This blog-post is for business lenders and for business owners. While the lender and the owner may take different action related to risk, the list remains the same.
This TOP TEN list comes from a CFO Magazine analysis of SEC comment letters on U.S. Companies in 2009 and the first half of 2010. In many cases, this ‘risk’ list for publicly-traded companies mirrors the challenges of small- to mid-size companies as well.
- Inadequate disclosure issues
- Market for products and services
- Reliance on suppliers, customers, governments
- Going concern
- Effects of regulatory changes
- Legal exposures and reliance on legal positions
- Ineffective internal or disclosure controls
- Reliance on certain employees
- Conflicts of interest/related party issues
- History of operating losses
Order of importance?
I am guessing not since the recent history of operating losses might be the first concern of a business lender. And if a business owner needs to borrow money, this may also be the first concern.
Pick your top three
This may be one way to identify potential, immediate setbacks and challenges to go to work on. Pick the top three concerns and develop a plan to improve them.
Unless your company is large enough to have management in charge of different departments, there are only so many things you can focus on at once. Prioritize so you can focus.
Consider your current borrowers as well as your top prospects. Pick the top three risks that might apply to that borrower so that when you have the conversations, review the financials, ‘google’ the key players and check out their website you are actively seeking information to decide whether the risk is well handled.
Then include that in your write-up so that you (next time you look at that file), loan committee and the regulators know that you considered and addressed the risks.