COVID-19: Accountancy / Accounting Consulting Industry Impact
Companies offering services in the accountancy or accounting consulting industry (such as risk management and restructuring services), may experience a surge in demand for their services within the next six months to one year. Companies that depend on third-party risk assessment or management services will be vulnerable to bankruptcy following the COVID-19 pandemic. For continuity, such businesses will rely critically on "third-party risk assessments," restructuring, and risk management services for the next six to 12 months.
Risk Assessment Services
- Chief financial officers (CFO's) of some companies that utilize the services of the accountancy or accounting consulting industry may face challenges related to risk assessment due to the ravaging impact of COVID-19. Consequently, such companies are likely to opt for third-party risk assessment services.
- The demand for risk assessment services from several companies will make companies offering third-party risk assessment services (like Deloitte and Plante Moran) see a significant rise in the market demand for their services.
- Plante Moran offers cybersecurity risk assessment, prevention, and forensic accounting services. Several companies will need to use remote workforces or those that have to visualize their workforce or create additional external access to their network following the COVID-19 pandemic. Such businesses are potentially becoming more vulnerable targets of cyber attacks, ransomware, and data theft, These companies are likely to demand cybersecurity risk assessment services which may continue to increase in importance for the "next six to 12 months."
- Deloitte predicts that third-party risk assessment services will become critical (become very important) for the next six months to one year.
Risk Management Services
- To manage through the impact of the COVID-19 pandemic, one of the six imperatives that will confront companies that depend on third-party accounting or accountancy consulting services are challenges relative to managing risks. For some time, third-party management of risks will help CFO's to function as protectors of company assets throughout the vulnerable season.
- "For the next two quarters" (six months), several companies (including S&P 1,000 companies) will face challenges related to the management of liquidity as well as cash in the short term. They would have to depend on third-party risk management services. Companies that fail to meet their short term cash or debt obligations are said to be those facing liquidity risks.
- Managers, as well as creditors, often analyze liquidity ratios to measure and manage risks for an organization. According to Deloitte, risk management is one of the services that will become critical for the coming six to 12 months. Some direct risks that companies will have to manage are risks based on internal controls as well as fraud, supplier and customer failures, and risks associated with cyberattacks.
- Downturns and recessions often disrupt supplies and receivables. Diversifying as well as securing "suppliers and monitoring customer" payments are practices that can help companies to manage and mitigate several risks identified above. Companies like Plante Moran will benefit from increased demand in third-party risk management services because they offer enterprise risk management services to help companies in their business decision-making processes.
- One of the impacts of the COVID-19 crisis is that it will provide an impetus for the restructuring. It will also provide an incentive for the consolidation of some companies that depend on third-party accounting or accountancy services to drive their efficiencies.
- Some restructuring services that these dependent companies will need are related to the requirement to start using a visualized shared services model due to the COVID-19 pandemic. Several companies will depend on judiciously implemented outsourcing contracts to transform their fixed costs into variable costs as the economy tries to adjust to the impacts of COVID-19. Future demand for corporate real estate may decline due to the increasing demand to work remotely, and real estate companies may also need the services of the accountancy or accounting industry to restructure.
- Several companies will have to restructure by reducing their leased space as well as by selling their assets. In a situation where they use third-party accounting services, they would provide more opportunities for their service providers as they restructure. Accountancy or accounting services consulting companies (like Plante Moran that offer restructuring and transformation services) stand to benefit from this development.
- Several companies may not have access to sufficient cash to survive the impact of COVID-19 in the long-term, would go into bankruptcy, and may require third-party restructuring or liquidation services. Again accountancy firms like Plante Moran offer services that help companies improve their liquidity and are likely to benefit from increased demand for liquidity or liquidation services.
- The COVID-19 pandemic may affect some registrants negatively as well as their ability relative to "financial reporting quality" or their ability to achieve new SEC filing deadlines. Such companies may have to reach out or contract the services of their auditors proactively.
- COVID-19 has also affected several private companies in a manner that gives them concerns on how to file their financial statements to meet the requirements of their bondholders. These private companies may also rely eventually on guidance from regulators.
- Companies in the accounting consultancy industry known to offer audit services relevant to filed financial statements (like Plante Moran), may benefit from this increased demand for audit services.
The research has examined how COVID-19 as expected to impact the accountancy or accounting consulting industry. This strategy reviewed academic journals, the website of companies offering services in the accountancy or accounting consulting industry within the United States like Deloitte, Plante Moran, and other similar organizations. A limited number of resources disclosed the predicted impact of COVID-19 on the accountancy or accounting consulting industry in the United States for the next six to twelve months. Consequently, insights published by Deloitte and also predicted to affect the third-party accountancy, accounting, risk management, and restructuring services within the next six months are in the study. The insights and predictions might be relevant to the United States market because some authors (Sanford A. Cockrell and Susan Hogan) work for Deloitte in the United States, and a majority of the "endnotes" (references) used by the Deloitte publication are United States-based resources. The term Deloitte is often used to refer to one or several members of the United States "firms of DTTL."