Why Risk Management Matters In Professional Services Accounting

risk-management-professional-services-accounting | Photo Courtesy of zrs_one http://www.flickr.com/photos/zrseward/6720056209/sizes/q/Despite the attention given to Hurricane Sandy and similar disasters, it is mismanagement and underestimating core business challenges that often pose the most risk to companies.

A recent article on CFO.com uses Kodak as an example. The 132-year-old firm filed for Chapter 11 bankruptcy this year because the company failed to recognize the threat to its business from digital imaging quickly enough.

As the article explains, companies need to take risk management seriously, especially for professional services accounting. It all comes down to analyzing the opportunities and threats to your business. Kodak, for instance, needed to understand what digital was going to do to its market.

The key is to analyze risk and speak honestly about all business situations. The problem is that when people start making finances, they forget to analyze true risk and look at the hard facts.

Granted, sometimes it’s tough to look at every aspect of a decision and all its possible outcomes, but you have to try. Some companies have meetings where no discussion is off-limits. And remember; don’t get too busy to plan for the future. Many companies get so swamped that if it’s not on fire, they can’t deal with it. The future is never going to be on fire, so you have to make it a priority now.

The key is to not just manage risks, but to manage the right risks — the ones that are the most likely to happen and cause serious damage. As an example, the CFO.com article highlights how requiring all employees to put lids on coffee cups while walking isn’t as critically important as ensuring safety while drilling for oil thousands of feet under the ocean’s surface.

Good risk management staffing can help companies manage many of the most important issues. However, hiring the right talent isn’t enough. Organizations also must follow good risk management strategies.

Source: CFO.com, November 2012