Page 59 - Initial Public Offering - An Introduction to IPO on Wall Street

In addition to standard basic insurance schemes, many private organisations do not retain the
liability insurance coverage of directors and officers (D&O).

As a new public corporation, there is a substantial increase in the potential liability of directors
and officers to public shareholders. To recruit and keep talented directors and officers to head
the public business, ensuring adequate publicity is crucial and is a key action item for any
organization planning an IPO.

When it comes to preparing treasury for an IPO, one of the most important steps is to consider
upgrading the treasury function. In certain ways, an IPO does not need much modification of
a treasury function’s operating infrastructure that is needed to perform the routine activities of
gathering, focusing, allocating and investing cash and other liquid assets.

However, the standards for the regulation, quality and effectiveness of treasury operations are
growing for a new public corporation. As a result, many businesses conduct detailed
evaluations of their treasury functions as part of preparing for an IPO with the goal of adjusting
their operations to these higher standards.

This evaluation may lead to: changes to the governance model of the treasury, its limits, and
signature agencies; upgrades to the team's expertise and maturity (particularly with regard to
capital market operations and financial risk mitigation); process improvements to strengthen
controls, particularly with regard to cash management; and, lastly, the introduction of leading-
edge treasury instruments and technology that enhance cash and liquidity transparency,
automate critical processes and ensure greater access to the data and resources needed to make
better decisions related to money and money management, and the risk related to finances.

Crucially, investments in treasury entities, processes and facilities are not only capable of
minimizing financial statements and operational risk, but are also potentially advantageous in
terms of lower capital costs, higher cash flow and lower operating costs.

4.3.9 Legal

As part of their IPO readiness assessment, organizations must consider having an appropriate
level of required legal counsel. A vital feature of every public agency is legal advice. Under
some circumstances, internal counsel can be more economically viable than external counsel,
but the need for professionals such as SEC counsel, trial lawyers, etc. would not be substituted
by internal counsel.

If the governance board has no legal counsel, the core legal expertise that is most required
internally should be considered, and staff counsel should be adequately assisted by external
professionals. In addition, for the interpretation of legal responsibilities and internal regulatory
criteria, internal counsel may provide insight and supervision.

Another important step is to build an effective legal and compliance program. For companies,
a Chief Compliance Officer (CCO) is a key position as they think ahead of regulatory and other
threats affecting strategic priorities and risking the continued growth of the company. In short,
a CCO will give encouragement to executive boards and management that the company is
adequately managing its internal and external responsibilities.

Like the Chief Information Officer (CIO) or the CFO, the CCO sets the guidelines for
regulatory control in the company. In order to identify problems early and enhance the efficacy

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