How does the notion of risk and reward govern the behavior of Financial managers?

In completive and efficient marks, greater rewards can only be achieved with greater risk. The financial manager is constantly involved in decisions involving a trade-off between the two. For a company, it is important that it does well what it knows well. If it gets into a new area where it has no expertise there is little reason to believe that the rewards will be commensurate with the risk that is involved.