Remember having growing pains as a kid? You’d complain about that weird achy feeling, and then Mom or Dad would explain you were getting taller.
You might be experiencing that same feeling as your business grows. It’s exciting but scary; you might want someone to tell you how to handle it. That’s what risk assessment and assurance is all about.
Risk assurance is a safeguard that lets companies identify and manage risks in their operations, finances, and compliance activities. And if you have a growing business, you’ll want to learn all you can about it because it can be a foundation for a profitable future.
Let’s dig in and find out more.
Why bother with risk assurance and assessment?
The growth phase is one of the most delicate and formative times for any business. Each day brings new challenges and, quite frankly, the potential for disaster. There are so many potential pitfalls in all areas of finance, operations, and compliance it’s impossible to recognize them all. But even if you recognize them, when staff and customer bases are growing, keeping up with the internal processes needed to sustain growth can be challenging.
Risk assurance allows you to recognize potential problems. It also gives you a strategy on how to fix them, making your company’s future much smoother. It will help you get more control over your business. And you can use those internal processes as a selling point when trying to gain financing for your growing business.
Carrying out risk assurance
Carrying out a risk assurance assessment doesn’t necessarily have to be complicated. The first thing to do is call in a trusted source, such as a CPA firm. Depending on the size of your business, you may get a team or a single person. Whatever the case, you can expect them to conduct interviews with key personnel in the company. They will also review documents such as financial statements, workflows, internal control policies, and risk management plans. They’ll also observe daily processes to better understand any gaps that may pose problems in the future.
A Risk Assessment Example
If you are still a little hazy about the need for risk assessment and how it works, this example should help clarify it. In this case, we’ll use a fake company to illustrate. Joe’s Widget Company is growing by leaps and bounds. But the CEO is beginning to see troubles with collecting payments on time, getting accurate accounting, and getting accurate financial reports to make better business decisions. He calls in a CPA firm that conducts the risk assessment. Then they create policies and workflows for conducting credit checks on customers and regular follow-ups on overdue accounts. They also offer internal controls to improve the accuracy of financial statements and offer a plan to ensure GAAP compliance, so all future accounting is accurate. If any of those changes had not occurred, it could have derailed Joe’s Widget Company in the next few years and they would never really understand why the company failed.
The Bottom Line
Risk assessment and assurance is an excellent investment, even if you aren’t seeing problems in your growing company. It leaves your company better equipped to handle growth and mitigate risks that are bound to occur.
Reach out to our CPA to learn more about risk assurance and how it can create a positive future for your business.