Risk Assessment 
A bottom up approach to risk assessments
Risks
Excess risk (specific to the company), business risk (specific to the activity) market risk (specific to the market), deal risk (specific to the deal structure).
Independent variables
inefficiencies
In the underlining company, activity, market & deal structure.
Independent variables
Opportunities
Short term, long term, organic / in-organic
Dependent variables
Risk Report
Once we assessed the sustainability of the opportunity we can define a risk adjusted price.
Understanding where an opportunity’s value can be destroyed, maximised, and ultimately developed.
For our clients:
- We help buyers make sustainable capital allocation decisions.
- We help sellers prepare for a transaction.
- We help stakeholder appraise their risk exposures.
"The less the prudence, with which others conduct their affairs, the greater the prudence with which we must conduct our own."
The identification & assessment of key risks, inefficiencies & opportunities inherent to the company, business and market
So to define a systematic process to appraise the risk adjusted price of an investment
Valuation
Appraising the risk adjusted price of an opportunity
Systematic Process
“A process used to determine the viability of a project or procedure based on the experiential application of clearly defined and repeatable steps and an evaluation of the outcomes.
The goal of a systematic process is to identify the most efficient means to generate consistent, optimum results.”
First Valuation
Definition of Mandate
Internal Data Collection
External Data Collection
Quality Data Set
Definition of Mandate
Define
With Investors &/or Target Company
Internal Data Collection
Data source
From Target Company
Shareholders
Board Members
Management
General Employment
External Data Collection
Data source
From Stakeholders & External Providers
Customers
Competitors
Local industry experts
External providers fiscal, legal, HR, IT, compliance, etc...
Etc...
Conducting research so to define:
I. A quality data set: qualitative and quantitative data points that have a material impact on company value.
II. Growth assumptions and limitations.
III. An absolute valuation methodology.
From there we streamline the valuation process and only calibrate the valuation as KPIs evolve through time.
We alter the valuation only when material events, either change or affect the fundamentals of the investment case.
For our clients:
- We help buyers understand the gap between price and value (safety margin vs premium).
- We help sellers bridge the gap between price and value so to develop solid investment proposals.
- We help stakeholder monitor value.
"Not everything that can be counted counts, and not everything that counts can be counted."