Although financial factors play a significant role in aiding investment decisions, they cannot be used as sole determinants of capital budgeting. A firm must look into other soft non-financial aspects before making investments decisions. While nonfinancial factors are many, some of them are discussed below:
Environmental Issues
The current global business environment is defined by various critical factors one of which is environmental conservation and the use of the environment-friendly process in the production (Masini & Menichetti, 2013). Potential customers view companies that do not invest in environmental conservation as irresponsible. Thus, environmental factors must be considered before making any investment decision.
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Employee Motivation
The success of an organization depends on the inputs of its staff. Thus, a firm should consider the effect of an investment on its employees’ motivation before furthering the investment process.
Customer satisfaction
Every investment done by a firm should be designed to maximize customer satisfaction. After all, customers are what keeps the business running,
Competitor’s Actions
Most companies operate in highly competitive markets where each firm must always consider the actions of its competitor before making the next move (Masini & Menichetti, 2013). Investing in a market where the competitor has a competitive advantage will hurt the firm.
A Project that was not Approved
I took part in a project whose aim was to build a water bottling plant in the local neighborhood. While the project had significant financial results, it was not approved because the company feared that the local community might protest against the depletion of their water reservoirs. If I was in control of the project, I could have negotiated with the local community to see the best way of sharing profits from the proposed water bottling plant.
References
Masini, A., & Menichetti, E. (2013). Investment decisions in the renewable energy sector: An analysis of non-financial drivers. Technological Forecasting and Social Change , 80(3), 510-524.
