuing subscription-based companies, such as Average Revenue Per User (ARPU).

New financing options for technology companies are discussed, including:

• Angel investors
• Venture capital
• Crowdfunding
• Peer-to-peer lending
• Revenue-based finance
• Start-Up Loans Scheme

Chapter 10: Managing Financial Risk: International Trade

Chapter 10 provides content on cryptocurrencies and their role in international trade. Key points include:

• Definition of cryptocurrencies as digital tokens facilitating online trading
• Use of blockchain technology in recording cryptocurrency transactions
• Differences between traditional currencies and cryptocurrencies
• Risks associated with cryptocurrencies, including volatility, security concerns, and privacy issues

To ensure you're fully prepared for the 2025 syllabus, our Professional Level subscription package includes comprehensive coverage of all new content. Click here to access this valuable resource. [Link coming soon!]

To download our free PDF summary of the main syllabus changes, click the link below.