The Importance of Risk Advisory in International Business
By Space Coast Daily // November 27, 2019
A quick glance at the global economic climate confirms that businesses may well find it hard to sustain growth in the near-term, with both advanced and developing countries facing up to the prospect of a recession.
In fact, the UN has confirmed that a global recession represents a clear and present danger as 2020 approaches, making it hard for businesses to implement concrete growth plans for the future.
Not only this, but it’s important that businesses look to mitigate relevant risks in an increasingly strained climate. In this post, we’ll look at the importance of risk advisory for any business, whilst appraising the difference between this and consultancy.
What is Risk Advisory?
In simple terms, risk advisory work similarly to an audit, and one that seeks to identify real-time risks in your business whilst helping stakeholders to take practical steps towards negating these.
This can work across every area of business, from finance and sales to production and record keeping, with the auditing process requiring stakeholders to provide detailed monitoring reports and evaluations to middle managers.
But how does this compare with risk consultancy? Well, consultancy is generally defined as assisting in specific structure and management projects, as part of a company’s long-term objective to improve their efficiency and bottom line.
This highlights to core difference between risk advisory and consultancy, as the former is more focused and offers recommendations to clients rather than working collaboratively as part of a more involved project.
In Which Sectors is Risk Advisory Particularly Important?
The more focused nature of risk advisory means that there are specific areas of business in which this should be applied.
As this relies heavily on auditing business process and identifying risk, it’s commonly applied to entities such as the supply chain, manufacturing processes and a business’s financial management.
In the case of the latter, this will include highlighting issues pertaining to financial reports, with a clear focus on taxation and the submission of accurate records.
Two key areas of risk advisory services include compliance testing and risk management assessments. As a result of this, risk advisory services should also be applied to processes where your business is required to comply with independent national guidelines, as you look to identify potential risks and eliminate these going forward.
The Importance of Working With External Risk Advisory Firms
Ultimately, understanding the importance of risk advisory and applying this effectively can genuinely benefit your business, so long as you collaborate with an external auditor such as RSM.
The reason for this is simple; as internal auditors must be managed by stakeholders who may already have preconceived notions of specific processes and the associated risks.
They may also be defensive of any business process that they’ve helped to implement, create inaccurate findings that are far from effective.
In contrast, external auditors and risk advisory experts can introduce a fresh and objective perspective, creating more effective risk management processes going forward.