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The Risks and Data Points That Even Seasoned Evaluators Overlook

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Evaluators play a critical role in the financial services industry as appraisers of fair value for all kinds of assets. Their assessments influence investment strategy, corporate transactions, and other important financial decisions. Evaluators, for example, can give stakeholders precious insight into the value of a business, intangible asset, or complex financial instrument. 

To meet stringent standards of quality and compliance, evaluators undergo rigorous training. Accuracy and precision are essential, as their assessments carry significant weight. The margin for error is slim, as mistakes can easily undermine evaluators’ credibility and the public’s trust. 

If the practice were simple, anyone could set a valuation. But assigning prices to assets is as much art as it science, an alchemy of known data and sometimes unquantifiable risks in an increasingly complex environment for appraisals.  

The Complex Landscape of Valuation 

To derive insights and arrive at valuations, evaluators must analyze financial statements, market trends, industry benchmarks, and more, often under tight deadlines. Some inputs are formulaic, while others are abstract and require interpretation. Supporting their valuation with data and industry benchmarks is vital to presenting and defending the “how” and “why” behind their logic.  

Even the simplest valuations require a deep understanding of the broader economic and regulatory landscape. Valuation today is more complicated than ever given the variables in interest rates and the economy. Depending on their industry, evaluators may navigate a range of intricate scenarios, from litigations to divorce proceedings, so more complex assignments often come with considerable challenge. 

While seasoned evaluators have extensive knowledge to draw on, even they can miss important inputs. Among these are market fluctuations, which are difficult to account for, yet significant in their impact on business and asset values. These sudden changes may be spurred by updates to laws, interest rates, or macroeconomic indicators, but any of these can introduce uncertainty and volatility to a valuation.  

What’s more, the industry lacks a one-size-fits-all formula for calculating value. There are standards - like the market, income, and asset-based valuation approaches - but each relies heavily on the availability and quality of relevant data. Furthermore, each organization uses a unique (and often proprietary) valuation formula, leading to different conclusions. 

Once a valuation is complete, evaluators must present their findings to describe and support their calculations. They must demonstrate how they reached their conclusion in hopes the involved parties agree with the value. If an evaluator’s report lacks rigor or authority, it could be detrimental to their reputation. 

Evaluating Under Pressure 

Besides the challenges of navigating an inherently complex process, evaluators face other considerable obstacles: 

  • Declining valuation-service pricing: Industry pricing has fallen steadily in recent decades, increasing the pressure to provide top-quality service while charging less.  
  • Time constraints: Evaluators often work on tight deadlines and must find ways to streamline their analyses without compromising quality. 
  • Data availability: Reliable data sources are essential for accurate assessments, yet evaluators often have limited access to industry-specific data. As a result, much of the information they reference is incomplete, outdated, or subject to interpretation—leading them to spend more time searching for information to fill in the gaps. 

RMA's Crucial Role in Identifying and Mitigating Risks 

In the delicate task of financial evaluation, transparent and quality data are essential for accurate and reliable assessments.  

The Risk Management Association (RMA) hosts an extensive database of industry benchmarks and financial metrics that help evaluators navigate complexity with precision.  

RMA has produced statement studies for over 100 years, hosting a vast collection of historical and modern data. Professionals across varied industries use RMA data to gain insight into their markets.  

Unlike data providers that use proprietary models to set their benchmarks, RMA’s approach is consistent and transparent, reported openly to promote deeper understanding of our methods. 

With data covering over 750 industries and 2,000 sector reports, RMA provides the information needed to understand and analyze the nuances of your market.  

The RMA database is an invaluable tool for valuations, unlocking access to detailed, industry-specific information at the click of a button. 

Why RMA? 

RMA strives to set the industry standard for mitigating risks through data-driven solutions. RMA data empowers evaluators with the latest information on their industry’s complexities.  

The RMA database is trusted and licensed by business evaluators, CPAs, attorneys, and lending professionals for its quality and accessibility.  

The expansive resource makes it easier than ever for evaluators to find and leverage data in their work—delivering superior service to clients and stakeholders. 

Unlock the best source of industry-specific data. Keep on the leading edge with the RMA!