IMGCAP(1)]Corporate valuation is all about numbersrevenue, EBIT and the like. But whats behind the numbers? In many cases, its confidence and, specifically, confidence in the business.
If companies want to increase their valuation, they have to improve their numbers, improve confidence in their business, or ideally, improve both.
Posting better numbers is pretty straightforward, though rarely easy. Companies increase sales and/or cut costs. Improving confidence is a different matter. How do organizations positively impact an intangible like confidence? With a corporate compliance strategy that shores up weaknesses that would otherwise detract from their valuation.
Concerns that will kill a valuation very quickly are material weaknesses or discrepancies that cause an inconclusive compliance status with regulatory issues. One of the fastest ways a company can drive down its stock price is to make a public statement that it was not compliant with SOX, DCAA or some other regulation and may therefore have to restate earnings. Another surefire valuation killer is a set of auditors comments about material weaknesses in corporate reporting structure, in controls and in policies.
In the world of GRC, people are very much focused on the G and the R, governance and risk. But the fact is that the Ccompliance and the certification of that complianceis the essential underpinning upon which valuation is measured. Of course risk identification and mitigation are the keystones of compliance, but the corporate baseline is compliance, both in data gathering as well as in reporting.
Similarly, the foundational piece of a GRC strategy is not a platform upon which you perform GRC but the actual compliance reporting and data gathering itself. With that compliance information in hand, you can build risk mitigation strategies, trending and analysisand governance reporting and analysis as well. Without that rock solid data, youre just guessing.
As a matter of fact, compliance-based, governance-driven organizations are in a much better situation to improve their valuation. They have a good handle on their corporate compliance data, they have controls and policies in place, and they can measure those things over time.
John H. Capobianco is president and CEO of
