Friday, September 21, 2007

Lack of Financing Biggest Stumbling Block

The lack of risk management plans among smaller firms pursuing overseas expansion may be scaring lenders away according to Mary Leone of Here are a few highlights from the full article.

According to research by RSM McGladrey, small and mid-size companies say that the biggest stumbling block to expanding overseas is "lack of financing," specifically obtaining bank loans. Moreover, the funding problem is directly tied to risk management, asserts Tom Murphy, executive vice president of RSM's manufacturing and wholesale distribution practice.

Of 947 senior executives polled by RSM McGladrey, 54 percent, most from small (under $15 million in revenues) and mid-size (between $15 million and $499 million) companies, admitted to having adopted none of what RSM considers the three basic risk management processes. Those missing pieces leave smaller companies "vulnerable" to fraud, non-compliance with regulations, and lack of preparedness for catastrophic disasters, says Murphy, risks that lenders shun.

The three basic risk processes of a good risk management plan according to RSM McGladrey are: an independent audit committee to oversee risk management activities; a corporate risk management assessment process; and an internal audit function to manage the risk.
It all boils down to giving the lender comfort on how its loan will be used and how it will be repaid.

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Tags : CFO Magazine , RSM McGladrey , business loans , risk management

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