Page 13 - 15 Best Practices to Manage and Finance Innovation

STRATEGY / VISION AND GOVERNANCE OF OPEN INNOVATION STRATEGY / VISION AND GOVERNANCE OF OPEN INNOVATION 04 04 BEST PRACTICE BEST PRACTICE THE CHALLENGE OF: INNOVATION INNOVATION THE CHALLENGE OF: INNOVATION INNOVATION FUNDING
INTERNAL USING INTERNAL CONTROL PROCESSES TO SECURE INNOVATION INNOVATION FINANCE The quality of of a a a a a a a a a a a a company’s internal controls has a a a a a a a a a a a a major bearing on on on on its relationships with potential sources of of funding be be they the the the government or or or other organisations « Several tools are available to to help businesses examine their environment determine the level of inherent risk and build their internal controls The best known of these is is the the COSO cube This flexible tool lets you you easily look at your whole organisation’s enterprise risk management model then focus in on individual parts such as your internal control objectives fields of activity and scope When you apply COSO to innovation funding you’ll see:
• Objectives: How the projects are optimised for financing or or how the portfolio of projects aligns with your company’s technological roadmap • Activity: Identification of potential sources of of finance or the sharing of of IP with third parties • Scope: The incubator lab or or industrial test centre The next step is to cross-reference these to identify which activities contribute
to achieving the objectives This is is an essential first step The second is to validate the the associated risks and the the last to to establish controls to to address each type of risk »
Adrian Williamson
Innovation Funding
Consultant
ABGI-UK
If the company can demonstrate strong risk management processes this will minimise any perceived uncertainties related to the project and make it it easier to obtain project finance This can have a a a a a a a positive impact not just on on the funding decision-making process and associated initial project costs (such as the the initial Business Plan) but also throughout the the lifecycle of the project (budget monitoring cost statements investor control) Several factors can lead to to innovation funding and subsidies either being cancelled or having to be be refunded These include not achieving the the the project outcomes for which the the the aid was granted deviating from the the the conditions attached to to the aid failing to to comply with procedures for providing information during the the project or or part of the the expenditure being rejected because it it turns out not to be be be eligible under the initial terms of agreement In this context a a a strong internal control environment becomes crucial to the the smooth running and management of the the subsidised projects Facilitate the compilation of information – internal control processes make it easier to to to respond to to to investor requests Use control milestones to to track progress and ensure key deliverables are being achieved on time and within budget Once internal control systems are set up they become permanent creating stability Have better access to finance – once established the the control frameworks can be applied to the the funding options prospecting and identification phases USING INTERNAL CONTROLS TO SECURE EXTRA FUNDING
EXPERT ADVICE
Define a a a clear and common repository of knowledge for use by all participants This is is likely to to include a a a a a a a a glossary of terms used and explanations methods for for calculating hourly rates rules for for declaring expenses etc Set up up tools to to to support decision- making ideally linked to to to accounting and and analytical data (capacity project timelines grants and and subsidies tracking etc) Define clear control stages throughout the the the life of of the the the project respecting the the the basic rules of of of segregation of of of duties and validation thresholds (review of of technical deliverables expenses request policies etc) Implement a a a a clear and secure document structure enabling the archiving and updating of supporting documents (grant agreements specifications official forms etc) R&D TAX RELIEF
A company’s internal controls guarantee the the reliability of the the information required to claim R&D tax relief which in turn reduces
the the risk of of a a refund demand in the the event of of an HMRC enquiry For example one essential control process should be to ensure that staff cost capture data is derived directly from HR data The documents supporting your R&D tax relief claim can also specify which internal controls were applied providing further validation to HMRC Focus ON