One of the problems companies encounter when raising investments is the company's unreadiness for the investor (for example, the lack of appropriate articles of association with minority rights, improper financial management, cyber risks, or non-compliance with legal requirements in the company's field of business). When an investor conducts due diligence on the company prior to investment, they may refuse to proceed, demand control, reduce the price, or require the execution of certain actions as a condition for the investment - conditions that the company at that stage has no choice but to accept. The solution to this is conducting an internal due diligence review to prepare the company before the investor arrives. However, sometimes it is not a company preparing for an investment, merger, or IPO, and it only discovers its risks due to administrative or criminal proceedings against the company and its managers. An early risk assessment can prevent this.
Many companies in their early stages (but not only) operate without full legal accompaniment, or with the accompaniment of lawyers who lack the full required expertise. In many cases, the accountant is also a figure who "meets" with the company only once a year - and with a year's delay - merely to prepare the financial statements. They do not truly examine the company's day-to-day conduct and its tax exposures (and certainly do not delve into the business side, but examine matters solely from a narrow accounting perspective). Examining IT and cyber risks is completely out of the question. In many cases, this type of conduct not only harms the company's valuation (or "merely" its profitability), but may also lead to personal liability for directors and officers.
For example, in cases of failure to make correct provisions for employees, this creates an accounting and legal exposure for the company. Non-compliance with cyber regulation conditions may not only create legal exposure but literally prevent clients from contracting with the company (a deal can be finalized with an important European client and then be halted by their legal department due to non-compliance with NIS conditions). Beyond that, there is a long list of laws that establish passive personal liability for officers even if they were not involved in the process, including laws in the fields of labor law, environmental protection, planning and building, and antitrust. All this even before entering into privacy issues in light of Amendment 13, which today also increases the personal liability of directors and officers who did not properly appoint a DPO and did not conduct themselves correctly.
What is the solution? An integrated risk assessment conducted by a joint legal-accounting-cyber team, which will examine the company holistically (initially in general and, if necessary, in detail) and point out deficiencies that should be corrected. Informed decisions can then be made: what the company wants to correct and what risks it is willing to bear. It is important not only that this examination be carried out by an external expert (a lawyer, accountant, and technology expert with experience in mergers and acquisitions, accustomed to such reviews), but that to the extent additional parties are involved in the examination, they all operate under the lawyer to ensure the existence of attorney-client privilege. Ultimately, an ounce of prevention is worth a pound of cure, saving unpleasant surprises with investors or authorities, or at least being aware of the risks and hedging them in advance, as much as possible.