The Value of the M & A Risk Assessment

As risk management specialists you might expect us to highly recommend the creation of risk assessments for most any activity. While it may seem that that is what we do we can assure you that that is not the case.  Remember that a risk assessment is a point in time opinion by someone about some aspect of risk.  There is value in that opinion, but the value depends on many factors including, but not limited to: thoroughness of the risk assessment; experience of the person (s) completing the risk assessment, and the reception and use of the information provided by the risk assessment.  

The one instance where value far outweighs the efforts extended for a risk assessment is in the area of Mergers and Acquisitions. Aside from a project plan, which can be quite comprehensive, management often forgets the value of a completed risk assessment designed specifically for mergers and/or acquisitions. The benefits to management include: 

1. Detailed scope of changes to the risk profile of the organization once the merger is completed. This information can be provided to the board of directors and linked to the risk appetite statement of the organization ensuring excessive risk is not introduced to the company. 

2. Highlighted changes to process, compliance and legal risks. Once recognized, management can create action plans to address any concerns. 

3. Recognition of new or exacerbated risks affecting the new organization including staffing and/or skill deficiencies that might otherwise go unnoticed until many months or even years after the merger is complete. 

4. Confirmation that regulatory concerns are addressed throughout the merger process ensuring that regulators and other stakeholders have confidence in the merger and acquisition process which could pave the way for additional growth in the future. 

While a risk assessment is time consuming and must be completed by experienced personnel the value of a pre merger or acquisition risk assessment is something that should not be disregarded.