Tag Archives: Regulatory Compliance Health Check

Compliance Audit: What To Look For In Strategy Document

AGM or Business Plan Document.

“If you can’t see where you’re going, you surely aren’t going to get there.”

That’s why you need a AGM Statement/business plan: a clear, convincing, tangible road map that will align the enterprise and possibly convince investors to keep or place their investments with you. 

These are the elements of any sound Business Plan/AGM Strategy Document that needs to be checked whenever a Compliance benchmark/Health Check Audit is conducted. Part 1 in the “What To Look For” 

Cover Sheet And Table Of Contents
Kick things off with all the basics: should see a list of company name, address, telephone number and contact info for all owners, along with a road map for the rest of the document. In all, the document should be no longer than 30 or 40 pages, including the appendix of supporting documents.
Executive Summary
Here, usually in no more than two pages, billboard all the important stuff. They should communicate their value proposition: what the company does, how it does/will make money and why customers pay/will want to pay for the products or services.
Market Opportunity
For Existing, Expanding or Diversification of channels: Once they have established the product or service they’re selling, explain who they’re selling it to and why that group is particularly attractive. They’ll need to answer questions like: How large is the target market? How fast is it growing? Where are the opportunities and threats, and how will they deal with them? (is value proposition highlighted?) This information should be evidenced/linked in case they need to back up their claims.
Industry Analysis
Do they make the common mistake of thinking their business is unique. They should size up the competition objectively: Who are they? What do they sell? How much market share do they have? Why will customers choose their product or service instead of a competitors? What are the barriers to entry? Include indirect competitors, i.e., those with similar capabilities that currently cater to a different market but could choose to challenge them down the road and enter the market
The Team
Execution is just as important as the idea. That’s why institutional and private investors care a lot about who is on the team. Include profiles of each of the business’s founders, partners or officers and what kinds of skills, qualifications and accomplishments they bring to the table. If their business is a partnership, explain why those partners were chosen; if it’s a corporation, outline the corporate structure and introduce their officers. (Include CVs in the Appendix.)
Business Model / Operational Plan
This section covers the nuts and bolts of the operation, so does it include all revenue streams (product sales, advertising, services, licensing) and cost structure (salaries, rent, inventory, maintenance). Does it list all assumptions and provide a justification/rationale for them. Is there a list any names of key suppliers or distribution partners and a potted history of them (perhaps in the appendix).
Financial Performance / Projections
If it is a going concern, include at the very least a 12-month trailing income statement, balance sheet and cash flow statement. Then project all three statements forward at least three years. Also, do a break-even analysis that shows how much revenue they need to cover their initial investment. For early stage companies with only limited funds in the bank, the cash flow statement comparing quarterly receivables to payables is most important. Accounting profits are nice, but cold cash is what pays the bills.
Stress-Test Those Projections
There should be a clear indication of what will be impacted if disaster strikes to find out how their business will fare. There shopuld be an outline of the worst-case, average-case and best-case scenarios for the business. How will regulatory capital be affected? How will they make sure they have enough cash to weather the worst of storms.
Sources And Uses Of Funds
If they are trying to raise money from investors, they will want to know how they plan to spend it, and why they plan to spend it that way. This section should be used to outline their estimated project startup costs like site selection (if applicable), branding, new equipment, office furniture and logo design. Most entrepreneurial types underestimate just how expensive starting a new business can be.
Appendices
A good business plan clearly conveys the basics of a business in a hurry; put supporting documents toward the back. This hodgepodge of related material might include resumes, credit histories, industry studies, blueprints, advertising materials, press coverage, copies of leases and contracts, letters of intent from future customers, patent and trademark registrations, partnership agreements and letters of incorporation.
This guide is only an aide memoire and intended for information only for anyone appraising the documentation needed in an audit/compliance check. It is not to be considered as direct advice or intended to replace specific 1 to 1 engagement with your compliance and risk professional.