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Economic crime and risk teaching example around CTS Eventim and Frequentis

The Commerzialbank Mattersburg ceases its business. A small bank in the east of Austria. In a small town with less than 10,000 inhabitants, numerous investments in shopping centers, schools and sports facilities, a football club in the Austrian Bundesliga and a “patron” where all these threads came together: Martin Pucher.

While Martin Pucher is now under police protection, over 60,000 private and business customers of the bank fear for their deposits. Especially the larger business customers who should not benefit from Austrian deposit insurance.

This would not only provide exciting material for a commercial crime thriller, but is also a lesson in how we should think about risks when investing. Let’s stick to the second one for today.

Finally play with the Austrian technology company Frequentis and the German live event giant CTS Eventim two listed companies also play a central role.

Underestimated risks: low probability of occurrence, large impact

Both Barracuda Music (34 million euros), at the beginning of the year CTS Eventim took over 71% of the concert organizer, and Frequentis (31 million euros) each trusted the Mattersburger Commerzialbank more than 30 million euros. A non-profit housing association is also afraid of 30 million euros. It almost seems as if the conditions from 30 million euros were particularly lucrative.

Let us stay with Frequentis, the Viennese provider of communication and information systems for control centers, for further consideration. Because here we have a much greater transparency than with the other two large victims. There, the 31 million euros represent a proud 36% of the company’s total bank balance. Fortunately, 56 million euros were entrusted to other banks.

Even if the 31 million euros are undoubtedly a gigantic sum, the disappearance of this sum would not be a existential situation for Frequentis. And there is still hope to see at least a small part of the money again.

In this way you have complied with the most important risk rule. Never take financial risks with life-threatening consequences. Not even if you rate the probability of occurrence as small as possible.

If Barracuda Music had not slipped under the stable Eventim roof earlier this year, I would not be so sure here. Not even if the concert organizer’s business would operate today without pandemic restrictions. After all, Eventim paid just 12.1 million euros for 71% of the company.

We should learn this from investing

As painful as the economic crime thriller around Mattersburg, Martin Pucher and the commercial bank is for many, he also has something good. History shows us once again that unlikely events can occur.

It doesn’t happen often, but banks can go bankrupt. And bank balances that had previously been considered safe will vanish overnight. Even if the probability of occurrence is low here, the effects of such an event should be designed in such a way that their existence is never threatened.

For investing, we should do it like Frequentis. If something is not 100% secure, we shouldn’t put our entire financial future on it. I am very sure that there are no safe bets when investing and in business.

So we should never put our financial future on a single thing. Not a single house. Not on a single share. Not a single company. Not a single employer.

With this in mind, the correct handling of risks, successful investing and Fool on!

Disclosure: Sven owns shares in CTS Eventim. The Motley Fool recommends Frequentis shares.

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