Open the Books, Root Out Crooks
Taking a closer look at a company’s financial statements can mitigate risks and unlock opportunities
The cornerstone of any effective due diligence exercise is a thorough examination of a counterparty’s financial statements. Without it, organisations investing in Spain risk substantial financial losses, regulatory non-compliance, and associations with fraud or money laundering.
Spain's business ecosystem is largely made up of micro-enterprises and small businesses, which are more exposed to financial pressures than the broader EU corporate landscape.
According to Moody’s, Spanish firms' reliance on borrowing during the pandemic has left them vulnerable to interest rate fluctuations, especially in the construction, real estate development, and business products & services sectors.
It’s no surprise that in these economic conditions, there is an increased likelihood of fraudulent activities as companies may resort to misreporting financials to cover up their struggles.
To manage these risks, firms investing into Spain should prioritise obtaining a comprehensive understanding of a counterparty’s financial position through due diligence.
This process almost always begins with assessing the consistency between a company’s claims and its financial position. For example, if a Spanish tech company soliciting investment claims to possess high-value proprietary software or intellectual property (IP) but reports very low intangible assets on its balance sheet, it could signal a red flag—indicating that the company’s financial position has been misrepresented.
How can Sagrada Due Diligence Help?
Understanding a counterparty's financial position requires a multi-faceted approach that builds on a forensic assessment of financial data complimented by detailed public records research and a healthy dose of OSINT (Open-Source Intelligence).
This holistic approach, which considers a broad range of factors, helps us to identify key risk areas for further exploration and is most likely to produce the type of strategic assessment that leads to better decision-making.
Our methodology:
We assess a company's financial health by analysing its financial statements, including the balance sheet and income statement. Our methodology adapts to the type of company and industry sector, but generally begins with a detailed analysis of shareholder equity, assets, liquidity, and debt (see images below).
We use this approach to quickly identify potential red flags, assess liquidity and solvency, and evaluate overall financial stability. We then translate these assessments into actionable insights that help our clients make informed decisions.
Contact Sagrada Due Diligence today to uncover hidden risks and gain a strategic edge.