Identifying risk factors

All share offer documents need to include identification of the key risks facing the investment project, and plans for mitigating these risks.

First of all it is good practice to examine both general and sector-specific risks to the business itself. These could include such items as the potential for failure in completing a purchase of property or land at a viable level; the failure to attract sufficient workforce (voluntary or paid); the failure to achieve predicted profit levels; restrictive government legislation etc. It is worth pointing out that any list is not necessarily comprehensive and any trading activity is vulnerable to changing or unanticipated risk.

A second element of risk arises from the lack of regulation on community shares. This does lend an extra risk to the investor that must be explained if the share offer is being promoted responsibly.