THE TRAP OF TREND-DRIVEN INVESTMENT: WHEN EMOTIONAL CRISIS ARISES AND LESSONS IN MARKET DEMAND ASSESSMENT

“Let us work with expert Master of Laws Nguyen Huu Long to analyze the following real-life situation and find a comprehensive solution that is both legally sound and human-centered.”

1. Summary of the Real-Life Situation

Mr. M and Mr. K are two founders and have been close neighbors in the [LOCAL] residential area for many years. In 2024, they pooled their capital to establish TechTrend Digital Solutions Joint Stock Company. The company specializes in developing utility software products. Mr. M serves as Chief Executive Officer (Founder), in charge of investment and business strategy. Mr. K serves as Chief Technology Officer, responsible for the company’s technology infrastructure. Because of their close neighborly relationship, Mr. K entrusted Mr. M with full authority to decide on the company’s product portfolio and coordinate its working capital.

At the beginning of 2026, seeing the growing trend of automated smart mini-rooms (Smartbox), Mr. M made a serious mistake. Driven by the desire for rapid growth and the temptation to capitalize on the crowd-driven trend in order to achieve short-term brand recognition, he unilaterally withdrew VND 1.5 billion from the company’s funds to place a mass-production order for these devices. Mr. M did not conduct or document any research into actual market demand. He carelessly ignored the fact that the model was merely a short-term bubble and had already reached saturation in the local market. The products failed to sell and became 100% dead stock. The company’s cash flow was frozen and suffered a severe deficit, while its core project was pushed into deadlock.

The company became paralyzed and faced the risk of bankruptcy. Believing that Mr. M had acted recklessly and irresponsibly in managing the company, thereby dissipating assets that his family had accumulated, Mr. K became extremely angry. He demanded that Mr. M compensate for the entire economic loss with his personal assets. Their neighborly relationship immediately collapsed. The two families engaged in heated arguments and exchanged serious insults in the neighborhood. They threw dirty substances into each other’s homes, disturbing public order and security and forcing the local police to intervene.

2. Legal Perspective – “A Strong Shield”

From the perspective of civil and corporate law, a manager’s unilateral approval of a major budget expenditure for a spontaneous investment project without conducting the required due diligence may constitute a breach of the duty of care and cause damage to the company’s assets.

Breach of the duty of care by a company manager: Pursuant to Article 165 of the Law on Enterprises 2020, company managers are required to exercise their rights and perform their obligations honestly, carefully, and to the best of their ability in order to protect the company’s legitimate interests to the greatest extent. Mr. M’s abuse of the managerial authority provided under Article 162 of the Law on Enterprises 2020, by unilaterally investing VND 1.5 billion in a crowd-driven project without a market demand survey report, constitutes irresponsible conduct. This emotionally driven investment decision, made without following the proper procedures, is legally problematic with respect to the validity of the company’s expenditure approval under Article 122 of the 2015 Civil Code.

Personal civil liability for damages: Pursuant to Clause 2 of Article 165 of the Law on Enterprises 2020 and Article 584 of the 2015 Civil Code, a manager who breaches his duty of care and causes damage to the company may be personally liable for compensation. Mr. M is unable to produce any duly approved investment regulations demonstrating the legitimacy of the expenditure. Therefore, under Article 585 of the 2015 Civil Code, Mr. M may be legally required to bear responsibility for compensating the resulting property damage from his personal assets to the company and shareholder K.

3. Psychological – Educational – Management Perspectives – “The Human Key”

Psychological and Educational Perspective

Short-term achievement-driven greed creates FOMO and illusions: Mr. M was influenced by the fear of missing out (FOMO) and herd mentality, leading him to gamble with the company’s financial resources. His short-term financial ambition caused him to underestimate the need to protect the company’s assets and the intellectual and financial contributions of his long-time neighbor and business partner. When the crisis occurred, Mr. K fell into a state of panic, fearing that his family’s accumulated assets could be completely lost. This triggered intense suspicion and ultimately destroyed their neighborly relationship.

Insufficient education in practical market-demand assessment: Many startup business executives mistakenly believe that if other people have become wealthy from a particular business model, they can simply enter the same market and quickly make large profits. They lack sufficient awareness of procedural compliance and respect for corporate law. They fail to distinguish between the ability to identify emerging trends quickly and irresponsible conduct that neglects the safeguards protecting the company’s strategic assets.

Management Perspective

A critical failure in product-strategy and market-risk management: Mr. M placed TechTrend’s survival at risk by betting on a trend-driven product without properly verifying actual purchasing demand. Managing a business based solely on crowd sentiment is highly dangerous. The absence of a systematic Risk Assessment Process eliminated an important layer of protection for the company and its management against the harsh realities of market competition.

A serious gap in the approval process for new projects: TechTrend had no effective financial-control procedure governing the approval of new investments. A properly governed company should establish clear rules: any plan involving a substantial allocation of funds for manufacturing or launching a new product line must be supported by an independent user-behavior and market-demand survey, accompanied by a risk assessment and reconciliation report from the accounting department, and approved in writing by the Board of Directors through a clearly documented resolution.

4. Comprehensive Solutions Proposed by Expert Nguyen Huu Long

Step 1: Immediate Neighborly Mediation and Emergency Inventory-Crisis Containment (Short Term)

Emergency neighborly mediation: Mr. M and Mr. K must immediately stop throwing dirty substances into each other’s homes in order to avoid potential legal consequences relating to property damage or public-order violations. Mr. M should remain calm and proactively invite the neighborhood representative to act as a mediator and organize a private meeting. The objective is to prepare a written neighborly mediation record and ensure the safety of both families before addressing the underlying financial dispute.

Liquidating inventory at a loss and negotiating cash recovery: Mr. M must immediately coordinate with the sales department to accept a controlled loss, liquidate the inventory, dismantle and resell components, or transfer the entire Smartbox batch to larger businesses in other provinces and cities in order to maximize the recovery of working capital in accordance with the Law on Enterprises 2020. He may also consider using personal funds temporarily to cover essential operating expenses that have been frozen, thereby reducing internal tensions.

Step 2: Restructuring Investment Procedures and Internal Capital Reimbursement (Medium Term)

An agreement for the Founder to assume financial responsibility: To compensate for the budget deficit and alleviate Mr. K’s concerns, the two parties should enter into a supplemental agreement based on the 2015 Civil Code. Mr. M may voluntarily use his existing private assets or accept a reduction in his future dividend entitlement to secure his obligation to compensate for losses caused by his unilateral management decision. This approach would allow him to assume responsibility for his management error and help restore both cash flow and internal trust.

Adopting market-assessment regulations and a dual-approval mechanism: The company should immediately develop and issue a Product Portfolio Management and New Business Risk Assessment Procedure based on the Law on Enterprises 2020. The regulations should clearly prohibit the unilateral allocation of production capital without data-driven market research confirming actual demand. Approval of major production-project disbursements should require written confirmation from the accounting department and joint digital approval by both founders on a quarterly basis, thereby ensuring comprehensive financial control.

Step 3: Long-Term Lesson on Separating Personal Relationships from Corporate Assets

Objective market research is the most civilized form of capital protection: The hard-earned lesson for business managers is:

“If a startup’s cash flow is not allocated on the basis of actual market research and reliable data, crowd-driven trends can eventually overwhelm the entire business.”

Clarity and discipline in product-strategy management, together with respect for legal requirements from the very beginning, do not reduce a company’s ability to respond quickly to market trends. On the contrary, they provide the strongest protection for personal assets, corporate capital, and long-standing neighborly relationships against the risks of doing business.

EXPERT PERSPECTIVE

This article was developed based on professional consultation and advice from Master of Laws Nguyen Huu Long – an expert in Leadership, Law, Psychology, and Education. Through an integrated multidisciplinary approach, we aim not only to provide a strong legal shield but also to offer comprehensive risk-management and psychological solutions for the sustainable development of the community.

If you or your organization are facing similar issues involving land or education, please contact us through our hotline or submit your questions through the website tuvanphapluattamlygiaoduc.vn, or call 0898.627.762 for timely assistance.