On the last day of the ASA/AICPA conference in Las Vegas last week, Ron Klein of Camico Mutual Insurance Company talked about engagement risk management for business appraisers.  He separated all BV claims into two groups; the first group consists of all claims associated with a specific transaction (transaction-based claims), the second group consists of all other claims.  And you may have guessed, the transaction-based claims “is where the money is” and are “4-50 times larger than all other claims.” Klein discussed a few things BV firms can do to help to mitigate engagement risk:

1. Use a formal client acceptance procedure.
2. Include someone other than the engagement partner in the acceptance process. The point: Take care to have an uninvolved third party with your firm sign off on the process.
3. Do not become involved in the negotiations or financing of deals. Why? The more you are involved, the more advice you are seen to be giving and the more risk you incur.
4. Don’t include words like “advised” or “assisted with” on company timesheets that describe the time charged to engagements. The reason: Opposing counsel will find this in discovery and infer greater involvement with the deal

And as an added bonus, Camico has published their 10 Ways to Manage Your Risk in This Economy here.