'Pivotal role' for accounting firms in improving risk controls

The risk management flaws exposed by the outbreak of the global credit crisis are forcing financial institutions and corporations around the world to revise their business models and shape up their managements.

At the center of this reshuffle that could reshape the global business environment are international accounting firms that also provide highly influential management consultant services.

In an interview with China Business Weekly, Timothy Flynn, chairman of KPMG International, one of the world's four biggest accounting firms, said that the crisis has presented corporate executives with a host of "strategic possibilities".

His advice to the major international corporations, most of them clients of the "big four" accounting firms, was to do a thorough and comprehensive review of their business models, operations, compensation incentive packages, and, more importantly, risk management status.

Since the outbreak of the financial crisis last year, KPMG, as well as its peers, have all strengthened their corporate advisory capabilities and focused especially on risk management services. These include the redefining of risk management structures, achieving better cash management procedures, optimizing returns on capital and asset, restructuring debt, and improving the transparency of financial reporting.

"We need to bring risk management front and center into the new system," Flynn said. "Organizations that have effective risk management processes are likely to be the ones that are successful in these unprecedented economic times, and raise the level of trust both inside and outside their businesses," he said.

Flynn said he was encouraged by the G20 summit in London in April, which brought world leaders together to coordinate international efforts in strengthening the regulatory framework to minimize risks and enhance transparency.

"These are very encouraging signs to me that the world would be very different when we come out of the crisis," Flynn said. "It is important to recognize that what we are experiencing is not a cycle, but a fundamental resetting of the global economy and the way we do business," he said.