Introduction
The role of Business Valuation has always been instrumental to mergers and acquisitions and fundraising in the capital markets. The expanded use of fair value in financial reporting has further put a spotlight on the valuation profession as a critical contributor to the reliability of financial statements and indirectly to the workings of the capital markets. Despite this, there is still no single professional framework governing the profession in terms of conduct, education, credentialing, and performance.
There is still no single professional framework governing the profession
The absence of such a framework makes it more difficult for the business community at large, who hire valuation professionals, to easily ascertain whether valuers possess the requisite skills to perform a high-quality valuation. Additionally, there is risk that the lack of a framework could impact the quality, efficiency, and effectiveness of the valuations being performed.
Benefits to the business community
On this basis, the case for a governing framework for the valuation profession seems clear, but what would the benefit be to those who rely on and use the work of professional valuers?
A more efficient selection process for buyers of valuation advice
The accreditation of valuation professionals would make selection of providers a more efficient process for buyers, reducing the amount of diligence required through reliance on the professional accreditation.
A more competitive market for valuation advice
The accreditation of valuation professionals would allow smaller valuation providers to demonstrate market credibility by membership of and adherence to the professional framework. This would provide buyers with a greater choice of provider and increase market competitiveness to the benefit of buyers.
Increased confidence in the robustness and consistency of the work
A professional framework would credentialise valuation professionals based on education, experience, examination, or some combination of these factors. This would give buyers comfort on the technical competence of the valuer in a world of increasingly complex and specialised valuation requirements.
Performance standards would also provide guidelines for the level of analysis to be applied and work to be performed to issue a valuation report. A robust quality review process would promote high-quality valuations, and provide a meaningful disciplinary mechanism for members who do not comply with the standards of conduct and performance. This would give additional comfort to buyers of valuation services that the valuation work has been performed to a good and consistent standard.
Confidence in professional conduct
A professional framework is likely to include a code of conduct giving buyers of valuation services comfort on professional behavior. This would cover important considerations such as independence, conflicts of interest, and due professional care, all of which would enhance buyer’s confidence in their dealings with appropriately accredited valuation professionals.
In conclusion
A widely recognised set of professional standards would enhance user and regulator confidence in the quality of valuations performed by promoting a greater level of consistency and robustness in the methodology, documentation and business/professional conduct. The Business community is also likely to benefit from a wider choice of valuation providers and a more competitive market for valuation services. #
The Chartered Valuer and Appraiser Programme was officially launched on 19 April 2016. Registration for the first intake is now open. Please click here for more information.
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