Fall 2012 issue of Horizons

TRANSPORTATION & DEALERSHIPS

Organizational Risk for Automotive Dealers by John Butler, CPA

F or most businesses “organizational risk” is just a fancy way of saying “What keeps you up at night?” Every business, large or small, manages common risks which can include the loss of key employees or customers, fraud, embezzlement, theft, natural disasters and much more.

Sometimes, manufacturers require a costly facility upgrade even though one occurred just a few years before. Some risks are insurable and some are not. Even if a dealership is insured, the risk could still be catastrophic if the business lacks a recovery plan. Too many businesses insure the risks they can and hope for the best as they manage day-to-day challenges. The process of managing risk is essentially the same as looking for internal control weaknesses that could allow fraud or theft to occur in a dealership.

Automotive dealers also have unique risks of their own.

The manufacturers they represent can go bankrupt, withdraw from the market or fail to deliver vehicles consumers want to buy.

page 42 | horizons Fall 2012