Risk Assessment 101: A Guide for Accounting and Tax Professionals

We all know that businesses that handle sensitive and financial data must take a proactive approach to cybersecurity. For accounting professionals, tax professionals, and bookkeepers, protecting client information is not just a best practice—it is a regulatory requirement under the FTC Safeguards Rule. A key aspect to that rule is conducting a risk assessment, which is a structured process that identifies security vulnerabilities and informs the development of an effective information security program.

Why Is a Risk Assessment Important?

A risk assessment serves as the foundation of an organization’s information security strategy. Without understanding existing threats and vulnerabilities, it is nearly impossible to implement the right safeguards to protect customer information. The FTC Safeguards Rule specifically requires financial institutions—including accounting and tax firms—to conduct periodic risk assessments to ensure security measures remain effective and up to date.

Key benefits of a risk assessment include:

• Regulatory Compliance – Helps businesses meet the FTC’s requirements under the Safeguards Rule.

• Threat Identification – Uncovers cybersecurity threats that could impact business operations or customer data.

• Prioritization of Security Measures – Provides insight into how resources should be allocated to efficiently address the most significant risks.

• Continuous Improvement – Enables organizations to create risk mitigation plans that outline specific actions needed to address security vulnerabilities and refine security programs as threats evolve.

When to Perform a Risk Assessment

It is important to remember that assessing risk is not a one and done. Continuous monitoring and periodic reassessments help ensure that security measures remain effective as new threats emerge. Organizations should:

• Perform annual or biannual risk assessments

• Conduct penetration testing and vulnerability scans

• Update security policies based on new compliance requirements

• Address findings from security incidents or audits

Maintaining an ongoing risk management process is essential for FTC Safeguards Rule compliance and long-term security resilience.

Challenges in Risk Assessments

While risk assessments are essential, some organizations struggle with:

• Limited cybersecurity expertise – Many small and midsize accounting firms lack in-house IT and/or security professionals, making it difficult to know where to start.

• Time and resource constraints – Conducting a thorough assessment requires dedicated time and effort, and it must be repeated on at least an annual basis.

• Unclear risk priorities – Some organizations fail to properly assess which threats pose the greatest danger.

To overcome these challenges, organizations can leverage external cybersecurity experts or vCISO services to guide the risk assessment process and ensure compliance.

Common Risks in Small & Midsize Firms

Small and midsize accounting, tax, and bookkeeping firms often face unique cybersecurity challenges due to limited resources and lack of dedicated IT security personnel. The following risks are among the most common and can significantly impact compliance with the FTC Safeguards Rule:

• No Asset Inventory and Lack of Data Visibility – Many firms do not have a clear inventory of devices, software, and data storage locations, leading to blind spots in security. Without knowing what data exists and where it is stored, firms struggle to implement effective security controls.

• BYOD Device Security for Contractors – Some firms rely on contractors and remote workers who use their own personal devices (Bring Your Own Device—BYOD) to access client data. Without proper security controls, these devices can become an easy target for cybercriminals.

• No Incident Response Plan or Lack of Testing – A cyber incident is not a question of if but when, yet many firms lack a formal incident response plan (IRP) or fail to test it regularly. Without a clear response strategy, breaches can escalate, resulting in regulatory violations, financial loss, and reputational damage. Remember that an ounce of prevention is worth a pound of cure.

• Lack of Security Awareness & Training – Employees and contractors are often the weakest link in cybersecurity. Without proper security awareness training, staff may fall victim to social engineering attacks, engage in risky online behavior, or mishandle sensitive data.

Conclusion

A well-executed risk assessment is the foundation of a strong cybersecurity program and a core requirement under the FTC Safeguards Rule. For accounting professionals, tax professionals, and bookkeepers, this process helps safeguard client information, maintain compliance, and protect the business from cyber threats.

By systematically identifying risks, evaluating security controls, and implementing mitigation strategies, organizations can reduce the likelihood of data breaches and enhance their overall security posture. Regular monitoring and updates ensure that security measures remain effective as the threat landscape evolves.

Sales pitch incoming...

Risk assessments are an integral part of Entoo Security's FTC Safeguards Compliance Program. We’ve designed a comprehensive, cost-effective program that scales with your business, making compliance both simple and sustainable. To find out more, contact us at sales@entoosecurity.com.

To learn more about compliance with the FTC Safeguards Rule, refer to the FTC’s official guidance: FTC Safeguards Rule: What Your Business Needs to Know.