Аrticles 06/01/2022 04/02/2022

"Library of Risks" from YouControl: Where to Read about Risk Factors in Business

There is not just "honour" in taking risks but also inevitability. And even if you do not like champagne, sooner or later you will have to consider risks in business. We manually compiled a series of YouControl articles about various business risks to keep everything close at hand.

Risk is the probability of negative consequences.

External threats often do not depend on the activities of a company or an individual entrepreneur. They can be avoided only with the help of foresight and prior checking. Check counterparties before cooperation – and their risks will not become your real problems.

What Exact Risks Are Meant

First of all, some types of activity themselves are considered risky. We wrote about their dangers and checking in the article. And many NACE/KVEDs (classifiers of types of economic activity) of one company raise suspicions, because the desire to cover as many directions as possible and to register as many NACE codes as possible is a sign of a shell company.

Frequent changes in the constituent documents of a counterparty are another risk factor and a sign of its instability. You can read in detail what frequent changes in the work of a company indicate.

Links with a PEP (politically exposed person) are also not in favour of business stability, as the status of politically exposed persons is associated with the possibility of conflicts of interests and influence in economic activity.

International sanctions. Violations of legal prohibitions and restrictions for companies and individuals can be costly for business. Assets of such companies may be blocked, their trading operations may be restricted.

This will also influence their partners. Therefore, it is better to know in advance that a counterparty is subject to sanctions.

The risks of cooperation with a counterparty also depend on the authorised capital. More precisely, they are inversely proportional to its size. The lower the authorised capital is, the higher the risks are. Which is logical, because, in fact, it is the financial responsibility of the company owners towards their partners, creditors, investors. We explained how the size of the authorised capital influenced cooperation.

There are risks of cooperation with counterparties from certain countries with a high level of corruption. The location of participants or beneficiaries of a company in these so-called risky jurisdictions attracts special attention of the National Bank of Ukraine.

It also happens that a seemingly decent organisation is created without the intention of real economic activity. Simply put, the company is fictitious and registered not for honest work at all. You can find out this if you check the reality of economic activity of the enterprise.

Even a law-abiding subject is not insured against a subpoena – for example, as a witness. But if the number of lawsuits in which a legal entity is the defendant (the court load of a company) is growing every year, this is a reason for paying attention to the security of cooperation with it.

Youth is not a flaw either, but a young company is able to jeopardise the stability of its business partners. After all, the less time has passed since the registration of the company, the lower is the probability that the partner can qualitatively, without interruptions and other “surprises” implement serious projects entrusted to it.

The director is responsible for the results of production, economic and financial activities of the company; and no less – for its reputation. Therefore, we advise you to check not only the company itself but also its head before starting cooperation. About how to do it quickly there is the article "Everything about Him/Her: How to Quickly Check the Director of a Company". In addition, pay attention to the limitations on the powers of the head.

Debts to the Tax Service should alert you before risky cooperation. We explain what you need to understand about the companies that do not pay taxes.

The counterparty’s absence of a licence can be a problem, as the need for permits is established by the Law of Ukraine "On Licensing of Types of Economic Activity" in 30+ fields of business, and doing business in these fields without a licence is punished criminally.

After all, having looked out of the box, you can see that your counterparty belongs to a financial industrial group (FIG) and may not act 100% independently. Such companies are called counterparties of “a special type” and their category includes state institutions, natural monopolies, system-forming and strategic enterprises, as well as companies within a FIG. Before cooperating, make sure you know how to check counterparties of a special type.

How to Check All the Risks in 1 Minute

YouControl specialists developed the tool "Express Analysis" with an emphasis on those factors that are important to you, as well as are relevant within tax due diligence and financial monitoring.

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