Governance has always been somewhat of a stodgy thing; few get genuinely excited about it. It reminds me of button-up sweaters, elbow patches and the smell of mothballs but I think governance will be the next great opportunity for accountants as their bread-and-butter compliance services become commodified and here’s why.
De-risk your clients
The most obvious benefit of providing a governance service is the intrinsic value of governance itself. By design, a governance framework will have your clients thinking about risk in a very different way. Not only can you make money selling the service but it will also help your clients to de-risk and in the long-term become more profitable. This will generate an opportunity to upsell other products to your existing clients. Further, fewer of your clients will go out of business and clients that are happy will refer you more work.
Business owners lack this knowledge
Unlike say, social media marketing, business owners cannot just ‘pick up’ corporate governance. With social media, a bad post may get some comments with negative sentiment and a good post may generate referrals. The savvy business owner will naturally improve over time by seeing what works and what doesn’t; it’s posting by natural selection. Governance is a different type of beast. Without a governance framework, a business will continue to operate as is and may continue to take unnecessary risks until one day, one risk materialises that can take out the business.
It is not set and forget
Governance is not self-correcting and does not have naturally built-in feedback loops. If, for example, an organisation doesn’t have cascading delegations of authority, it will not be inherently obvious that they need them. Conversely, if an organisation implements a bad social media campaign, they will receive feedback on it and it will be obvious that they need to take a different approach. To that end, governance needs constant attention and refinement and it could be the job of the accountant to advise the client on governance issues over the long-term. This means a retainer-type engagement which can build recurring revenue.
Dress for the job you want
Many small business owners believe that governance is something reserved for larger business and is only a bureaucratic hindrance to a small business. This is only true if the corporate governance framework is either not fit for the business or poorly implemented. A small business may not need cascading delegations of authority but all businesses should have a well-maintained risk register and should use risk as a lens through which you can make decisions. If your business is turning over $200k and you want to reach $2M, then act like a $2M business; dress for the job you want.
Practice what you preach
Offering governance as a service will necessitate robust policies, procedures and artefacts in your own firm. After all, you can’t advise a client on what decision-making framework to adopt at board level if your own board is making decisions off the cuff. Accountants that help clients implement an enterprise risk management (ERM) framework will be more attuned to identifying risks in your own firm and facilitate a bottom-up risk approach where employees identify and notify management of risks. By teaching clients about corporate governance, your firm will better improve their governance.
At Accodex, we actively pursue good governance within our own firm and subsequently started incorporating it into the advisory services we offer our clients. Regardless of any revenue made through advising on governance, the investment we have made in governance internally has already paid dividends through smarter decision-making and better risk management.
For a creative analysis of corporate governance principles as applied by the rulers of Game of Thrones, check out the following series of blogs: Game of Risk. The first of the series is Robert Baratheon.
Photo Credit from Joyless Creatures
Sholto Macpherson