This article will deal with risk management of small and medium-sized public accounting firms. It will provide a guide to dealing with and managing risks in an accountants office.

In general, large public accounting firms have the structure, resources, and methodology necessary to assess risks that affect them. Universities and specialists are hired, studies are carried out, and solid conclusions are drawn. At least that is expected from the investment of such resources in risk management issues.

However, to a large extent, the accountant profession is composed of medium and small companies, along with independent professionals. Their financial, market, operational, and legal risks are different from those of large firms. In many cases, their situation has not been studied or analysed correctly.

This article will provide some valid recommendations. We will first give an explanation of and a brief analysis of each of the traditional risks involved in this type of firm.

Traditional Risks Involved In The Business World

Liquidity risk

This refers to the possibility of obtaining a negative effect when selling a service that is difficult to place in the market.

Operational risk

This comes as a consequence of deficiencies or operational limitations of the business itself, such as the absence of sufficient trained personnel, lack of preparation, etc.

Counter-party risks

These are the possible costs of being associated with a client who could not pay for services provided to clients. Or who cause harm by associating the name of the accounting firm with them, such as criminals or persons of dubious reputation, etc.

Market risk

The general definition of market risk is: exposure to a negative variation in costs or profits due to a change in market prices.

Traditional Risks Applied to an Accountants Office

25The above risks are common and typical in many fields of business risk management. How can they be applied to an accounting firm?

Perhaps we could manage them as quantitative, qualitative, business management risks and use them to examine recent audit results.

Quantitative risk should be evaluated by aspects such as the efficiency of the business’ cash flows. The amount of capital of the firm itself. Also, the adequacy of the fees to be charged and the financial situation of the business.

The business’ qualitative risk should be determined by specific aspects such as its main clients, the industry in which the firm is immersed. The number of clients and suppliers, and the experience of the management are also relevant. The number of products in the market, key personnel, should also be taken into consideration.

Operational risk mainly results from issues such as pressure from partners for management to generate profits or positive cash flows. Financing needs, additional capital, reserves for not recognising or (inadequately recognising) income, very high management compensation based on results are also very important to consider. Unsound accounting practices may also result in risk, comparable to a management’s concealment of information from the firm’s partners.

The results of recent accounts audits can point out risks that other accounting professionals have identified in the recent past. Pressure to impose ideas, unreasonable reporting dates, detected fraud, unexplained departures of firm personnel, may all cause problems. It is smart to take these into consideration.

Litigation is also a source of risk for the firm, as are unnecessarily complex transactions or contracts with parties to the firm. This should not be under-evaluated.

One suggestion to assess the firm’s total risks is to develop one or more risk matrices that evaluate the different types of risk to which the firm is subject by assigning values to each of the different risks noted above.

The analysis of these matrices will surely lead to smart business decisions. It also will allow for defining the levels of capitalisation, or levels of insurance, or what is sought to manage, or mitigate. All of which may incur different types of risks to which the firm is subject in particular.

Conclusion

In the current era, a more effective, efficient, and professional management of public accounting firms is required. Demands on external public accountants are beginning to become commonplace.

It is, therefore, crucial to adopt risk management concepts both inside and outside the firms in order to prevent serious problems for the firms and their partners. Managing risks is an essential part of running an accountants’ office of any size.

There aren’t enough words to emphasise the importance of health and safety in the workplace. Employers must do everything required by law to ensure their employees are safe at all times. Although challenging, the goal of keeping everyone in the company safe isn’t impossible. With proper management and control procedures, you can make your workplace safe, even when it comes about managing electrical health and safety risks.

Faulty wiring can cause a fire or fatally shock someone, hence the reason for always hiring the best electricians in Kent. You need to be sure the people who do the repairs or installation go through the necessary steps of isolating wires for safety and strategically placing them where no damage can be done. Electricians Kent

Electricity Can Be Extremely Dangerous

As you probably know already, electricity can be extremely dangerous. When someone gets electrocuted, they are at risk of losing their life. Furthermore, other employees who touch this individuals without proper equipment may also duffer an electrical shock that could kill them. Since this is one of the greatest health and safety hazards, it makes sense to treat it with maximum care. This is the only way you can prevent terrible workplace accidents that involve electricity.

Electrical Protection Equipment

First of all, you ought to know that proper protection equipment isn’t optional. You also need to ensure all your workers are aware of this fact. You have to make it clear to everyone in your company that ignoring the health and safety regulations will attract severe penalties. It’s better to have to put up with a penalty than to end up on a hospital bed, not knowing whether you’ll survive electrocution. Any worker that doesn’t understand this is at risk of either getting laid off or losing their life.

In order for your employees to be able to manage electrical health and safety risks, they should know exactly what they are allowed to do and what they are forbidden in terms of handling different tools and machines. Operating heavy equipment without proper training may result in injuries. Your employees should get the best training on the job, in order for you to have the peace of mind that they will know what to do and how to act in emergency situations. The biggest problem isn’t the day to day work, but unexpected situations that may arise. You can’t ask these people to know how to react, unless you provide them with detailed training on all these issues and abnormal situations. For instance, they should all be aware of the fact that touching electrical wires may kill them. In addition, they should know what to do in case one of their work buddies touches one of these wires and gets electrocuted. They should know how to stay calm and how to do what they are supposed to, in order to minimise the risk of suffering the same injuries as the other person.

Management of Electrical Health and Safety Risks

All these being said, you need to take time to develop an in-depth policy in regard to the health and safety risks and their proper management. Furthermore, you shouldn’t rely on people’s memory, as it can fail when you less expect it. Always ensure all your employees have acquired the needed knowledge. Test them, if needed, and remember to ask them to sign a document concerning the training they’ve received in regard to the health and safety procedures to follow in case of emergency. Always repeat the tests whenever you feel your employees may have forgotten some of the rules they should observe and follow. This is for their won good, so you should be keen on having everyone present at these meetings. Don’t allow anyone to work without the proper protection equipment. These safety rules have been developed for a reason, so there’s no way anyone can evade or ignore them and not get punished for that. This is something of utmost importance, as it is the best way to keep your employees safe and yourself out of trouble. You can rest assured that, if someone dies or gets severely injured at work, your company will be help liable. Are you ready to put up with endless trials and with paying huge amounts of money to your workers? If you aren’t ready for that, make sure you develop a detailed health and safety guide and you have everyone in your company learn it by heart and apply it in everything they do. This is a lifesaver, so don’t hesitate to penalise anyone who disregards these rules and regulations. Electricity kills, so you have the duty to keep your teams safe at all times.