About Risk Assessment

Risk Assesment is used to quantify the potential degree of "Risk" the business has to a hypothetical new Owner.  Analysing and Quantifying the Risk enables the Appraiser to accurately determine the  "Capitalisation Rate" of the business. (The Capitalisation Rate (or 'Cap Rate') is the ratio between the net operating income of the business and the cost paid to buy the business taking into account the 'degree of risk'.) 

The higher the Risk the higher the monetry 'reward' on the funds invested that the business must provide (ie. Profit) to compensate for the higher Risk.

Conversley, the lower the Risk (or the higher the 'degree of security') in the business the lower the expected monetry 'reward' (ie. Profit) because of the higher degree of security for the funds invested.

 

During the Risk Assesment  we carefully analyse a minimum of 18 Standard Areas of Risk that apply to most businesses.  The areas of potential Risk examined in detail include:                                                           

  1. Continued Earnings Risk Assessment
  2. Company History Risk Assessment
  3. Company Growth Projection Assessment
  4. Competition Analysis and Assessment.
  5. Business Growth Opportunity Assessment
  6. Barriers to Entry for New Competition Assessment
  7. customer Base Sensitivity Assessment
  8. Management Retention Projection Assessment
  9. Business Location Continuity Assessment
  10. Operational Facilities/Equipment Analysis.
  11. Business Finance availability Assessment
  12. Industry Sector Strength Assessment
  13. Environmental Risk Assessment
  14. Social Desirability Assessment
  15. Alternate Investment Return Assessment
  16. Technology & Internet Uptake Assessment
  17. Business & Strategic Planning Assessment
  18. Procedures Systemisation and QA Assessment

 

recently valued private companies

international standards for valuing a private company

conducting a risk assessment in the valuation of a private company

testimonials from private company valuations

sample

Absolute Certified Equipment Appraisals