Managing Global Tax Risk

Effective tax risk management does not have to be complex. At BDO we believe a simple, but structured approach to managing tax risk can demonstrably improve an organisation’s identification, assessment and management of tax risk and create an environment of ‘no surprises’ around the delivery of tax on a global basis.

Tax risk and control frameworks which are fit for purpose within modern organisations need to provide the following:

1. clearly defined tax roles and responsibilities
2. a formalised tax risk identification methodology
3. embedded tax controls which support an organisation’s policies and processes
4. reporting lines to communicate tax risk in a timely manner (both periodic and ad hoc reporting)
5. a defined tax risk appetite which has senior level agreement.

It is only by considering each of these five components in the context of the business that an organisation can gain assurance that it has managed its tax risk position effectively. We would also expect such an exercise to create a clear definition of what tax risk means, and a strategy to use appropriate tax risk reporting tools.

In our work with all organisations, we always start by developing a clear vision for what a culture of strong tax risk management means for the business. This enables us to establish the right environment to create a tax risk and control framework which is right sized and appropriately structured (as below).

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