Strategic Alliances: Handle With Care

Source: Current Accounts

A strategic alliance with another CPA firm or financial service provider can be an effective way to provide services to larger clients and reduce costs. But it also carries some significant disadvantages, including hidden costs, "transaction-driven" client relationships, loss of independence, and additional liability risks.

This article offers tips for minimizing the risk, including thorough due diligence, and carefully negotiated and drafted alliance agreements. For example, some form agreements attempt to shift liability to your firm, even for a service provider's errors or omissions.

Other risk management steps include:

• Evaluating whether the firm's cultures are a good match.
• Having an attorney review the alliance agreement.
• Consulting your professional liability carrier regarding coverage implications and investigating your potential strategic partner's professional liability coverage.
• Not automatically accepting terms in a preprinted agreement.
• Developing solid quality control and loss prevention strategies and practices.

For the complete article, click here and read "Avoid Added Liability From Strategic Alliance Agreements" on page 8 of the May/June 2010 issue.

From Current Accounts, Georgia Society of CPAs, May/June 2010.