CA firms in today’s knowledge driven practice are constantly exposed to risk of litigation arising out of professional negligence, due to unforeseen pandemic or due to technology advancement. It is imperative for leaders of CA firms to recognize this and plan well in time and ahead of CA firms to mitigate and manage these risks.
As per COSO Enterprise Risk Management – Integrated Framework, 2004, COSO, risk management is defined as,
“… a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identity potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.”
According to the risk management framework, entity objectives can be viewed in the context of four categories:
Source: COSO framework
A typical risk management model is presented below:
The components of risk can be classified as:
Best practices for CA firm
a. Employ the COSO framework and create a risk management model for the firm.
b. Constantly align the firm’s growth trajectory to appreciate and address risks facing the firm
c. Keep an eye on improving the firm’s response to risks arising out of strategic, operational, reporting and compliance components.
d. Use standardized models and frameworks to document, implement and monitor risks, in a sustained and structured timeframe.