Having spent 8 years working in the Internal auditing and risk management field, I always wondered why this market still remains to be niche for most of the small and medium practitioners (SMPs) and even today the big pie of the market belongs to the club of Big 4s or arguably Big 5s.
It does not mean that the profession has not grown. In fact it has grown more than it was expected to grow as per recent studies published by reliable sources available on Google. The growth is also reflected in the profession moving up the value chain from conventional aspects such as ensuring compliance to the integrated risk management and process transformation. The emerging concepts of environmental audits, business continuity planning, fraud prevention and detection controls are keeping the professionals busy. However, the average SMP practicing chartered accountant has not been able to cash in on the growth story within this market.
What are the major snags?
After a careful revisit on the facts, the answer lies in the basics !
We as professionals have not been able to sell the idea of internal control, and risk based auditing to our clients. We may also say that we may have never given so much attention to it. As on today, most of the organizations seeking such services are the big multi-nationals, listed companies or the companies which are required to have an internal control and internal audit system mandatorily as per regulatory system in India. We have not been able to devise our customized strategies for the client base for which it is not mandatory to have an adequate internal control and audit system as per regulations.
Additionally, the SMPs have almost ignored the value of ‘branding’. While I do not want to suggest in any way that firms should go all out to make their brand value by advertisements campaigns (as it is not allowed by our professional ethics guidelines in ICAI). I am only suggesting here that the firms need to give some boost to its brand value through means which are allowed and well within the acceptable practices adopted by professionals worldwide. This is a general aspect which could help in all kinds of business and not only internal controls related practice.
It is also a question of skills and knowledge base within the SMPs in India. Limited knowledge of latest concepts and practices in the risk management area on various Internal Control Frameworks, Enterprise Risk Management, Environmental audits, Process Audits etc is the biggest hindrance in creating break-through in the business. This also results in limited staff abilities to present the business case to clients and get the business.
What can we do?
Make the communication action oriented and action will follow.
Starting point can be a simple discussion on the need of implementing internal controls for our existing clients. We need to bring ourselves to the level where clients can believe us to deliver value out of internal controls implementation. We need to give them the belief that we (as their existing consultants) shall be able to implement an effective internal control mechanism within their organizations which will be value adding and a great trade off between cost and benefits.
Strategy for Phased Implementation.
We need to build our strategies for phased implementation of internal controls within the client organizations and this has to be customized for each clients’ needs. This is hard work but not impossible for sure. Once we do this, we will become the true consultants helping our client in their day to day business while also earning good money out of it. Once and internal control system is in place, all the other related aspects such as internal audits, risk management etc can be implemented later depending upon the maturity levels of each organization.
Attaining and updating skills.We also need to spend our time and energy simultaneously into attaining and updating the related skills for our staff and ourselves. There are various acclaimed certifications which can help us in attaining the related skills while also ensuring that our practice is in line with the international standards. The Certified Internal Auditor (CIA), Certified Information System Auditor (CISA), Certified Fraud Examiner (CFE), and Project management professional (PMP) are few of the popular courses in this domain. These courses are practical oriented and address various practical aspects of Internal controls, audits and risk management topics.
Building Brand Value – in the eyes of investors.Building brand value of firms is equally important. After all, the big business will come from the big organizations and they look out for a professional organization that is well known, has adequate knowledge and above all is treated as reliable by their investors. This is why many of the SMP firms having good clientele have been losing out their clientele to the MNC consulting firms in the recent past. Large organizations look out for a reliable, credible, well known service provider who can cater to their needs on timely basis at an effective cost (not necessarily the lowest cost). Most of the SMEs will have the cost advantage in comparison to the bigger consulting firms. However, they lack in brand value and presentation skills and thus lose out on potential clients. Effective brand value can be built by organizing contests, participation in institute activities, articles, newsletters, etc. Additionally, having a powerful and interactive website is essential in leaving a good impression on clients. Social media such as facebook, twitter, blogs, youtube, webcasts, etc are powerful medium to enhance the web presence of the SMP firms with a low cost.
Relook at Pricing Models.Last but not the least, pricing and costing models need to be decided for each kind of assignment/work separately. An overly cost optimization centric model may not be what the client is looking for. Thus, for value adding activities, the focus is more on quality of work than on cost. While for normal work of internal audits the cost becomes more important. Thus, the strategy should vary for each segment of market and each type of work separately. Maintaining the transparency on pricing with the larger organizations (clients) is also helpful in building trust and confidence of management in the service provider, although it may not work very well with the smaller organizations.
With these steps we can surely hope to bring a change in the currently existing market share scenario in the short term and become real “consultants” to our clients, and be the agents of change.
CA. Naval Bajaj
Email: [email protected]: (navalkbajaj)(The author is a Certified Internal Auditor from The IIA USA, an Indian Chartered Accountant, and is currently working as a Senior Manager in the Global Internal Audit department of a French MNC)
What SMPs can do to improve their Internal Audit and Risk Management related practice
