Q Assignment about Product Risk Factor Matrix-A comprehensive digital strategy and improved operational models Home, - Product Risk Factor Matrix Product Risk Factor Matrix Introduction ? Risks are an integral part of businesses ? The product risk factor matrix assess the risks in various cases of tax accounting and audit services SN: The risks for expansion and diversification have been identified in this context. The product risk factor matrix provides insight into the identified risk factors for tax accounting and audit services as well as management consultancy practices. Difference in business risks between traditional tax and audit services and management consulting services For tax and audit services the demand risks identified are: ? CbC reporting ? Inherent risk ? Audit risk ? Greater public disclosure of financial information ? Client lawsuits ? Accounting firm property ? State aid investigations The supply risks for the same include: ? Detection risk ? Control risk ? Security and accounting firm data breach For management consultancy services the demand risk factors have been identified as: ? Budget schedule ? Financial transformation ? Business intelligence ? Cross-channel connectivity ? Stakeholder engagement The supply risks for the same include: ? Comprehensive digital strategy ? Talent retention and recruitment ? Operational models SN: The business risks for conventional tax and audit services and management consulting services have been identified in the product risk matrix as presented before. Demand risks and supply risks are consistent factors for the types of services offered by the firm. As per laws set by several countries, such as UK, Australia, USA and more, there are requirements to be met with regards to product risks in taxations and audit services (Dhir & Dhir, 2015). For instance, the CbC reporting which refers to Country by country reporting may enhance the scope of analysing the risk factors involved in the industry (Ato.gov, 2019). According to the Australian taxation Office, the BEPS action plan, also known as Base erosion and profit shifting plan, under Tax Amendment Act 2015, results in the obligation of SGEs (Significant Global Entities) to provide documentation for a CbC reporting (Ato.gov, 2019). Additionally, this may be responsible for information disclosure at a public level. Similarly having a comprehensive digital strategy and improved operational models aids in coping with the innovation on the industrial level (Braithwaite & Reinhart, 2019). Biggest potential risks faced by the firm in case of diversification ? Overextension ? Lack of expertise ? Reduced innovation SN: The overextension of the organisation’s resources may occur as a result of lack of appropriate and efficient calculations. The maintenance of the infrastructure and the operations is essential for approaching a diversification in the business industry. Furthermore, the lack of expertise can be another huge problem. The retention of the original area of expertise may often be detrimental for a firm, as different skill sets are required for different industries (Enste, 2018). Lastly, innovation may suffer a backlog in case of the diversification. It may be mentioned that the focus on business goals and technological innovation adds to an improved innovation of the firm. Furthermore, wide diversification may result in decreased focus, growing bureaucratic inertia and thus lack of quick response to market changes (Batten & Vo, 2016). Recommendations for growing into a consultancy service or third party acquisitions for achieving new goals The advantages of diversification include: ? Correct timing ? Growth through diversification ? Minimization of risks of loss ? Tapping into various markets ? Variation of products and services The disadvantages include: ? Overextension ? Lack of expertise ? Reduced innovation ? Costing SN: In order to evaluate whether the firm should grow into consultancy service or must acquire the aid of a third party for achieving the new business goals, can be determined after a thorough analysis of the advantages and disadvantages of diversification into a new business. Analysing through the pros and cons, it may be stated that the net risk factor is reduced in case of diversification, also, it has been found to be important in the long run (Cedergren, Norstrom & Wall, 2017). Therefore, a third-party acquisition for the achievement of business goals may be taken into account, considering both the pros and cons of diversification. Conclusion ? Overextension, Lack of expertise and Reduced innovation are the three biggest potential risks in diversification ? Cross-channel connectivity, budget schedule and CbC reporting have been identified as demand risks in conventional tax and consultancy services. SN: A comprehensive digital strategy and improved operational models aids in coping with the innovation on the industrial level may also prove beneficial.