Risk-taking in businesses from an accounting perspective
Abstract
Risk-taking is a broader topic that entails implementing the techniques which the organization is not sure whether they will bring positive impact or negative impact on the business. The reward for risk-taking is expressed in the form of high production and high profits. In some companies, financial accountants are considered important in ensuring that the amount of finance allocated to each risk is enough. This translates that the accountants are part of the risk-taking processes within the firm or organization. Modern businesses have been faced with the problem of the risks taken, not going as it is expected. Some enterprises claim that accountants are being irresponsible in allocating the amount that is not worth the risk. For this matter, there develops a need to understand the risk-taking in businesses from an accounting perspective.
Background Information
Risk is generally defined as the possibility of a loss of danger, injury, or any other outcome that comes against the expectations. When it comes to the field of accounting and finance, the risk is mentioned on the grounds such as profitability distributions, cost-volume analysis, profit analysis, and distribution analysis, among other dimensions. For the business to thrive, risk must be taken (Christensen, Nikolaev & Wittenberg‐Moerman, 2016: 1-5). Every company or the organization has the risk management team that ensures the decisions made are safe. The risk management team ensures that there are alternatives for the operations when the first option does not work (Lopes, 2016). It is the fact that all the companies have finance and the accounting departments which are responsible for the operating capital. Just like any other operational department, the accounting and finance department takes risks for the better of the organization. Where there is risk-taking, the risk management team must be employed. In this case, risk management can be defined as the processes in which the company’s or the organizations addressed the risks associated with their daily activities in an attempt to reach the goals and objectives of the business. Effective risk management includes the assessment of the risks, evaluation of the risk, treatment of the risk, and reporting of the risk. The top management team entrusts the financial officers and the accountants and the board of shareholders to deal with any economic dimension. The finance officer ensures that there is a reputable financial institution to finance the institution. On the other end, the accountants ensure that once the money has been received in the company, it has been accounted for following all the accounting principles (Lopes, 2016: 1-5). The financial officers may take the high risks of acquiring the money in a way that he or she may not bother to know how the funds will be paid back. Don't use plagiarised sources.Get your custom essay just from $11/page
1.0. Chapter 1: Introduction
There is a say that goes, the future cannot be predicted. The saying can be used in the business perspective to define the risks. The fear of business failure cannot prevent business operations. The business people have in their mind that there are only two chances for the business, either to fail or to pick up (Begenau, 2019: 1-3). Business analysts claim that there must be a risk to any business because no one can correctly predict the status of the market for the future. For that matter, it is said that the risks are minimized or mitigated but not solved (Begenau, 2019: 1-3). Risk is part of the strategic planning whereby the several risks are tabled and analyzed by the specialists. During the strategic planning, the risks are categorized depending on the type of department. There are which are associated with the market, financial risk, strategic risks, and the accounting risks, among others. After categorizing the risks, the specialists from every department take it as their responsibility to deeply analyze the nature and extent of the various risks (Begenau, 2019: 1-3). The risk managers try to come up with the mechanisms of minimizing the risks, which are considered to have as many alternatives as possible. The risk register is considered to be the best way to identify the risk and try to take the necessary precaution measures. Just like the other departments, accounting has several risk dimensions. According to COSO (2004), the accounting risks are managed using the internal control model that comprises the eight components. The first component is how the internal component sets the mechanisms on how the risk is viewed and taken care of. The second component is that the objectives of the company must have consisted of the risk appetite. The third component is that the events which affect the achievement of the objectives must be identified and let them be distinguished between the opportunities and the risks. The fourth component is how the risks are assessed and analyzed on how they can have an impact on the company. The fifth component is how the management comes up with the responses on the grounds of how the risks are mitigated, transferred, or held. The sixth component is the control activities such as the policies and the procedures used to ensure that the risk responses are positive. The next part ensures that the risk is communicated as soon as it is received, and the necessary measures or alternatives are employed. Finally, it is essential to have the risk monitoring team that ensures that the chances of failing are very minimal. The eight components are generally used in the field of risk-taking and risk management. When it comes to taking risks in the field of accounting, the accounting principles are applied. The dangers in accounting are determined in terms of the decision trees, probability distributions, cost-volume-profit analysis, discounted cash flow, capital assets pricing models, and hedging techniques, among others. The methods mentioned make it simple for the accountants to identify the possible risks and take the necessary measures as per the organizational policies.
1.1. Thesis Statement
This dissertation will try to research more about the risk-taking in businesses from the accounting perspective. The essay will first analyze the general dimensions of the risks and how they affect the accounting dimensions, either directly or indirectly. The dissertation will seek to find the various problems associated with the accounting risks and try to come up with possible solutions to those problems.
Statement of the Problem
Many businesses have been failing because they do not have reliable management means of dealing with the risks. What the shareholders must note is that the risks exist in all the business entities. It doesn’t mean that if the business is fully established in the market cannot have the chances. Most of the departments in the companies or organizations do not have the proper analysis of mitigating the risks. This makes it a challenge for them to deal with the threats and may end up either closing the business or realizing the lower profit with time. After carrying out some research, many industries and organizations have failed to address the risks associated with the accounting department. The majority of businesses only deal with market risks. For the company to meet its goals, it has to address the risks from all the departments, including the accounting department. Modern technology is advancing at an alarming rate, and hence it is changing everything in the management (Lopes, 2016: 1-3). The traditional techniques for analyzing accounting risks are becoming useless. The new risks are also becoming difficult to handle. This creates a gap for the researchers to examine the risk-taking in the accounting perspective and how it should be conducted in modern businesses or organizations (Begenau, 2019: 1-3). This dissertation will, therefore, analyze the risk-taking in the firms from the accounting perspective and try to come up with recommendations on how it should be carried out in the modern society as a way of meeting the goals and the objectives of the company.
1.2. Aims of the Study
The main objective of this dissertation is to try to solve the problems which firms face when addressing the issues related to risks while being specific from the accounting perspective. Other aims will be analyzing different dangers as they are treated in the business entities and how they contribute towards the success of the business. The dissertation also examines the role of the management in controlling the risks from the accounting perspective.
1.3. Research Objectives
- The main objective is to analyze the different risk-taking dimensions in the department of accounting.
- To analyze how the risks affect the performance of business either directly or indirectly.
- To analyze the internal control measures that the business firms follow when addressing the risks within the firm or organization.
- To determine how the behavior of taking risks, for instance, what happens when the high risks are taken and what happens when the low risks are taken.
Research Questions
- What are some of the risk dimensions in the accounting perspective?
- Who is responsible for the risk-taking and management in the company as long as accounting is concerned?
- What is the essence of analyzing the risk-taking in the businesses from the accounting perspective?
- Is there any relationship between modern technology and the risk-taking from the accounting perspective?
- What are some of the techniques used to help the problems associated with the risk-taking in the businesses from the accounting perspective?
2.0. Chapter 2: Literature Review
(Christensen, Nikolaev & Wittenberg‐Moerman, 2016: 1-3) Christensen et al. write about the accounting and financial information that the business entities and the organizations should understand as long as risk management is concerned. The authors first explain the general understanding of the risk and how they should be managed from the business perspective. The modern accountants have to go through some training programs for them to get conversant with the modern associated risks. Sometimes it gets difficult to understand the main areas where accounting risks may arise (Lopes, 2016: 1-3). The modern technology is changing everything regarding accounting principles. The accountants who use the traditional methods of accounting are sometimes facing the challenges associated with modern accounting perspectives. According to this article, the traditional finance and accounting emphasized that many risks are not objective but are subjective and qualitative. For example, the litigation risks, losing the important employees, facing natural disasters, economic recessions, and the loss of reputations are considered to be subjective judgments (Begenau, 2019: 1-3). The authors also claim that the risks are socially constructed within society, and their responses must meet societal expectations. Some businesses take high risks for different purposes. The risk taken depends on the extent to which it impacts the general performance of the businesses. The accountants may allocate the money in the high-risk projects as a way of increasing the effectiveness and efficiency of the business (Lopes, 2016: 1-5)). The money allocated may either fail to work as it was expected or respond positively. If the project succeeds, then it is said that the risk taken was positive, and it was managed properly by the accounting technicians and the financial officers. It is important to take risks in the business on the grounds of financing the new and the old projects as a part of working towards achieving the goal of the organization (Ioannidou, Ongena & Peydró, 2015: 95-144). The modern accounting mechanisms such as internal control systems and using the proper accounting techniques are some of the important dimensions which should be considered by the accountants when it comes to taking and managing the risks.
(Lopes, 2016) talks about the motives which make the banks take high risks of allocating loans to the individuals and the institutions. According to Lopes, taking high risks is an advantage to the company. When the business firm takes high risks, then there is a high probability that the firm will meet its strategic goals and objectives (Lopes, 2016: 1-5). Financial institutions take the risks of giving loans to many organizations or individuals without the assurance of paying back. According to the statistics, many financial institutions in Europe give out loans of more than $20 million in a day (Narayanaswamy, 2017). Out of the people who take the loans, an approximated number of 5% sometimes fails to payback, and it is finally declared as a bad debt. This does not happen all times, and giving the loans may also vary depending on the season (Narayanaswamy, 2017). The financial officers and the accountants in the banks first analyze the kind of the individual or company that is being given the loan. Things such as the assets and the size of the businesses are sometimes taken as the guarantee for the loans. Taking guarantors is a way of minimizing the risks of bad debts. Some financial institutions give loans using online platforms. This means that it is not a must to meet the person taking the loan. Financial analysts have termed this as the risk of the highest degree because there is no assurance that the clients will payback. Those are some of the risks which this dissertation will seek to address and try to explain how the accountants are responsible for addressing the risks associated with the financial institutions (Narayanaswamy, 2017: 1-5). Accountants from the business perspective tend to calculate the amount of the money required by the firm or organizations. Sometimes they may take high risks by allocating a lot of money to risky projects. They also find alternatives to the risks in case they happen. They employ the cost models which help in determining the costs, accounting models, and the basic management models to explain the extent of the risks and how they can be controlled when they arise (Narayanaswamy, 2017: 1-5). In short, risk-taking is part of the business management, and accountants must take high risks to increase their chances of meeting the long term goals and the objectives of the organization.
Narayanaswamy, 2017 talks about financial accounting theories on the bases of risk management. According to this source, financial management in any organization is the most critical department. Managers here have to be very careful with the risks they take in a way that, if they fail, would not have a lot of impact on the general business operations. Business firms should take risks that they can manage. Otherwise, they will face a lot of troubles in the future when things do not go as they were planned (Rahman, 2018: 1-5). The financial position of the business is the key determinant to what extent the risk should be. The companies which have a weak financial base should not take the high risks, while those who have strong finances should take high risks. Accountants should use modernized models to analyze the risks while dealing with different accounts (Narayanaswamy, 2017: 1-5). They should review the accounts to check if they align with the business objectives and the goals of the company. There are projects which may need a lot of money, and if they are not properly analyzed before they are allocated, it may be a problem. The financial officers and accountants will be responsible for that. To make the accountants relevant with the modern technology, the business firms should employ the training programs on the modern models of accounting and which would be relevant in addressing all the risks and help in mitigating them when they arise (Rahman, 2018: 1-5). Many accounting activities have been put in the operating systems of the company, and without the modern knowledge of how to handle them, you may make it fail once and for all. For this matter, many business organizations are ensuring that they have the most qualified employees and those who can easily adapt to modern accounting techniques as a way of mitigating the risks associated (Ioannidou, Ongena & Peydró, 2015: 95-144). The experienced accountants are also very helpful in dealing with the accounting risks. With their level of experience, they can handle as many accounting models and projects successfully. Successful companies like Coca-Cola have been using the strategy of acquiring experienced accountants who can easily identify the risks and take the necessary measures. This means that risk-taking in business has a relationship with the accounting department and, therefore, there is a need for the companies to ensure that they have a strong accountant who can easily handle the risks.
XIONG & ZHANG, 2016 introduce the topic of risk-taking in the stock exchange market. Many individuals and companies have invested in different stock exchange markets. The individuals may not have the finance and accounting consultants on the topic of risk-taking. As a wise business person, it is important to record any transaction that you carry out. When someone works without having the proper accounting system, a lot of money may get lost in the process and reduce the working capital of either the individual or the company that has listed in the stock exchange market. According to the research, good accountants have the quality of identifying the risk from far and taking the necessary measures before it fully affects the entire program or process (Rahman, 2018: 1-5). All businesses must take high risks so that they may maximize their goals. During the strategic management, managers from all the departments come together and design the mechanisms which would sound relevant for the business organization or firm. The risks are recorded in a risk register for every department for easy consultation when the firm is faced with related risks. The employees on the other end are also welcomed in analyzing the kind of risks which may face them during their operations. The employees are termed as the most sensitive people in the workplace since they directly interact with the machines and any other operations. They can predict the risks from far and inform the relevant manager to take care of it. Another dimension in the risk is communication. Reliable communication is a basic requirement when it comes to addressing the issue of risk management, especially in the field of accounting (Ioannidou, Ongena & Peydró, 2015: 95-144).
There are accounting managers and also accounting employees. The most preferred communication channel is that when the accounting employee finds out a risk, for instance, when one project that was highly financed going down, he or she may inform the immediate supervisor who then informs the accounting officer. The accounting officer then communicates the risk to the top management for it to be reviewed from the risk register. The researchers claim that when the risk is identified as early as possible, then there is a possibility that everything would be alright, and it would not cause severe damage. The research questions answer the relationship that lies between the risk-taking and the accounting departments of the business activities and the organizations (Yoffie & Baldwin, 2018: 1-5). This means that the two variables here are the risks and the accounting department. The risks taken within the firm have either a direct or indirect impact on the accounting department. The topic of risk-taking, according to the researchers, goes hand in hand with risk management. This means that risk management is another variable that should be incorporated into the dissertation as long as the accounting department is concerned. Risk management is defined as one of the critical activities in the business, especially when employing a certain project to the firm or organization (Brettel, Chomik & Flatten, 2015: 868). The analysis of risk management in any organization is always readily available, and it is only used when the problem arises. This means that the business firms should have reliable corrective techniques that should be used to control the risks not only in the field of accounting but also in the other departments.
Rahman, 2018 discusses risk management and how it should be taken in companies. The accounting department deals with the accounts of the firms and keeps the records of all the money inflows and the outflows. They are held responsible for any misallocated amount or any money that has been used in the other means apart from what was required. The modern accountants are claiming that they have faced a lot of challenges because of the advancing technology in modern society. Their accounts of the firms or organizations are at the risk of hackers. The hackers may also leak information about the organization and use it for competition purposes (Rahman, 2018: 1-5). This means that there is a relationship between rising modern technology and risk management from the accounting perspective. To deal with the issue of advancing technology, modern management has come up with the Information Technology training programs, which will help the accountants and the other employees have the required skills of tracking the hackers (Lopes, 2016: 549). The employees are also made conversant with the operating systems such that once they make an error, they can easily track it and do the necessary measures before it causes severe damage. There are also other companies and organizations which have made their systems much advanced in a way that when an error occurs, it can be detected by the relevant bodies.
In most cases, the risks in the accounting department come during the time of project initiation. Companies keep on initiating the projects which help the business realize its goals. Sometimes the projects may need a lot of money, and their accounts are a bit confusing because the budget keeps on changing (XIONG & ZHANG, 2016: 1-5). This makes the accountants get confused, and in the process, they may make some errors that may cost the entire business. The management style is also another dimension that should be explained in this part (Cameron & Shah, 2015.: 484-515). The type and style of management also affect the risks associated with the accounting department in one way or the other. For instance, when the management does not allow for the communication from the employees, all the risks may not be identified, and this may affect the general performance of the business. The management style that is appropriate for the business firm is the one that allows the employees to participate in the decision making processes. In short, it can be said that those who are responsible for making the accounting department have minimal risks are the management, the employees, and the general working environment of the firm or organization.
3.0. Chapter 3: Research Methods and Ethical Issues
3.1. Data Collection Techniques
Since the dissertation is more about the risks taking in business from the accounting perspective, the secondary sources of data collection were used. The dissertation had to go through several journals and books which had relevant information about risk-taking concerning the accounting perspective. More than forty reviewed journals were used, which helped in familiarizing with the topic of risk-taking. In every journal that was used, the important points were noted down, which would later be used in coming up with the recommendations and the conclusions (Cameron & Shah, 2015.: 484-515). The related accounting and finance books were also used to gather relevant information about risk-taking concerning the accounting department. During the data collection, the dissertation ensured to record all the information that was related to general risk-taking and filter the one that was more specified in the accounting department. To make the dissertation simple for the readers, samples of the companies to be used to investigate the risk-taking procedures were taken. The dissertation used the websites of the five top companies such as Amazon, Apple, Coca-Cola, Unilever, and Toyota (Westerman et al., 2016: 1-5). The five companies represented the other business entities across the world and how they try to handle the issue of risk-taking as long as accounting is concerned. From each Company used, the dissertation recorded all the dimensions of the risks form the accounting perspective and the strategies which are employed to deal with the risks (Cameron & Shah, 2015.: 484-515). The dissertation also relied on the case studies from the five companies and which were related to the risks. The dissertation also took the data of the financial statements from the selected companies and analyzed their trends on whether they could have been caused by the risks or not. Management styles were also another concern. Under this point, the dissertation tried to analyze all the management strategies that the companies used and tried to compare and contrast to see whether they could show any signs of the relationship between the risk-taking and the management styles. Another important variable that was important to analyze when collecting the data was the impact of technology on risk-taking in the department of accounting (Cameron & Shah, 2015.: 484-515). Technology, as one of the main issues affecting modern businesses, should be incorporated in any aspect of research. Through the websites, the dissertation could be able to record how the accounting techniques have been used by the modern accountants to ensure that the risks within the firm or organization are minimized. The dissertation did not use secondary information since a lot of the information that seemed to be reliable was available in books, journals, and websites.
In summary, the data was collected from secondary sources such as journals, newspapers, books, and websites. Five companies were also analyzed as the samples, which included the Amazon, Apple, Unilever, Coca-Cola, and Toyota Motor Company. The samples represented all the other business firms across the world and how they handle the issues associated with risk-taking and management from the accounting perspective.
3.2. Reliability and the Validity of the Data
The data collected was considered to be reliable since it was more specific about the risk-taking. The driving questions which helped the study included, what are some of the risk dimensions in the accounting perspective? Who is responsible for the risk-taking and management in the company as long as accounting is concerned?, What is the essence of analyzing the risk-taking in the businesses on the accounting perspective? Is there any relationship between the modern technology and the risk-taking in the accounting perspective?, and What are some of the techniques used to help the problems associated with the risk-taking in the businesses from the accounting perspective? Using these questions, the relevant sources were only used and which would help in answering the questions (Narayanaswamy, 2017: 1-5). The dissertation also kept in mind that the data collected was to be more specific from the accounting perspective. In this case, it was necessary to carry on with the investigation from the selected companies. The risk-taking dimensions from the samples were noted down together with their mitigation strategies. The financial statements were also important for the study since they could show the impact brought about by high risk-taking and also the low risk-taking (Rahman, 2018: 1-5). To make the dissertation credible, only the official websites from the sample companies were used. The dissertation also observed all the ethical and legal considerations while accessing the financial strategies and the policing strategies for the sample companies. The data collected was from credible sources, and only the important and reliable points were noted down and which were used for coming up with the findings and the conclusions.
3.3. Limitations of the data collection techniques
During the process of collecting the data, there were many challenges, and they resulted in some limitations. First, the sources of data were from the secondary sources meaning that the information was not from the sources. The secondary source contains the ideas of the other people, and sometimes they could not have proved their theories. The second limitation is that there are a few sources that have talked about the same topic, and this made it difficult for the dissertation to have the most detailed information as it was required. Most of the sources talked about general risk-taking and management. The sources which tackled the topic on the accounting perspective did not exactly give the necessary information, but instead, they found talking about the general risk-taking. In this case, the dissertation did not give the most detailed information about the risk-taking on the business perspective. Another limitation was that viewing some of the information from the websites of the sample companies required the activation codes, which were a challenge to get. This made the dissertation spent a lot of time while getting the codes and permission from the companies. The dissertation had to go through many procedures, which could even take two days hence becoming a big challenge. There was also a time limitation (Sadgrove, 2016: 1-3). Most of the time, it was difficult to have adequate time to review as many sources as possible. The dissertation needed as many sources as possible, and this could not be managed within the given time frame and daily commitments. For this, an extra commitment was required, which sometimes could be a challenge, but with all that, the dissertation managed to get the data and noted down the relevant findings and recommendations (Loishyn et al., 2019: 1-5). Another limitation was that the data collected had to be recorded down as soon as it was collected. The recording would be made either on the tables or personal computers. Sometimes where the information was written could get lost and hence making the work gets started again. In summary, there was a limitation of time, money, difficulty in accessing the websites, and it was difficult to get the relevant, credible sources talking about the same topic.
3.4. Assumptions
Just like any other research, there must be assumptions during the data collection. The dissertation, as it has stated it used the five companies as the sample to study the topic. From the five companies, the dissertation assumed that they all take risks in carrying out their activities. The dissertation also assumed that all the companies have accounting departments and several numbers of accountants. It was assumed that the accountants are responsible for the risks taken within the firm or the organization (Overell & Tunstall-Pedoe, 2015: 1-5). The accounts in the selected companies take risks on their own, and they have the specific procedures that they follow to ensure that the risk does not adversely affect the whole operations of the company. Finally, the dissertation assumed that what happens in the five companies selected as the sample, it still happens in all other businesses all over the world. With those assumptions, the dissertation would easily analyze the risk-taking in businesses on the accounting perspective as a way of helping solve the associated problems facing the companies across the globe.
3.5. Data Presentation Techniques
After collecting the data, it was presented using the different techniques which were found to be reliable for this paper. Since most of the data collected were from the primary sources, the tables, diagrams, and images from the internet were used to elaborate the points. The main issues here which were discussed included the risk-taking in businesses and how they are tackled in the business perspectives (Narayanaswamy, 2017: 1-5). This means that the table had the two things to be recorded the risk takings in the accounting department and how they impact the general activities of the company. Other things are also important to be represented in the tables or the graphs, which include the risk mitigation techniques and the impact of the modern technology on risk-taking as long as the accounting department is concerned (Liu et al., 2017). The graphs, tables, and images are enough to elaborate points about risk-taking in businesses from the business perspective.
3.6. Ethical Considerations
During the data collection and presentation processes, ethical concerns were highly preserved. Since there was no face to face interactions, the legal procedures of collecting data were only made online (Koche et al., 2018: 1-5). Most of the sources obtained were downloaded, and others purchased. This ensured that there were no conflicts with the original writer of the source. The dissertation also ensured to request permissions from the sample companies before their information was accessed (Laursen & Thorlund, 2016: 1-6). During the fieldwork, all the legal documents from the university department as always available to be used to prove that I was carrying out an academic exercise. During the process of data collection, the dissertation maintained respect with the online and physical communities since they helped me in getting reliable and credible information for the study. The dissertation did not attempt to use any offensive language that can hurt people, and for that matter. Finally, the dissertation ensured to follow all the university guidelines as they are required by the students while carrying out the research paper.
4.0. Chapter 4: Analysis, Findings, and Discussions
From the research, it was found that there is a body known as the Combined Code on Corporate Governance. The body is considered to be a very crucial motivator for the management of the risk and the internal control practices. It requires the top management and the board of directors to have a reliable system of internal control that safeguards the shareholders’ investments and the company’s assets. Internal control is defined as the complete system of the internal controls, finances, and the accounts that are established to provide the reasonable assurance of efficient and effective operations on the grounds of the financial control and ensure that the company complies with the laws and regulations. In this case, profits are considered to be the reward of the risk that succeeds in any business or organization (Feng et al., 2015: 529). This brings in the purpose of the internal controls that helps in managing and controlling the risks so that they may not fail. From the research, it was found out that all the four sample companies under the study had a stable internal control system that comprised of the qualified financial and accounting managers. The internal control ensures that the internal risks are taken concerning finance or considers the external forces on the outcome.
Contrary to the general expectations of the company, the risk management practices change from one organization to another, depending on the size of the business. For example, the Coca-Cola Company has been taking the risks of venturing in almost all the markets across the world (McNeil, Frey & Embrechts., 2015: 1-5)). This means that the more the company invests in many markets, the more the risk that the company would have, and therefore the internal control system, including the accountants and the financial officers, should take the due care to ensure that all the procedural processes are followed. The survey results suggested that risk management was driven by an institutional response to calls for improved corporate governance, which may reflect both protection and economic opportunity. The external drivers who affect the risk-taking in one way or the other included the external stakeholders like the customers and the government in terms of regulations of the business. The external drivers can change the accounting and finance policies hence making it difficult for the company to change the market expectations, and as a result, it may lead to the loss. The methods to change the risks may become useless since they are interfered with by the external stakeholders such as the regulations and the cultures (Christensen, Nikolaevn & Wittenberg‐Moerman, 2016: 397). A company like Unilever has employed a mechanism that ensures that before the implementation of the risk, proper market research should be taken so that it should be included in the policy and the control measure risk. The accountants from the Toyota Motor Company are always keen on ensuring that the all the accounts within the firm or the organization are safe from the risks and also that they are always kept updated with the modern accounting technologies so that they help in minimizing the number of risks.
The research noted down the points regarding the risk and management accountants. The main role of the risk management accountants was to analyze the information and the systems, strategic management, and performance, and they also have a significant role in implementing and developing the risk management and the internal control system within the companies (Köhler, 2015: 195-212). The results have some important implications of the role of accountants in managing the risks and how the multinational corporations have been dealing with the issue. Most of the companies have line managers who are responsible for identifying, analyzing, and reporting the risks to the relevant departments. The finance directors from all the samples used for the research have the duty of analyzing, assessing, reporting, and monitoring the risks associated with the finance (Hoffman et al., 2015: 1-5). The Chief Executive officer is only the person who decides what to do with the risk and incorporates the specialists in taking the necessary recommendations. The financial accountants from all the companies on the sample were said to have the role of actively participating in the risk decisions. One of the best methods of managing the risks is ensuring that the role of management accountants keeps on changing. To curb the issues related to the technology, the companies under the study ensures that they train the management accountants accordingly on how they should handle the problem of the risks and which are related to the accounting (Ho et al., 2015: 5031). Amazon, as a technological company, has a unique way of taking and managing the risks. Amazon ensures that its websites are free from hackers by installing the sensitivity devices, which lets the employees identify the mistakes as soon as they arise.
In summary, the management accountants and financial officers are very important in taking and controlling the risks within the firm or the organization. For the five selected companies, they all have the accounting and finance departments that actively take part in the decision making processes involving the risk takings and management from the perspective of the accounting (Saebi, Lien & Foss, 2017: 567). The accountants are responsible for ensuring that the control systems are safe from the risks, and whatever is written in the policies is followed by all the stakeholders.
4.1. Discussion
Companies must take risks as a way of attempting to meet their long term goals and objectives. The reward for risk is said to be high profits and mass production. Risk-taking is analyzed during the strategic management. All the risks which might arise during the time of operations are noted down in the risk register, and the possible mitigation strategies are employed (Hotelling et al., 2015: 1-5). Many companies, like the samples selected for this dissertation, have narrowed down the risks to the department level. Accounting as one of the departments in any business entity has the associated risks which must be defined. In addition to this, the financial managers, together with the accounting managers, are taken responsible for ensuring that the internal control systems are as per it is required by the policies within the firm or an organization. From the information obtained from the Coca-Cola Company, it was confirmed that the accountants from the several branches are welcomed in the decision making processes and with their knowledge of cost budgeting and other models of analyzing the risks, it would be simple for them to identify, access, analyze and take the necessary measures as soon as possible. The accountants are very sensitive people in the businesses, and their ideas are heavily used during the decision making processes regarding risk-taking (Akey & Lewellen, 2017: 1-5). The accountants also act as advisors to the industries or the organizations on the grounds of areas where to invest a lot of money and others where to invest less. They do this after carrying out thorough market research on the financial sources and the financial institutions hence making the company deal with some of the things which might seem to draw back the business operations. Another issue that was under investigation was the relevance of modern technology concerning accountants and how it helps in managing the risks within the firms (Chebet, Waruiru & Ogolla, 2018: 1-5). Modern technology is almost changing everything in the sector of accounting. Business activities are switching from the traditional modes of operation to the modern modes of operations. From the sample analyzed by the paper, it was found out that modern accountants know Information technology. Thus they can manage the accounting risks associated with the operational systems. In short, it was generally found out that the financial accountants and officers are involved in the risk-taking processes in one way or the other. They do this by employing risk control measures and applying modern technology in management.
5.0. Chapter 5: Conclusion and Recommendation
For the business to meet its strategic goals and objectives, it has to take risks. The risks taken depend on the nature and the goal of the firm. Coca-Cola, Amazon, Toyota, and Unilever are considered to be some of the largest companies in the world. Those companies are characterized by taking high risks and also narrowing down the risks at the level of all the departments. The accounting department is one of the most sensitive departments as per the research (Aven, 2016: 12). Accountants and the financial officers are welcomed in the important decision-making processes to ensure that the risks taken are important, and the allocation of the finance is done appropriately and with due care and diligence. For this matter, the accountants take it as their responsibility to ensure that they give the necessary accounting information about the risk-taking and help in the internal control procedures. The dissertation has analyzed the risk-taking and how the big companies have been dealing with it as long as the accounting perspective is concerned (Narayanaswamy, 2017: 1-5). The problems which were being solved were how the accountants had been faced by the challenges while addressing the issue of taking risks. It can, therefore, be concluded that the problems exist, and the companies are doing all that they can to ensure that they do not affect the company’s operations. The research was done from the five top companies, and they represented the other businesses across the world.
5.1. Recommendations
From the research, the following recommendations should be considered for the issue of risk-taking in businesses from the accounting perspective.
- The accounting department should be given the opportunities to analyze the risk before they are taken and inform the management on which are good and which are not good.
- The businesses should make sure that there is a proper training program for the accountants to ensure that they cope up with the modern technology as a way of managing the risks.
- The top management should also ensure that they employ the most qualified accountants and the financial officers who would ensure that there are no risks associated with the loss of money.
- The financial accountants should be welcomed in the important decision-making processes regarding the risk-taking since they are responsible for ensuring that all the finances are allocated appropriately to cater for all the risks.
- The internal control system should also be made transparent for all the employees to know what happens within the organization.
Tables, Figures, and Graphs
Figure 1: Coca-Cola financial statement from 2014 to 2018
Figure 2: Consolidated financial statement for Toyota Company
Figure 3: Financial statements for Unilever
Figure 4: Amazon, Inc. Financial Statement
Figure 5: Apple, Inc. Financial statement
Figure 6: Risk Elaboration
Figure 7: Accounting Internal control risks
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