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Why Risk Management is Important for Growth

Jun 2, 2022
Risk Management
Every business has risk exposure, a fact we’ve grown especially familiar with during the pandemic. But risk management goes beyond insurance, liability and compliance. Taking positive, calculated risks is what allows you to grow and transform, and every business and organization benefits from taking a deep dive into their risk management approach. 

“As the INCPAS team and board have looked at changes within our own organization, many conversations have boiled down to understanding what level of risk we’re taking on and what our comfort level is when it comes to changes,” said Courtney Kincaid, CAE, INCPAS President & CEO.

Kincaid notes that COVID-19 has also created a new opportunity to realign. “People are looking at risk a little bit differently and trying to understand what their risk appetite is so they can be innovative,” she said.

Risk management is a key part of leadership and management decisions that move business forward and impact overall success. 

Understanding levels of risk

How comfortable is your firm or organization with risk? Every team will have a different answer.

Every leadership team should have conversations to determine their three key levels of risk for their organization:
  • Risk appetite: This is the level of risk you’re willing to take to achieve goals and desired outcomes. Changes that fall within the risk appetite realm usually don’t require major considerations; they’re quickly accepted as okay because they fall within the risk appetite zone. While being thoughtful and careful is wise, if your risk appetite is too low, you’re likely to find yourself stuck while competitors successfully transform to meet new demands.
  • Risk tolerance: This is the level of risk just beyond the initial risk appetite. Risk in this zone is not out of the question, but may require more internal deliberation and thoughtful execution. It can also be avoided. While there can be larger risk to engage in changes or activities in this range, there can also be worthwhile positive outcomes.
  • Unacceptable risk: Changes and activities that fall in this zone are an automatic no.

Establishing your various risk levels will help steer conversations around strategic plans, expansions, and other long-term changes and goals. It can also be helpful for CPA firms looking to make the leap and add client advisory services. 

Developing client advisory services

Client advisory services are the future of the CPA profession. But it doesn’t mean the transition is easy, especially for smaller more risk-averse firms.

“As our member firms start to pivot it requires them to get outside of their comfort zone,” Kincaid explained.

Modernization efforts also play a role in assessing risk and potential payoff to adding client advisory services. 

“Technology tools are facilitating the ability to have higher level insights and quicker responses,” Kincaid said. “Firms have different investments and technology that will facilitate their ability to provide these services in a different capacity.”

But no matter where you are on the tech spectrum, there’s likely still something you can provide. As a CPA, your relationships are in place to continue serving clients in new capacities. 

“They’re trusted, they speak the business language,” Kincaid said of CPAs. “We think they’re really primed to step into this role.”

Risk management with client advisory services

Once you’ve determined your general levels of risk, you’re ready to take a deeper dive into individual areas and the associated risks.

When it comes to exploring client advisory services, these questions can help you guide your risk assessment and figure out what makes the most sense for your firm or organization.

  • Does your team have the right level of expertise to offer a particular client advisory service? 
  • Can you offer a competent service? 
  • What are your knowledge gaps? Can you fill them? How?

  • What does a client expect from this type of service engagement? Do our expectations align? What standards should we follow to achieve optimal service? 
  • What documentation needs to be in place to assure both sides are protected and expectations are met? 
  • What systems should we put in place to deliver this service? 
  • How can we best communicate with clients throughout this service engagement?

Internal morale
  • How happy are your team members doing the work they’re currently doing?
  • How will they adjust to new services?
  • Are they open to new training and education opportunities to grow?
  • On the other side of the equation—will team members be happy if you DON’T explore new services? 

  • Will these services help or harm when it comes to recruiting new talent?
  • What additional skill sets will be required of new team members?
  • Do we need to hire new talent to handle new services? 

  • How will these services impact our brand perception? What adjustments, if any, will need to be made?
  • How will we manage a brand change?
  • Who will be responsible for brand management?

Want to learn more? Register for these upcoming in-person and virtual courses:

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