The role of risk management in IPOs: Mitigating risks for investment banks

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Rebello, Nishant Damian
Issue Date
MBA in Finance
Dublin Business School
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The goal of an IPO is to successfully launch a company on the stock market. To achieve this goal an Investment Bank is faced with many risks; some risks that are in control of the investment banks and some that are not. Investment banks play a major role in an IPO process and post the 2008 financial crises, Investment banks have lost their trust and reliability which can be mainly due to poor Risk Management Practices. However Risk Management is often used in each and every process and an IPO is no different. An IPO being complex and time consuming requires extensive planning in the form of Risk Management. A failed IPO could drastically impact the company opting to go public along with losses to an Investment Bank and damaging its reputation. In this research the primary data was collected qualitatively from individuals working either in an Investment Bank, Risk Management Company or in the field of Corporate Finance. The aim of this paper is to identify the risks an Investment Banks faces and the use of statistical tools and empirical analysis to mitigate these risks. Since few risks are not measureable, in this paper we would be trying to understand if statistical tools and empirical analysis are dependent on each other or are capable of performing individual analysis.