![]() ![]() Internal risks may include staff, the business premises and location, threats to goodwill and reputation and information technology. When assessing the kind of risks the firm is exposed to, it is important to consider both the internal risks and the external risks. In assessing the level of the risk and identifying high and low risks, the process should include the firm’s existing and anticipated areas of practice the composition, experience and expertise of the firm the management and internal control procedures the likelihood of being sued and the process to assess new and existing clients. One of the simplest models to identify the cost of the controls and their adequacy is to consider the likelihood of occurrence of an event and the consequences of that event e.g. This involves a comparison of exposure levels against a predetermined tolerance level, the degree of control, potential or actual losses and benefits and opportunities presented by the risk. The potential risks can be categorized as services performed, contract risk, acceptance or continuance risk and performance risk.Īnalyze and evaluate the risks on a continuing basis. Identify existing and potential risks as well as existing controls. clients, personnel, consultants, agents, internal systems, third parties, suppliers, etc.). Identify internal and external stakeholders (e.g. When developing the firm’s risk management framework, consideration should be given to the services offered, marketing and communication, staff and human resources issues, information and resource management, regulatory obligations, IT issues and security, succession planning, acceptance and continuance of clients and cash flow management.Ĭonsider the goals and objectives of the firm and the environment in which it operates (e.g. Implement a Risk Management Framework based on the Risk Policy.Setting the scene for continual improvement within the firm.Įight steps to establishing a risk management program are:. ![]() Less disruption and less rework through better understanding of process by all staff in the firm and.A systematic, well-informed and thorough method of decision-making.Increased knowledge and understanding of exposure to risk.Reduced risks of litigation as a consequence of processes and contingency plans.Increased profitability through better client and job controls.Better cost control through enhanced workflows, client evaluation and engagement processes.Implementing a risk management program provides many benefits, including: The articles are a result of discussions at recent IFAC SMP Committee meetings, which involves practitioners from around the world sharing their perspectives and insights and material included in the Guide to Practice Management for Small- and Medium-Sized Practices, which includes a whole module on risk management, including professionalism and ethics, client engagement, quality control and business continuity planning and disaster recovery. The second article will highlight 10 steps for successful risk management and the third focuses on business continuity planning and risk mitigation strategies. This article is part of a risk management series covering the benefits and steps of establishing risk management program. The goal of creating a risk management culture is to create a situation where partners and staff instinctively look for risks and consider their impacts when making effective operational decisions. This emphasizes the importance of managing risk as part of each staff member’s daily activities at all levels of the firm. It is important to establish a risk management “culture” in the firm. Effective risk management will protect the reputation, credibility and status of the firm. This is both in terms of protecting the assets, finances and operations of the firm and contributing to satisfactory legal compliance, corporate governance and due diligence. Risk management is critical for all firms, including small- and medium-sized practices (SMPs). ![]()
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