Emerging Risks are forward-looking signals designed to help you identify potential financial stress before it becomes a larger issue.

Rather than only showing where a client stands today, RunSmart evaluates projected financial performance over the next 3–6 months and highlights meaningful deterioration trends or structural risk conditions.

These alerts are designed to help advisory firms:

Emerging Risks are not predictions of failure. They are early warning signals based on forecasted financial data.

After each forecast refresh, RunSmart evaluates projected financial statements and key metrics using a set of rule-based triggers.

These rules fall into two categories:

Indicators of potential financial distress.

Indicators that performance is weakening beyond expected seasonality.

If one or more rules are triggered, the Portfolio View will display an alert count (e.g., “2 Alerts”). Clicking the alert opens a detailed breakdown of each triggered condition, including severity and explanation.

Below are the types of financial signals we monitor.

These indicate potential financial instability.

Triggered if projected cash balance is forecasted to fall below $0 within the next 6 months.

Why it matters:
A projected negative cash balance indicates potential liquidity failure if no corrective action is taken.

Triggered if projected Debt Service Coverage Ratio (DSCR) falls below 1.0.

Why it matters:
A DSCR below 1.0 means projected operating cash flow is insufficient to cover required debt payments.

Triggered if projected interest coverage falls below 1.0.

Why it matters:
Indicates projected earnings may not fully cover interest obligations.

These indicate material weakening trends that may require attention.

Triggered if net income is projected negative for 3 consecutive months.

Why it matters:
Extended losses may reduce financial flexibility and liquidity over time.

Triggered if projected cash declines significantly over the next 3 months and runway is limited.

Why it matters:
Accelerating cash decline may precede liquidity pressure.

Triggered when projected revenue declines materially over the next 3 months and the decline also exceeds year-over-year performance.

Why it matters:
This helps distinguish abnormal contraction from normal seasonal fluctuations.

Triggered when revenue declines for 3 consecutive forecast months with meaningful cumulative decline and negative year-over-year comparison.

Why it matters:
Indicates a sustained weakening trend rather than short-term volatility.

Triggered when projected net margins decline meaningfully over the next 3 months and year-over-year margins are also lower.

Why it matters:
Margin compression can signal pricing pressure, cost inflation, or operational inefficiencies.

These are directional signals that may warrant monitoring.

Triggered when projected current ratio declines meaningfully and approaches lower liquidity levels.

Why it matters:
Deteriorating short-term liquidity can reduce financial flexibility.

Triggered when projected debt-to-capitalization increases significantly over the next 6 months.
​

Why it matters:
Rapid increases in leverage may elevate financial risk, even if current coverage remains adequate.

For revenue and margin-based alerts, RunSmart compares projected performance against year-over-year trends to reduce false positives caused by expected seasonal patterns.
​

This helps ensure alerts are based on abnormal deterioration rather than routine business cycles.

Emerging Risks are designed to help you:

In Portfolio View:

Emerging Risks are based on forecasted financial data.
They are not guarantees of future outcomes.

Alerts should be used to inform professional judgment — not replace it.

By surfacing forward-looking risk signals alongside forecasted financial data, Emerging Risks help you prioritize attention, strengthen client conversations, and monitor portfolio health with greater clarity.