Startup Life: The Benefits of a Top-Bottom Risk Assessment

When starting out a company, entrepreneurs have enough on their plates without focusing on financial and business best practices. However, conducting an audit of the financial processes and overall risk assessment early on will ultimately save time and money, identify areas of inefficiencies, and allow the company to scale by avoiding some common growing pains plus being able to navigate uncertainties through robust risk mitigation plans in place.

Risk Assessment

Early recognition and mitigation of risk are critical factors for success, especially for startups, since there isn’t much room to recover from failure. In addition, by anticipating and getting ahead of potential areas of concern, the company becomes more adaptive and agile, minimizing the impact of adverse events to the business.

A top-down risk assessment doesn’t need to intimidating, and the value ultimately outweighs the upfront time / cost commitment. In addition, identifying and managing risks inherent to your company’s industry and competitive landscape can often mean the difference between failure and success. Planning for the “what could go wrongs” will bring clarity in future business strategy decisions. No one knows the business better than those managing its day to day. A proper risk assessment will look at the financial health of the company and also better understand the current and planned future state operations. With this in mind, along with industry analysis, Hawk Consulting provides feedback on low/medium/high risk areas in the business, identifies potential fraud scenarios, and gives recommendations on business and finance controls to implement to minimize high risk areas.

Preliminary Audit of Financial Processes

In addition to a top-down risk assessment, taking an audit and inventory of your company’s financial processes can help identify gaps or areas for improvement. This preliminary assessment involves understanding your financial cycle processes, e.g. cash collection, vendor/supplier setup and pay out, budgeting, payroll, accounting systems, etc. Along with the controls identified in the risk assessment, Hawk Consulting will identify major financial accounts that lack a strong process flow or have potential fraud risk and assist with developing controls to prevent stagnation or collapse to your business. In addition, startups generally have basic processes in place and a preliminary audit shouldn’t break the bank to start establishing best practices.

I’m not planning to IPO (any time soon at least)…Do I really need an audit? The audit should complement the risk assessment and not be thought of as the traditional IRS audit where you have to turn over every receipt from every business transaction. This is a higher level look at where you’re at as a business to help you scale and is best recommended in the first three years of operation to help set up the right practices. Best of all the value will be seen immediately… tightening up finances, fixing accounting errors, more efficient processes, and fraud mitigation, to name a few.

Final Stage - Strategic Execution

The last phase of the top-down risk assessment is the strategy and operations of the company and putting a plan in place to execute on the results. This involves working with management on high areas of risks and timeline for control implementation. Then establishing a tracker to have accountability and ownership. Hawk Consulting offers retainer services to assist with year-long implementation plans, or can create a roadmap for self-management.