A capital market company (the Company) underwent a significant business transformation after securing a substantial private placement investment and building a multi-billion-dollar digital asset treasury. As the organization shifted from its traditional operating model to one centered on digital assets, leadership faced new governance, compliance and risk management considerations. Cherry Bekaert was engaged in helping strengthen internal controls, evaluate operational risks and support management through a period of rapid change.
Navigating New Risks and Building New Frameworks+
The Company's transition into a digital asset treasury model introduced new risks and operational complexities. Management was navigating an unfamiliar technology environment while simultaneously scaling the business and managing significant digital asset holdings. At the same time, the Company needed a control framework capable of supporting public company compliance requirements and satisfying the expectations of its previous auditor.
Key challenges included:
- Establishing effective governance and oversight around digital asset transactions
- Strengthening segregation of duties to reduce the risk of unauthorized transactions
- Building management's understanding of blockchain technology and related operational risks
- Developing controls that aligned with the unique characteristics of digital asset ecosystems
- Preparing for heightened compliance and reporting requirements while the business continued to evolve
A Risk-based Approach to a New Operating Environment
Cherry Bekaert’s Risk Advisory team focused on identifying where risks could arise, evaluating their potential impact, and determining how controls could be designed to address those risks efficiently.
Because blockchain technology operates differently from traditional financial systems, Cherry Bekaert worked closely with management and stakeholders to evaluate how risks were mitigated within the underlying protocols around a public distributed ledger environment. This approach helped distinguish genuine risks from perceived risks and provided greater clarity around the controls necessary to support the Company's evolving business model.
Strengthening Governance and Control Structures
Cherry Bekaert helped the Company establish a stronger control environment by redesigning critical governance processes and improving accountability across digital asset operations.
Implementing Stronger Segregation of Duties
Our risk advisory consultants evaluated transaction authorization processes and identified opportunities to reduce concentration of control. New governance structures introduced appropriate segregation of duties, limiting the ability of any one individual to initiate and execute transactions independently. These changes helped reduce exposure to asset misappropriation and financial reporting risks.
Enhancing Management's Understanding of Digital Assets
Cherry Bekaert worked alongside management to increase awareness of blockchain technology, digital asset operations, and related risk considerations. This collaboration helped leadership make more informed decisions as the company continued to expand its digital asset activities, embrace authentic crypto activity, and evaluate new opportunities within the ecosystem.
Creating Ongoing Risk Visibility
As the engagement evolved, Cherry Bekaert established recurring executive-level reporting focused on risk mitigation activities, compliance initiatives, and the organization's broader risk management strategy. The reporting provided leadership with greater transparency into key risks and helped support decision-making as the company continued to scale.
Strong Controls and Visibility To Support Growth
The Company successfully strengthened its control environment while continuing to grow and mature its digital asset operations. Throughout this process, what initially started as an initiative for public company reporting turned into a periodic status update to the CEO and executive leadership to support the risk framework as a marketing differentiator.
As a result of the engagement, the Company:
- Avoided a publicly disclosed material weakness
- Met all reporting and disclosure requirements for a public company
- Established stronger governance and oversight over digital asset activities
- Improved segregation of duties and transaction approval processes
- Built a more mature framework for evaluating risks associated with new technologies and digital asset initiatives
- Increased management visibility into compliance and risk management performance through recurring executive reporting
- Positioned itself to meet future public company compliance requirements as reporting obligations continue to expand
- Improved security and enhanced quality of data
The Company now operates with a more mature risk management framework capable of supporting increasingly complex digital asset activities. Management has a structured process for evaluating new technologies, transactions, custodial relationships, and operational risks before implementation. The organization is also better prepared for future regulatory and compliance requirements as it continues to grow and evolve its digital asset strategy.
Your Guide Forward
By combining technical knowledge, operational insight and risk advisory capabilities, Cherry Bekaert helped the Company strengthen internal controls, improve governance and create a foundation for long-term growth in a rapidly changing environment.
Connect with an advisor to learn more about how our Risk Advisory practice can help your team.
