1. Risk Management
Risk Management
There are many things that are difficult to project or estimate when establishing an integration plan.
Executives are mainly concerned about these areas:
Future financial performance
Future operational performance
Potential cultural risks
Potential business risks
Customer and employee retention “
Integration Risk Assessment Sources
A review of due diligence materials
Thorough series of interviews with key executives
Analysis of previous integration activity successes and failures

2. Risk Management Assessment
The following is a list of “universal” risk assessment questions you can use to craft your own assessment survey:
What are the business rationale and key financial metrics that support the deal?
What are the core business strategies of the NewCo (the newly combined company) or the acquiring company?
What are the most sensitive areas of the business that might be prone to disruption?
Are there significant government and/or regulatory affairs challenges for this industry? (e.g., Pharma integrations.)
Will some portion or unit of the acquired or merged company be carved out and left alone (making it necessary to add extra effort to preserve it during the integration)? “

3. Risk Management Assessment (continued)
What are the timeline expectations for the integration that have been communicated to key stakeholder audiences (e.g., the investor community)?
Are major IT system integrations required to realize synergy benefits or operational efficiencies? What are their expected timings?
Are there any key managers or salespeople that might leave as a result of the merger or acquisition which would result in an “experience vacuum” in a particular area?
How involved will the integration team be in synergy workstream tracking and management?
Are there any EPA or union concerns that have to be addressed?
Are there any past business practices that are incongruent with the Newco’s (or acquiring company’s) business strategies (for example, credit standards for new customers)?
Are there any community affairs issues that will result in a more rigorous communication plan being required? “
These are just samples of the kinds of areas where discovery is needed to gauge integration complexity.
In addition to this you should add questions that are germane to the industry, deal type, and company.

4. “

5. Operating Style Risk
Risk Management
(continued)
How do “connective tissue” functions like HR, finance, and IT differ in each organization? Does finance call the shots in one organization more than the other?
How is spending approved in one company versus the other? Is one more liberal on spending practices than the other?
How do the companies differ in terms of their approaches to decision making? Does one company tend to “overanalyze” while the other is more expedient, perhaps relying more on gut, experience, and intuition versus heavy amounts of analysis and data?
Does one company have detailed and current information on their consumer and/or business-to-business (b2b) segments while the other has less?
Does one company have more of a “9 to 5” style versus the other company where “working late” is more of the norm? “
Assessment activities can also help identify areas of common ground that can be positively leveraged.

6. Performance Measurement Risk (HR)
Risk Management
How performance is evaluated and measured should also be assessed. Understanding the differences upfront can help you gain a better understanding of many risk and complexity factors.
Is there a standardized performance management program?
What is the process for evaluation? (e.g., direct line management, 360 review, peer review, or all of the above)
How often are employees evaluated? (monthly, quarterly, annually?)
What are the rewards for exceptional performance? How are they administered?
What are the consequences for poor performance?
Diagnosing significant differences here will help in many ways, including:
Providing the integration team with information to help inform and shape the overall integration plan and strategy
Helping the HR integration leads understand the challenges with integrating the performance management programs of the two organizations
Helping inform the creation of cultural and talent assessment tools “

7. Potential Cost Impacts
Risk Assessment Output (Sample)
Risk Management
Risk Area
Potential Impacts
Mitigation Plans
Potential Cost Impacts
dates push into busy season
Integration work competing with regular work at busiest time of the year for sales, production and fulfillment.
Make decision on transferring production into 2014 and fulfill all else from west coast
Rent costs for Company Ai
Delayed production efficiencies realization
Accounting related system integration dependencies
Alignment of back office financial systems delayed due to complexities and other factors
Maintain both legacy accounting systems to support each “division” of the company and consolidate
Accounting costs, IT costs, timeliness and quality of reporting.
Company B Production, Finance, Purchasing and Shipping staff augmentation
Inability to staff new resource needs in time overburdens existing resources and causes timelines to slip
Explore cross training opportunities for key Company B staffers. Retain Company Ai operations mgr thru 4Q
Training cost, salary cost, delayed operating efficiency realization
Delays in relocating Company A equipment and supplies to Company B
Production transfer delays
Explore dispatching Company B production resources to Company A to help facilitate relocation
Delays in producing Company A products at Company B
Company A is unable to fulfill orders for products due to delays in producing Company A products at Company B
Overproduce high-turn items prior to production integration, identify short term alternate manufacturer
Lost revenue, increased product costs “

8. Risk Impacts and Integration Planning
Risk Management
Integration leaders should factor assessment learnings into workstream planning.
Universal Risk Assessment
Integration Planning Impact
Workstream prioritization and timing
Overall integration timeline impacts
Critical dependencies
Cultural integration challenges
Communication planning priorities
Employee satisfaction/morale issues
Organization planning challenges
Operating Style Assessment
HR Assessment
Stakeholder Input “
Factoring assessment learnings into your integration plans will enable you to proactively address potential hotspots and issues.

9. Risk Mitigation Strategies
Risk Management
Examples of potential risk areas and Mitigation steps:
Issue
Mitigation Opportunities
Timing
Aggressive integration timeline
Ballpark expected timing for key workstreams
Pinpoint potential business disruption issues
Propose alternate timing scenario with rationale/examples
Pre- planning
Retention of key personnel
Identify critical employees
Develop retention plan
Where possible, identify probable roles for key execs.
Pre- planning
Inflated or overly aggressive synergy targets
Map synergy activities to integration workstreams
Verify responsibility and timing/amounts and CTA
Identify gaps and review with senior management
Day 0-30 “
Bad news never gets better with age.
Address potential integration risk issues early and recommend mitigation plans.

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