Is risk a natural part of being an accountant?

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Does being a leader in accountancy mean managing risks or taking them? Richard Sergeant speaks to five accountants about their attitude towards risk and what this means in practice for the modern firm.

The stereotype of an accountant is of (usually) a man of a certain age, in a suit and tie, perhaps willing to push the boat out at the 19th hole on occasion, but not prone to fits of abandon.

Hopefully, we’re well away from those days, within the profession at least. However, the sense of the attitude towards risk persists. While I find this stereotype understandable, it doesn’t always fit reality.

Over the years I've known accounting skydivers, bog snorkelers, and racing drivers. I've spoken to practitioners who have left serious careers, well-paid jobs, and excellent prospects to start up on their own, putting their houses and family lifestyle on the table. Hardly the actions of the super cautious.

And even within the role itself, there's compliance risk, client risk, services going wrong (nobody relishes a complex payroll going awry) and being on the hook for just about everything including AML and GDPR.

So is risk a natural part of being an accountant or something that is there to be managed? Does being a leader in the business dictate that you are more inclined to shake things up, and leave the technicians to keep things steady and on track?

The opportunity to take risk

John Toon, manager at Beever and Struthers, believes that there is a tendency for senior members of staff to railroad some of the free-thinking associated with risk.

“I think a lot of firms put up so many barriers that prevent staff from taking risks or being creative,” said Toon. “Sometimes this is for positive reasons - reputation, compliance risk management etc but this often results in overreach and extends into areas where it's unnecessary.”

A consequence of this attitude, according to Toon, is that firms run the risk of stopping people from thinking and expressing themselves. “If staff are empowered then this is to the benefit of everyone involved.”

Della Hudson of Hudson Business Advisers makes the point that risk can be about having the opportunity within your role.

“Naturally the [accounting] business owners are less risk-averse than most employed accountants,” said Hudson. “It’s not something I particularly considered when recruiting as customer service was my personality priority.

"We did have to change most of the appraisal forms to refer to job development rather than career development as our flexible working policies attracted a lot of mothers who had made the decision to put family before career for a period. This (temporary) lack of career aspirations may have been perceived as risk-averse, but I bet they’d have stepped in front of a bullet for their kids. Did they take a risk by putting their careers on hold? Probably”.

Don’t confuse aversion with awareness

However, there is undeniably an amount of caution that goes with the territory and by its nature needs to attract a certain kind of person in order to maintain it.

For Robert Stell, owner of Bradbury Stell, this isn’t a negative. “I think a lot of people still choose accountancy as a career because they are, by nature, risk-averse … and … I might add, isn’t that a good thing?”

giving clients the information to take the right risks at the right time"

However it would be wrong to confuse a cautious approach, especially in terms of professional scrutiny and distance, with a lack of desire to take risks as Steve Beaumont, a partner at TC Group explains: “Compliance work will always involve a degree of risk assessment in the very nature of it. Some of the reputation will come from that, that’s not risk aversion in my book - that’s just doing a professional job the right way.

According to Beaumont, the real value of our accountants’ work for clients should be in the advisory side, and a large part of that will be helping by giving them all the information they need to take the right risks at the right times.

“Advising on risks just means you have to be aware of them; that’s very different to being averse to them,” said Beaumont.

Entrepreneur accountants

Working in practice for many years for another firm is a way that many choose to earn their spurs before having the confidence to take the plunge into setting up on their own, creating a more nuanced approach to risk as Alan Woods, director of Woods Squared explains: “You need entrepreneurial risk, but that doesn't mean that an appreciation of risk in other areas doesn't need to be considered.”

The risk level Woods applies to his decision-making shifts depends on the activity performed. A marketing activity contains fewer bear traps than an AML check, and making a decision which goes wrong has far fewer significant implications or penalties.

“When I was an employee the only risks I had to consider were connected with compliance and regulation. The biggest risk we took in setting up our practice in 2007 was the fact that both myself and my wife walked away from salaried jobs … the rest, as they say, is history.”

Beyond the point of dropping a salary, this appetite for taking chances persists even as the business matures.

Risk is part of the business model

Having recently helped to judge the Fast Track firm of the year in this year's Accounting Excellence Awards it was clear that the most entrepreneurial firms (and individuals) were building risk into their approach.

For some, this might mean launching different client service models, developing new services and adopting fairly radical technology. For others it means doubling down on expertise, investing heavily in high-level people and taking a much more aggressive stance to marketing and business development.

However, it would seem that you don’t have to throw yourself out of a plane to understand, measure, advise and most importantly take the risk. It’s built into the fabric and service of every firm.

Ready to book that bungee jump now?

About Richard Sergeant

Richard Sergeant

Specialist insight and business development support for accountants and their vendors. Cloud advocate with a pragmatist eye.

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By DJKL
17th Jun 2019 18:03

Risk is merely a reflection of required reward, the nonsense that accountants are risk averse is manufactured, mere trope, what accountants maybe do more than others is measure risk and evaluate more so that the risks are taken on with a clear appreciation of the potential downsides and a reasonable appreciation of the upsides.

Back when we evaluated sites/properties to buy without planning , our aim to make a gain from either a planning uplift or by redevelopment ourselves, one of the key calculations was what is it worth with its current use class and given price and likely planning etc costs how much are we risking on the downside if planning for change of use is not forthcoming, how does that fit with the possible profit if we get the planning, evaluate the likely outcomes and give it a whirl.

I do not think I, as the finance person, was any more or less risk averse than say the owners or any other decision maker, what I did however was approach the evaluation with more numbers and less seat of the pants, it will be alright on the night- the secret is not avoiding risk, it is always having a plan B when plan A turns to ****.

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18th Jun 2019 10:10

If you haven't got a back door, don't go in the front door.

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By DJKL
to johnjenkins
18th Jun 2019 10:34

John

Very succinct re an all or nothing outcome within a risk evaluation.

For one where you may possibly salvage something on the downside (100% loss not likely) you could possibly use "embrace the possibility you may be exiting via the window."

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to DJKL
18th Jun 2019 11:27

The windows might have bars across to stop burglars which you won't know until you get in.

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By DJKL
to johnjenkins
18th Jun 2019 11:30

Very true.

They can also be jammed or may lead to a ten storey drop

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to johnjenkins
19th Jun 2019 10:17

Experience tells you to look at the issue from both sides, because you never know. Therefore.....

If you haven't got a front door don't go in the back door.

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19th Jun 2019 13:06

Too many accountants/agents suck up to the entrepreneur/tax payer in the pursuit of pleasing their paymaster and justifying the fee note. Accountants live with business risks like other businesses.
Accountants should be more on the side of the public duty to the taxpayer but sadly I do not see this

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