Page 63 - Initial Public Offering - An Introduction to IPO on Wall Street

Knowing that the function of the board is supervision while the job of the management team is
the daily implementation of risk management operations, the disclosure provisions provide
organizations with some flexibility to explain how the board fulfills its function. The separation
of obligation between the full board and the individual board committees should be considered
and formalized, and a transparent procedure should be developed for those committees to report
back to the full board on the significant risks under their jurisdiction.

For instance, is the risk miscalculation managed by the whole board, a dedicated board risk
panel or the audit committee? Do people who carry on everyday risk management duties
answer directly to the board as a whole or to a committee of the board? How do these people
obtain feedback from the board or a committee?

It is also important to consider how appropriate risk management helps the company to take
risks and accomplish strategic objectives, in addition to any criteria for executing a risk
management program. This involves constructive measures for prevention and effective
reaction and recovery from unforeseen events to mitigate the effects of these events.

This will include explanation of management and business leaders' positions and obligations
with respect to continuing risk oversight. The supportive procedures can be activated once the
duties and responsibilities are clear. Take into account how various types of threats are treated
by the group, as well as the particular cultural and organizational realities to be tackled.

Management should think about having a risk role that is based on allowing strategic goals to
be accomplished. This is not a risk owning group or group of risk auditors, but a feature aimed
at encouraging continuity and accountability and to facilitate a clear understanding of the risk
tolerance of the company.

The risk role can promote, track and organize methods, instruments and models, but risk
management is often in the hands of the organization. The company should try to build a feature
that provides risk data for better decision-making.

4.3.14 Corporate Strategy and Development

Another important step in the IPO readiness assessment is developing the equity story. It is
crucial to provide the public investors with a carefully created equity narrative so that these
investors understand the organization and the factors that provide the framework for the
company's valuation.

The basis for good IPO aftermarket stock success can be given by an investment thesis that
strikes a chord with potential investors. The equity narrative is created by synthesis of several
different aspects, including:
 The company’s business model;
 The strategy for growth;
 Predictions and estimates, including business guidance;
 Positioning of the business to be evaluated against the appropriate comparable firms; and
 Management who is able to implement the business model

To build the equity narrative and the reason for an investor to take an interest in the business
and, eventually, to purchase at the IPO and in the aftermarket, these factors need to be put

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