When financial irregularities surface or legal disputes arise, many business owners assume their annual audit will catch the problem. Unfortunately, audits and forensic accounting serve different purposes. Understanding which service you need can save you time, money, and potentially protect your business from significant loss. 

This article breaks down the core differences between these two disciplines and shows you when to use each one. 

What Auditing Actually Does 

Think of an audit as your company’s annual checkup. An auditor reviews your financial statements to confirm they’re presented fairly and follow generally accepted accounting principles (GAAP)—a set of standards that guide how financial statements are prepared and reported. The process is methodical and standardized, designed to give stakeholders confidence in your numbers. 

Auditors work with sampling techniques. They don’t examine each transaction. Instead, they review representative samples to form an overall opinion about your financial health. They also establish materiality thresholds—limits set by auditors to determine which discrepancies are significant enough to investigate further. This means smaller discrepancies may not receive detailed scrutiny if they won’t significantly impact the overall financial picture. 

The audit report tells investors, lenders, and regulators that your financial statements are reliable. It’s about compliance and assurance, not investigation. 

When You Need Forensic Accounting Instead 

Forensic accounting takes a different approach. When you suspect fraud, need to trace hidden assets, or face litigation involving financial disputes, forensic accountants step in to investigate. They don’t sample transactions; they examine detailed records with a specific question in mind. 

Certified Fraud Examiners—specialists with credentials in fraud detection and investigation—bring together skills from multiple disciplines: accounting, auditing, investigation, and law. They reconstruct financial events, follow money trails, and document findings that can hold up in court. Their work is targeted and thorough, often focusing on specific periods, transactions, or individuals. 

Common situations that call for forensic accounting include: 

• Asset Misappropriation: When cash, inventory, or other business assets disappear, forensic accountants find where they went. 
• Bribery and Corruption: Hidden payments and conflicts of interest require detailed investigation and extra scrutiny. 
• Financial Statement Fraud: Intentional manipulation of financial reports demands specialized analysis to uncover the deception. 
• Marital Dissolution: High-net-worth divorces often need forensic accountants to identify hidden assets or income. 
• Business Valuation Disputes: When partners disagree about company worth, forensic analysis provides clarity. 

For example, in 2022, a mid-sized retailer discovered a $200,000 inventory theft only after engaging forensic accountants. The annual audit had not flagged the loss because it fell below materiality thresholds and was concealed through false entries. This real-world scenario highlights how forensic accounting can uncover fraud that a traditional audit might miss. 

Learn more about our Forensic Accounting Services

Forensic Accounting vs. Auditing: The Critical Differences 

The scope separates these two services. Audits cast a wide net across your entire financial picture. Forensic accounting zeroes in on specific concerns with investigative precision. 

The goal differs too.  

• Auditors ask, “Are these financial statements fairly presented?”  
• Forensic accountants ask, “What happened here, and can we prove it?” 

Auditors use sampling and materiality thresholds because they’re forming an opinion about overall accuracy. Forensic accountants examine every relevant detail because they’re building evidence. An audit might not catch a $50,000 embezzlement scheme if it falls below materiality levels. A forensic investigation will find it. 

The final product also varies. Audit reports follow standardized formats and express opinions. Forensic accounting reports present findings, document evidence, provide support in litigation and can testify in court about their conclusions. 

Can One Person Do Both? 

Some auditors hold additional certifications as Certified Fraud Examiners, but the services themselves aren’t interchangeable. You wouldn’t ask your general practitioner to perform specialized surgery, even though both are doctors. Similarly, you need the right financial professional for the situation you’re facing. 

If you’re seeking financing, preparing for an acquisition, or need to satisfy regulatory requirements, an audit serves you well. If you’re facing a lawsuit, suspect internal theft, or need to trace assets in a divorce, forensic accounting is what you need. 

Professional Guidance for Complex Situations 

When you encounter financial irregularities or need support for litigation, consulting with a BPM forensic accounting professional can provide the clarity and evidence required to resolve your case. If you need professional guidance on complex financial investigations or litigation support, our forensic accounting team is ready to help. Contact us to learn how we can assist with your needs. 

Since Dell put down roots in the mid-1980s, Austin, Texas has evolved from a promising startup hub into a powerhouse ecosystem that’s redefining what it means to build and scale a technology company.  

Today, Silicon Hills (named for the region’s rolling Texas landscape and its California counterpart) is home to more than 5,500 startups and established tech companies, from household names like Apple and Oracle to innovative newcomers disrupting industries across software, fintech, and digital media. 

From Hypergrowth to Strategic Maturity 

The numbers tell a compelling story about Austin’s tech workforce evolution. The region now supports over 200,000 tech jobs—roughly 16% of total employment—but the composition of that workforce has changed significantly. Management roles have nearly doubled since 2019, and STEM management positions have climbed from 5.5% to 9.7% of the tech workforce. The share of computer and math occupations has also grown from 55.7% to 57.4% during this same period. 

This shift represents more than job creation. Austin is building a more experienced, skilled workforce capable of supporting complex operations and driving innovation at scale. The region’s tech sector has moved beyond simply attracting talent to developing and retaining it, creating the kind of stable foundation that sustains long-term growth. 

Global Players Making Strategic Commitments 

Major technology companies continue to view Austin as essential to their growth strategies, with investments that signal long-term commitment rather than short-term opportunism: 

• Apple is expanding its North Austin campus with three new buildings featuring R&D labs for hardware and software engineering, part of a broader $500 billion U.S. investment strategy supporting approximately 15,000 employees 
• Samsung is building a $16.5 billion fabrication facility in Taylor, where it will manufacture Tesla’s next-generation AI6 chips in a partnership both companies consider strategically essential 
• Tesla’s Gigafactory continues expanding, drawing suppliers and stimulating industrial growth throughout eastern Travis County and beyond 

The semiconductor cluster is particularly noteworthy, with NXP leading corporate partnerships alongside Applied Materials, Apple, and others. Austin Community College’s “Make It Center” is training students for advanced manufacturing roles, while a new state grant will create a semiconductor lab and precision welding lab in Round Rock, ensuring the talent pipeline keeps pace with industry demand. 

Why Growing Businesses Choose BPM

Startup Ecosystem and Entrepreneurial Energy 

Austin’s tech story isn’t only about major corporations. The region has cultivated a thriving startup ecosystem that produces globally competitive companies. Local unicorns include Anaconda (data science and AI), Saronic Technologies (autonomous maritime defense), The Zebra (insurance comparison), Firefly Aerospace (space technology), ICON Technologies (3D-printed construction), ZenBusiness (business services), NinjaOne (IT management), and Iodine Software (healthcare AI). 

This entrepreneurial core is sustained by several advantages: 

• Consistent ranking among the top five U.S. metros for one-way relocations and post-college career launches 
• Strong venture capital activity and local investor networks 
• University partnerships supporting research commercialization 
• Innovation spanning AI, biotech, clean energy, and advanced manufacturing 

The combination of established corporate anchors and emerging innovators creates a resilient ecosystem where companies at different stages can find the resources, talent, and partnerships they need to grow. 

Infrastructure Enabling the Next Chapter 

Strategic infrastructure development has been critical to accommodating Austin’s tech expansion. The State Highway 130 corridor has emerged as a major economic engine along the metro’s eastern edge, while Austin-Bergstrom International Airport provides connectivity for corporate operations. Cities including Manor, Taylor, Bastrop, Georgetown, and Kyle are becoming hubs for suppliers and advanced manufacturing. 

Commercial real estate trends reflect this evolution. While office demand has stabilized, industrial and R&D facilities are experiencing strong growth, particularly along SH 130 and throughout eastern Travis County. This infrastructure foundation allows companies to expand efficiently while connecting talent pipelines to high-impact employment opportunities. 

Looking Ahead 

Austin has transitioned from a market defined by rapid growth to one characterized by sustainable momentum. The region has attracted more headquarters relocations than nearly any other metro outside Dallas, demonstrating its continued magnetism for innovation-driven companies. The workforce is more experienced, the infrastructure more robust, and the ecosystem more diversified than ever before. 

The city’s next chapter will likely be defined by this maturity—a tech hub that can sustain growth not through constant disruption but through steady innovation, workforce development, and strategic investment. Austin has proven it can handle the boom. Now it’s proving it can build for the long term. 

The Financial Services landscape is undergoing significant transformation as private equity firms, funds, private credit providers, and fintech companies navigate a complex operating environment. Elevated interest rates, evolving regulatory requirements, and shifting investor preferences are reshaping deal dynamics and business models across the sector. Organizations that proactively address these challenges while capitalizing on emerging opportunities will be best positioned for sustainable growth. 

Six Trends Shaping Financial Services Next Year 

1. Private Equity Deal Mix Evolving Toward Secondary Transactions 

The traditional buyout model is giving way to a more diverse transaction landscape. Private-to-private (P2P) deals and take-private transactions are gaining momentum as firms seek liquidity and portfolio optimization opportunities in a challenging exit environment. This shift reflects both the maturation of the private equity market and the strategic need to recycle capital when IPO windows remain narrow. 

General partners are increasingly looking within their existing networks to source deals, leading to more sophisticated secondary market activity. This evolution requires enhanced due diligence capabilities and a deeper understanding of portfolio company performance metrics, as buyers must assess businesses that have already undergone private equity ownership and operational improvement initiatives. 

2. Private Credit Fills the Void as Traditional Lenders Pull Back 

Bank retrenchment has created substantial opportunities for private credit providers. Regulatory constraints and risk management concerns have pushed traditional lenders away from certain segments of the middle market, allowing direct lenders and credit funds to expand their market share significantly. The private credit market has grown to become a critical financing source for leveraged buyouts, growth capital, and special situations. 

However, this growth brings increased scrutiny around credit underwriting standards, portfolio concentration risks, and potential vulnerabilities in a stressed economic scenario. Private credit managers must maintain disciplined origination practices while building robust monitoring frameworks to track borrower performance and covenant compliance in real time. 

3. Fintech Sector Consolidation Accelerates Amid Margin Pressure 

The fintech industry is entering a maturation phase characterized by consolidation and the rise of embedded finance solutions. After years of rapid growth fueled by venture capital, many fintech companies now face pressure to demonstrate sustainable unit economics and clear paths to profitability. This dynamic is driving M&A activity as stronger players acquire complementary technologies and customer bases. 

Embedded finance—where financial services are integrated directly into non-financial platforms—continues to expand, creating new opportunities and competitive threats. Traditional financial institutions are partnering with or acquiring fintech firms to modernize their technology stacks, while fintech companies seek banking charters and licenses to expand their service offerings. 

4. ESG and Regulatory Reporting Requirements Intensify 

Environmental, social, and governance (ESG) considerations have moved from optional to essential. Investors, particularly limited partners in funds, are demanding greater transparency around ESG performance and impact measurement. Regulatory bodies globally are implementing more stringent disclosure requirements, forcing financial services firms to build comprehensive data collection and reporting infrastructure. 

Beyond compliance, ESG factors are increasingly influencing investment decisions, portfolio company valuations, and access to capital. Firms must develop standardized frameworks for measuring and reporting ESG metrics while integrating these considerations into investment due diligence and ongoing portfolio management processes. The challenge lies in balancing stakeholder expectations with practical implementation constraints and the evolving nature of ESG standards. 

5. Interest Rate Environment Creates Valuation and Exit Challenges 

Persistent elevated interest rates have fundamentally altered the financial services landscape. Mark-to-market impacts are pressuring portfolio valuations, while higher borrowing costs are affecting leveraged buyout economics and debt service coverage ratios. Exit multiples have compressed in many sectors, creating a mismatch between buyer and seller expectations. 

Financial services firms must model various interest rate scenarios and develop flexible strategies that account for a “higher for longer” environment. This includes stress-testing portfolio performance, refinancing obligations, and exit assumptions under different macroeconomic conditions. 

6. Limited Partner Caution and Fee Model Scrutiny 

Institutional investors are becoming more selective in their fund commitments, focusing on proven managers with strong track records and differentiated strategies. The traditional “2 and 20” fee structure faces pressure as limited partners seek better alignment of interests and more favorable economic terms. This shift is forcing general partners to demonstrate clear value creation beyond financial engineering. 

Fund managers must articulate compelling investment theses, deliver consistent returns, and provide transparent reporting to maintain and grow their limited partner relationships. Those that can demonstrate operational value creation and downside protection capabilities will have a competitive advantage in fundraising. 

Learn more about our Financial Services Industry Consulting Services

Strategic Imperatives for Financial Services Leaders 

To navigate this evolving landscape effectively, financial services organizations should focus on several critical priorities: 

• Strengthen Operational Capabilities: Develop detailed portfolio management playbooks that emphasize operational improvement and value creation beyond multiple expansion 

• Enhance Monitoring Infrastructure: Implement real-time systems for tracking liquidity positions, covenant compliance, and key performance indicators across portfolio investments 

• Diversify Origination Channels: Build multiple pathways for deal flow and capital deployment to reduce dependence on any single source of opportunities 

• Tighten Compliance Frameworks: Ensure robust anti-money laundering (AML) and sanctions compliance programs that keep pace with evolving regulatory expectations 

• Improve Scenario Planning: Model multiple interest rate and exit environment scenarios to stress-test portfolio resilience and inform strategic decision-making 

How BPM Can Help 

BPM provides comprehensive accounting, tax, audit, and advisory services tailored to the unique needs of financial services firms. Our professionals work closely with private equity funds, private credit managers, and fintech companies to navigate complex regulatory requirements, optimize tax structures, enhance financial reporting, and implement operational improvements.  

Whether you’re managing portfolio company performance, preparing for fund audits, or building ESG reporting frameworks, BPM delivers practical solutions that drive results. Contact us today to discuss how we can support your organization’s strategic objectives. 

The professional services industry stands at a defining moment as 2026 approaches. After years of experimentation with AI and digital transformation, firms are moving from pilots to production, fundamentally reshaping how they deliver value to clients. According to McKinsey’s latest research, professional services leads all sectors in generative AI adoption, with implementation rates soaring from 33% in 2023 to 71% in 2024.  

As talent shortages persist and client expectations evolve, success in the coming year will depend on your ability to embrace AI-driven delivery models, rethink workforce strategies, and adapt pricing structures to match the value you create. The firms that navigate these shifts effectively will emerge as leaders in an increasingly competitive landscape. 

Six Trends Taking Shape for 2026 

1. AI and Automation Transform Service Delivery 

Generative AI is no longer a pilot project; it’s becoming core to how professional services firms operate and compete. AI consulting is expected to account for 20% of revenue in 2024 and reach 40% by 2026, signaling strong client demand for enterprise-scale deployments. The shift extends beyond simple automation to fundamental service redesign, with firms typically capturing only 10-20% of their potential pipeline due to staffing constraints, but AI-enabled delivery models could increase this to 70-90%. 

In 2026, expect AI to become your operating system for work. Data from Hubstaff shows AI users spend 23% less time on unproductive tasks while completing more frequent focus sessions, demonstrating real productivity gains. Leading applications include automated data extraction for compliance, contract drafting, predictive modeling, and semantic search engines that understand meaning rather than just keywords. However, success requires more than technology adoption. You need to be reimagining your entire service delivery model around AI capabilities. 

2. Talent Strategies Demand Complete Rethinking 

The workforce transformation ahead is unprecedented. The World Economic Forum predicts 44% of workers’ skills will be disrupted in the next five years, making reskilling and upskilling existential imperatives rather than nice-to-have initiatives. Research shows 71% of employees want more frequent skill updates, while 80% believe employers should increase investment in development programs. 

In 2026, winning firms will reshape talent strategies across multiple dimensions. Essential human skills like communication, attention to detail, and leadership remain in high demand, complementing rather than competing with AI capabilities. T-shaped professionals who combine deep expertise with broad collaborative skills will command premium compensation. Companies prioritizing development see better retention, with 86% of professionals willing to change jobs for better growth opportunities. The message is clear: invest in your people or lose them to competitors who will. 

3. Pricing Models Shift From Time to Value 

The billable hour is dying. Clients increasingly demand measurable outcomes, fixed pricing, and risk-sharing arrangements that align incentives with results. GenAI fundamentally disrupts time-based pricing by performing tasks exponentially faster than humans, creating pressure for output-based and outcome-based pricing models. Productized services are gaining momentum, offering pre-agreed outcomes for pre-agreed prices that create predictable revenue streams. 

Forward-thinking firms are packaging expertise into repeatable, scalable offerings. Companies like Littler Mendelson have developed proprietary platforms that productize legal case management, delivering services more efficiently with predictable cost structures. In 2026, expect subscription models, managed services, and value-based pricing to become standard rather than alternative approaches. Value-based pricing ties fees to strategic outcomes rather than hours worked, creating win-win scenarios where both firms and clients benefit from efficiency gains. 

4. Digital Platforms Enable Data-Centric Delivery 

Data, analytics, and cloud-native workflows are becoming central to competitive advantage. Professional Services Automation (PSA) tools help firms streamline workflows, eliminate manual overhead, and maintain consistency while scaling. The firms building reusable platforms, proprietary IP, and data assets will scale faster while lowering delivery costs. 

In architecture, engineering, and construction, digital twins and integrated project data are revolutionizing project delivery. The global AI in professional services market is projected to grow at 32.4% CAGR through 2030, driven by demand for automation, generative content, and advanced analytics. These aren’t just efficiency tools—they’re fundamentally changing what services firms can offer and how quickly they can innovate for clients. 

5. Risk Management and Ethical AI Take Center Stage 

As firms digitize operations and embed AI throughout service delivery, managing risk becomes paramount. AI-led systems are reducing false positives in risk assessment while automating time-consuming compliance tasks. However, concerns about bias, transparency, and explainability are driving demand for responsible AI governance frameworks. 

In 2026, clients will expect secure, auditable delivery with clear AI governance policies. By 2026, expect industry-specific ethical standards for AI use in professional services and formal certification programs for AI-assisted professional work. Firms must invest in cyber resilience, model governance, and continuous monitoring to maintain trust. The regulatory landscape is also evolving rapidly, with increased scrutiny on how AI decisions are made and documented. 

6. Market Structure Shifts Through Consolidation 

Private capital is fundamentally reshaping professional services ownership and operations. By the end of 2025, more than half of the largest 30 U.S. accounting firms will have either sold an ownership stake or received investment from private equity, up from zero in 2020. This represents a seismic shift in an industry traditionally organized as partnerships. 

The trend extends beyond accounting. PE firms are increasingly drawn to specialist knowledge, loyal client bases, and potential for international expansion in professional services. Private equity deal volume is expected to rise 5% in 2026, following an 8% increase in 2025. These investors bring more than capital—they’re introducing new operating models, technology investments, and aggressive growth strategies that will accelerate industry transformation. 

Learn more about our Professional Services Industry Solutions

Strategic Imperatives for Professional Services Leaders 

For Managing Partners and CEOs: 

• Develop an AI-first strategy that goes beyond tools to reimagine service delivery models 
• Evaluate alternative ownership structures and capital sources to fund transformation 
• Build innovation capabilities through dedicated labs, partnerships, or acquisitions 

For Practice Leaders: 

• Transition from billable hours to value-based pricing models aligned with client outcomes 
• Create productized offerings that package expertise into scalable, repeatable solutions 
• Invest in platforms and IP that differentiate your services and improve margins 

For HR and Talent Leaders: 

• Evaluate your current HR tech stack and adopt/integrate AI first efficiencies in functional areas like recruiting, onboarding, benefits and compensation.  
• Design comprehensive reskilling programs focused on AI collaboration and human skills 
• Implement flexible career paths that accommodate diverse working styles and life stages 
• Compete aggressively for technical talent while developing existing professionals 

For Technology Leaders: 

• Build integrated data platforms that connect service delivery, analytics, and client insights 
• Implement AI governance frameworks balancing innovation with risk management 
• Prioritize interoperability and API-first architectures for ecosystem collaboration 

Partner With BPM for Your Professional Services Transformation 

The convergence of AI, changing workforce dynamics, and evolving client expectations creates both unprecedented challenges and remarkable opportunities for professional services firms. At BPM, we understand the complexities of navigating this transformation while maintaining operational excellence and client relationships. 

Our team combines deep industry knowledge with practical experience helping professional services organizations embrace digital transformation, optimize talent strategies, and adapt business models for sustainable growth. Whether you’re exploring AI implementation, evaluating pricing model changes, or considering ownership transitions, we provide the insights and support needed to make informed decisions. 

Ready to transform your professional services firm for success in 2026 and beyond? Contact BPM today to discuss how we can help you navigate industry disruption and emerge stronger. Let’s work together to turn technological change into competitive advantage. 

The technology sector continues to evolve at breakneck speed, with artificial intelligence now embedded in every layer of your business operations. As you plan for 2026, understanding the key trends shaping your industry—and preparing strategic responses—will determine whether your organization thrives or merely survives in this transformative period. 

From AI governance to global expansion, from talent acquisition to regulatory compliance, the challenges you face are complex and interconnected. Here’s what you need to know about the forces reshaping the tech landscape and how to position your company for success. 

6 Trends to Prepare for in 2026 

1. AI Governance Becomes Mission-Critical 

Building Trust in Intelligent Systems 

AI has moved from experimental technology to operational necessity. Your customers interact with chatbots, your developers rely on code assistants, and your business decisions increasingly depend on predictive analytics. But with this integration comes responsibility. 

In 2026, establishing formal AI governance frameworks isn’t optional—it’s fundamental to your business continuity. Leading organizations are implementing: 

• Up-to-date acceptable use policies that evolve with your expanding AI toolkit 
• Centers of excellence uniting business and technical teams around AI strategy and ethics 
• Human-in-the-loop models to verify and validate AI-generated outputs 

The companies that build robust governance foundations will earn stakeholder trust and maintain competitive advantage as global AI regulations continue to mature. 

2. Global Expansion Accelerates Amid Rising Complexity 

Navigating International Growth in a Connected World 

Digital transformation has erased many geographical boundaries, opening new markets for your products and services. But while Big Tech companies leverage their established global infrastructure, middle-market players face unique challenges in international expansion. 

Your expansion strategy must account for: 

• Fragmented regulatory environments across regions 
• Local data privacy laws that vary significantly by jurisdiction 
• Complex tax structures that differ from country to country 

Success in 2026 requires more than ambition—it demands rigorous market analysis, deep understanding of local regulations, and alignment of your compliance frameworks across borders. The competition for market share is global, but victory belongs to those who expand with precision and long-term vision. 

3. The Talent Shortage Intensifies 

Scaling Your Workforce in a Competitive Market 

Finding qualified technology professionals remains one of your biggest operational challenges. Skills in AI engineering, cybersecurity, cloud architecture, and data analytics are particularly scarce—and every company wants the same talent you’re pursuing. 

Forward-thinking organizations are adapting by: 

• Expanding global hiring infrastructure, often partnering with Professional Employer Organizations (PEOs) for streamlined international onboarding 
• Reassessing workforce models to optimize remote, hybrid, and in-person collaboration 
• Investing in upskilling programs to develop existing team members for emerging roles 

Your ability to attract, develop, and retain talent will directly impact your capacity for innovation and growth in 2026. 

4. Data Security Evolves From Priority to Imperative 

Building Trust Through Comprehensive Data Protection 

Your data represents both your greatest asset and your most significant vulnerability. Customers demand transparency about how you handle their information, while regulators enforce increasingly strict compliance standards. 

In 2026, data governance must be embedded throughout your operations: 

• SOC reporting frameworks strengthen your security posture and demonstrate commitment to protection 
• GDPR compliance remains mandatory for any data processing involving EU citizens 
• Similar privacy frameworks are emerging globally, requiring proactive adaptation 

Leading organizations treat data governance not as a compliance burden but as a strategic differentiator in building customer trust and competitive advantage. 

5. M&A Activity Reshapes the Competitive Landscape 

Strategic Consolidation Drives Innovation and Scale 

Despite market volatility, mergers and acquisitions remain central to growth strategies across the tech sector. Whether you’re considering acquiring complementary technologies or positioning your company for sale, the M&A environment demands sophisticated preparation. 

Key considerations for successful transactions include: 

• Comprehensive due diligence to identify risks and maximize value 
• Alignment of financial, tax, and IP structures with buyer expectations 
• Proof-of-concept pilots in new markets to validate scalability 

Cross-border transactions add layers of complexity, with regulatory, financial, and tax implications varying significantly by jurisdiction. In 2026, M&A success rewards those who combine strategic foresight with disciplined execution. 

6. Tax Compliance Grows More Complex 

Adapting to Evolving Policy Landscapes 

Your tax strategy directly impacts profitability, especially as you expand globally and navigate shifting policy environments. From international tax frameworks to domestic incentives, staying compliant requires proactive planning and continuous adaptation. 

Critical focus areas include: 

• Permanent establishment risks from distributed and remote workforces  
• R&D and innovation tax credits that fund technological advancement  
• Transfer pricing compliance for complex intellectual property portfolios
• Clean energy incentives that reduce costs while supporting sustainability goals 

Strategic Imperatives for Technology Leaders: Turning Trends Into Competitive Advantage 

As you navigate these trends, certain actions will position your organization for sustainable growth: 

• Prioritize governance and compliance. Build robust frameworks for AI governance, data protection, and regulatory compliance before they become urgent necessities. Proactive investment today prevents costly remediation tomorrow. 
• Think globally, act strategically. International expansion offers tremendous opportunity, but success requires careful planning. Assess markets thoroughly, understand local regulations, and build scalable operational frameworks that support long-term growth. 
• Invest in your people. The talent shortage won’t resolve quickly. Develop comprehensive strategies for attracting, developing, and retaining skilled professionals. Consider non-traditional talent pools and invest in continuous learning programs. 
• Prepare for transformation. Whether through organic growth or M&A activity, your organization will likely undergo significant change. Build financial, operational, and cultural foundations that support agility and adaptation. 
• Optimize your tax position. Work with advisors who understand both domestic and international tax implications of your business decisions. Strategic tax planning can fund innovation while maintaining compliance across jurisdictions. 

The technology landscape in 2026 presents both unprecedented opportunities and complex challenges. Your success depends on understanding these trends, preparing strategic responses, and executing with discipline and vision. 

Ready to navigate the complexities of 2026’s technology landscape? BPM’s technology industry professionals can help you develop strategies for growth, compliance, and operational excellence. Contact us today to discuss how we can support your organization’s success. 

How post-pandemic working patterns and heightened tax authority focus are creating new challenges for international businesses 

The landscape of permanent establishment (PE) risk has fundamentally shifted in recent years. What once seemed like straightforward rules for international businesses have become increasingly complex, with tax authorities worldwide sharpening their focus on this area as a key revenue source. 

For companies expanding into the UK market, understanding and managing PE risk isn’t just about compliance – it’s about protecting your business from potentially severe financial and reputational consequences that can derail your growth plans. 

Why permanent establishment has become a hot topic 

Tax authorities globally are under increasing pressure to maximize revenue collection, particularly following the financial strains of the pandemic period. PE rules offer an attractive target because they can generate substantial backdated tax assessments, penalties, and interest charges from businesses that may have unknowingly triggered these obligations. 

The UK’s HM Revenue and Customs (HMRC) has joined this global trend, taking a more aggressive approach to identifying and pursuing PE cases. This shift means that activities which might have flown under the radar a decade ago are now likely to attract scrutiny. 

Understanding the fundamentals 

Permanent establishment occurs when a foreign company has sufficient presence or activity in the UK to create a taxable presence, even without formally establishing a UK entity. If HMRC determines that a PE exists, your overseas company becomes subject to UK corporation tax on the profits attributable to that establishment. 

The challenge lies in the fact that PE determination is largely based on facts and circumstances, with significant gray areas that require careful judgment. What’s considered “sufficient presence” can vary dramatically based on your specific situation and the current interpretation of tax authorities. 

Key risk factors in today’s environment 

Fixed place of business: the office trap 

One of the most common PE triggers is maintaining a fixed place of business in the UK. This doesn’t just mean traditional office space – even renting a desk at a co-working facility or using serviced offices can create PE risk. 

Many companies fall into this trap when they decide to “test the waters” in the UK market. The logic seems sound: rent a small office space, hire a local salesperson, and see how the market responds. However, the moment you sign that lease agreement, you’ve potentially created a permanent establishment. 

The dependent agent problem 

Having employees or contractors who can bind your company through contract negotiations creates significant PE risk. This is particularly problematic for technology companies or service providers who send senior staff to the UK to help close deals – authorities are interested in anyone who is fundamental to the overall sales negotiation and securing process, looking beyond potential ‘rubber stamping’ exercises of treating someone solely responsible just because they act as end signatory on the agreement 

The risk isn’t limited to obvious sales roles. Even technical consultants or project managers who have authority to make commitments on behalf of the parent company can trigger PE status. The key factor is whether they can create legal obligations for your overseas entity. 

Senior personnel and decision-making authority 

The presence of founders, directors, or other key decision-makers in the UK substantially increases PE risk. Tax authorities view this as evidence that important management decisions are being made within the UK, which supports an argument for taxable presence. 

This has become particularly relevant as many international companies have embraced hybrid working models post-pandemic. A US company founder who splits time between New York and London, working remotely from various locations, may inadvertently create PE issues for their business. 

The post-pandemic permanent establishment landscape 

The shift to remote working has created entirely new PE risk scenarios that many businesses haven’t fully considered. Tax authorities have successfully argued in several cases that employees working from home can create PE risk when their home effectively becomes a place of business for the overseas employer. 

Consider this scenario: a German software company employs a developer who moves to the UK and continues working remotely. If this employee’s home is used for client calls, contract negotiations, or other business activities that generate revenue for the German company, it could potentially create UK PE risk. 

These situations were virtually unheard of before 2020, but they’re now a significant consideration for any business with internationally mobile employees. 

The financial reality of getting it wrong 

The consequences of unrecognized PE can be severe. HMRC doesn’t just assess current year taxes – they can go back several years, creating substantial backdated liabilities. More concerning is how they calculate the taxable profits. 

Tax authorities tend to take an aggressive stance on profit attribution. Rather than applying a simple formula based on the UK operation’s size relative to the global business, they often argue for higher profit allocations based on the strategic importance of UK activities. 

For example, if your UK-based employee is a director or key decision-maker, HMRC might argue that they represent a disproportionately valuable part of your business, warranting a much larger share of global profits being allocated to the UK for tax purposes. 

Beyond the immediate tax implications, there are penalties, interest charges, and the reputational risks associated with tax authority investigations. For businesses with investors or those considering future fundraising, unresolved tax issues can create significant complications. 

Taking a pragmatic approach to risk management 

The goal isn’t to eliminate all PE risk – that’s often neither practical nor commercially sensible. Instead, successful international businesses take a risk-aware approach that balances commercial objectives with tax exposure. 

Regular risk monitoring 

PE risk isn’t static – it evolves as your business activities change. A company that starts with low-risk market research activities can quickly move into higher risk territory as they hire staff, rent office space, or grant local personnel more authority. 

Regular PE risk reviews should be part of your international expansion planning, particularly during periods of rapid growth or operational changes. 

Strategic considerations for international expansion 

Timing your entity formation 

Understanding PE risk helps you make better decisions about when to establish a formal UK entity. Rather than waiting until you’re forced to by tax obligations, you can proactively choose the optimal timing based on your business needs and risk tolerance. 

Some companies choose to establish UK entities early in their expansion to eliminate PE concerns entirely. Others prefer to operate under alternative models for initial market testing, then formalize their presence once they’ve proven market viability. 

Structuring for compliance 

When PE risk becomes material, there are several strategies for managing it: 

• Establishing formal UK entities to house local activities 
• Implementing clear protocols around contract signing authority 
• Creating documentation trails that support your chosen structure 
• Regular training for staff on activities that might increase PE risk 

The compliance imperative 

Given the increased focus from tax authorities, businesses can no longer afford to ignore PE risk or assume they’ll fly under the radar. The combination of enhanced data sharing between tax authorities, improved tracking systems, and pressure to increase revenue collection means that PE issues are more likely to be identified and pursued. 

This isn’t about fear-mongering – it’s about recognizing that the risk-reward calculation has fundamentally changed. What might have been acceptable risk five years ago may no longer be prudent given the current enforcement environment. 

For growing businesses, particularly those with investors or governance requirements, getting ahead of PE issues demonstrates proper tax governance and risk management. 

Moving forward strategically 

The key to managing PE risk successfully lies in understanding it as part of your broader international expansion strategy, not just a compliance issue to be managed separately. When properly planned, your approach to PE risk can actually support your commercial objectives while maintaining full compliance. 

This requires working with advisors who understand both the technical tax rules and the practical realities of international business expansion. They should be able to provide pragmatic guidance that helps you achieve your commercial goals while managing tax risks appropriately. 

Planning your UK market entry? Contact BPM’s international tax team to assess your permanent establishment risk profile and develop strategies that support your expansion objectives while maintaining full compliance with UK tax requirements. 

When your business needs financial statements for lenders, investors, or other stakeholders, you’ll likely encounter requests for “audited,” “reviewed,” or “compiled” financial statements. These terms represent different levels of assurance that a CPA provides regarding your financial information’s accuracy and reliability. Understanding these distinctions helps you choose the right service for your specific situation while managing costs effectively.   

Audit vs. Review vs. Compilation 

Each service offers a different level of CPA involvement and assurance, from basic compilation services that focus on proper formatting to comprehensive audits that provide the highest level of confidence in your financial statements. This article will explore the key differences between compilations, reviews, and audits to help you determine which service best meets your business needs. 

Understanding Compilation Services 

A compilation represents the most basic level of financial statement service. During this process, your CPA takes the financial data you provide and formats it into proper financial statements without performing any verification procedures. 

The CPA gains a general understanding of your business and its accounting policies but doesn’t test your records, evaluate internal controls, or assess fraud risk. You might need to provide certain documents like  contracts to help draft financial statement footnotes, but the CPA doesn’t verify this information’s accuracy unless something may stand out as blatantly inaccurate. 

Because compilation work involves limited procedures, these services cost less than reviews or audits. However, the compilation report explicitly states that no assurance is provided regarding the accuracy of your financial statements. The CPA doesn’t need to maintain independence from your company, but must disclose any lack of independence in the report. 

“Compilations work well when you need formatted financial statements for internal use or when external parties require basic financial information without extensive verification.” – Kristine Malmanis – Partner, Assurance 

What Review Services Involve 

Review services provide a middle ground between compilations and audits. Your CPA performs analytical procedures and makes inquiries to provide limited assurance that your financial statements don’t require material modifications. 

During a review, the CPA compares your current year numbers to prior years, analyzes financial ratios against industry benchmarks, and investigates unusual variances. If something appears inconsistent, they’ll ask management questions or request supporting documentation to understand the discrepancy. 

Unlike compilations, review services require CPA independence. Your accountant can’t have financial interests in your company, serve in management roles, or face pressure to promote your business interests. 

“A financial statement review provides growing businesses with limited assurance that their financial statements are accurate, which helps builds credibility with management, lenders, and investors, without the cost of a full audit.” – Kristine Malmanis 

Reviews don’t include testing accounting records, evaluating internal controls, or assessing fraud risk like audits do. The review report states whether the CPA is aware of any material modifications needed for your financial statements to conform to specified accounting standards. 

This service level often satisfies lenders and investors who want more assurance than a compilation provides but don’t require the comprehensive verification that audits deliver. 

Comprehensive Audit Procedures 

Audits provide the highest level of assurance available from a CPA firm. The objective involves obtaining reasonable assurance that your financial statements present a fair view of your company’s financial position and conform to applicable accounting standards like GAAP. 

Auditors perform extensive procedures to achieve this assurance level. They obtain an understanding of your internal controls, assess fraud risk, and conduct detailed testing of account balances and transactions. This includes confirming balances with third parties, observing physical inventory counts, and examining supporting documentation for significant transactions.  

“Audit-level assurance is required in situations where owners, lenders, or other stakeholders need a higher level of confidence that the financial statements are free of material misstatement. Examples include public companies or companies seeking significant financing.” – Kristine Malmanis 

The term “reasonable assurance” is important here. Auditors can’t provide absolute assurance because they typically test samples rather than every transaction, and accounting standards require professional judgment in their application. 

Independence requirements for audits match those for reviews. The CPA must maintain objectivity and avoid conflicts of interest that could compromise their professional judgment. 

Because of their comprehensive nature, audits require the most time and resources, making them the most expensive assurance service. However, they provide stakeholders with the highest confidence level in your financial information. 

Learn more about our Audit Services

Choosing the Right Service for Your Business 

Your choice between compilation, review, or audit services depends on several factors. Consider who will use your financial statements and what level of assurance they require. Banks seeking larger loan amounts typically want reviews or audits, while smaller financing might accept compilations. 

Think about your business’s complexity and risk profile. Companies with sophisticated operations, significant transactions with related parties, or complex accounting issues often benefit from higher assurance levels. 

Budget considerations also play a role. While audits provide maximum assurance, they’re not always necessary or cost-effective for every situation. 

The stage of your business development matters too. Startups might need only compilations, while established companies seeking investors or planning acquisitions typically require audits. 

Working with BPM for Your Assurance Needs 

BPM provides comprehensive audit, review, and compilation services tailored to your specific business requirements. Our team works closely with you to understand your stakeholder needs, industry requirements, and budget considerations to recommend the most appropriate service level. We recognize that choosing the right assurance service involves balancing cost considerations with the credibility your financial statements need to support your business objectives. 

Whether you need basic compilation services for internal management reporting or comprehensive audit procedures to support major financing transactions, BPM delivers quality services that meet professional standards while serving your business interests. To discuss which financial statement service best supports your current business goals and stakeholder requirements, contact us.    

The IRS has finally delivered guidance that many small businesses have been waiting for. Revenue Procedure 2025-28 gives qualified small business taxpayers a practical way to handle their research and experimental (R&E) expenditures retroactively, without the hassle of amending multiple prior-year returns. 

If your business invests in R&E activities, this could significantly simplify your 2024 tax filing and reduce your administrative burden. Here’s what you need to know and how to take advantage of this relief. 

Who qualifies for small business relief? 

Not every business can use this simplified approach. To qualify for the relief outlined in Rev. Proc. 2025-28, your business needs to meet these specific criteria: 

Average gross receipts test: Your average annual gross receipts for the three tax years ending with 2024 (typically 2022–2024) can’t exceed $31 million. The IRS calculates this using all income sources, reduced by returns and allowances. If your business wasn’t operating for the full three-year period, the calculation adjusts proportionally. 

Tax shelter exclusion: Your business can’t be classified as a tax shelter under Section 448(d)(3). 

If you meet these requirements, you have access to several valuable options for handling your R&E expenses. 

Your election options under Section 174A 

Revenue Procedure 2025-28 gives you flexibility in how you treat R&E costs incurred in tax years beginning after December 31, 2021, and before January 1, 2025. Here’s how it works: 

The retroactive election 

You can elect to apply Section 174A retroactively, which means you can choose to either: 

• Immediately deduct your R&E costs, or 
• Amortize them over at least 60 months 

The key advantage? You can make this election on your 2024 tax return and avoid amending all your prior returns right away. Instead, you simply include a declaration stating you’ll file amended returns for applicable prior years by September 15, 2025. 

The automatic deemed election 

If you deduct your 2024 domestic R&E expenditures and meet the other requirements in Section 3.03, the IRS will treat you as having made the election automatically. This streamlines the process even further. 

Learn more about our R&D Tax Credits Services

Understanding the timing and deadlines 

Getting the timing right matters. Here are the critical dates you need to track: 

Election deadline: You must file your election by the earlier of July 6, 2026, or your statute of limitations expiration date for the relevant tax year. 

For example, if you filed your 2022 return on March 1, 2023, your election for that year must be submitted by April 15, 2026. The revenue procedure includes additional timing scenarios in Section 3.03(3)(b)-(d) that may apply to your situation. 

The alternative: Small business retroactive method change 

If you don’t make the Section 3 election described above, you have another option. Under Section 7.02(3)(c), you can change your accounting method to the “small business retroactive method” for tax years beginning before 2025. 

This approach works differently: 

• You file an accounting method change for your first taxable year beginning after December 31, 2024 
• You can deduct any remaining unamortized R&E costs either entirely in 2025 or split between 2025 and 2026 

This flexibility lets you align your deductions with your tax planning strategy for the next couple of years. 

Don’t overlook the Section 280C considerations 

Both elections come with an important wrinkle: how they interact with your R&D tax credits under Section 280C(c)(2). 

Revenue Procedure 2025-28 provides procedures for making a late Section 280C(c)(2) election or revoking a prior one. This matters because it affects how your R&D tax credits work alongside your deductible R&E expenses. You’ll want to evaluate these implications carefully as part of your overall R&D credit and amendment strategy—the interaction can significantly impact your tax position. 

What this means for your 2024 filing 

This guidance arrives at a crucial time. If you’ve been capitalizing and amortizing your R&E expenses under Section 174’s mandatory requirements, you now have a path to retroactively expense those costs—potentially freeing up cash flow and simplifying your tax compliance. 

The administrative relief is substantial. Rather than preparing and filing multiple amended returns immediately, you can make your election on your 2024 return and have until September 15, 2025, to handle the prior years. 

However, the decision isn’t one-size-fits-all. Your optimal approach depends on your specific circumstances, including: 

• Your gross receipts trajectory over the qualification period 
• Your current and projected R&D tax credit position 
• Your Section 280C election status 
• Your broader tax planning objectives 

Take action before the window closes 

Revenue Procedure 2025-28 represents a significant opportunity for small businesses investing in research and development. But taking advantage of it requires prompt action—you need to make decisions now to coordinate your 2024 filing with your amendment strategy. 

BPM’s tax advisors can help you navigate these elections and determine the most advantageous approach for your business. We can assist with eligibility analysis, election statement preparation, and strategic planning around your amended returns and R&D credit position. 

Contact your BPM advisor or visit bpm.com to discuss how Revenue Procedure 2025-28 impacts your 2024 tax filing and your long-term R&E tax strategy. 

Transfer pricing affects every business operating across international borders, yet many business leaders don’t fully understand or don’t fully value its strategic potential for their organizations. When companies engage in transactions with related entities in different countries (and sometimes even states), they have opportunities to optimize their tax position, improve cash management, and align their transfer pricing models with broader business objectives. Understanding transfer pricing becomes crucial not only for maintaining compliance but also for maximizing operational efficiency and supporting business growth. 

This article will explore transfer pricing fundamentals, examine its strategic applications for tax planning and business optimization, and outline how to operationalize effective transfer pricing models while maintaining compliance. 

Understanding Transfer Pricing Basics 

Transfer pricing refers to the prices companies set for transactions between related entities, such as subsidiaries, parent companies or sister companies. These transactions can involve goods, services, intellectual property or financing arrangements. The key principle governing transfer pricing is the “arm’s length standard,” which requires related party transactions to occur at prices that unrelated parties would agree upon in similar circumstances. 

Consider a U.S. parent company that purchases manufactured goods from its wholly-owned subsidiary in Ireland. The price the parent company pays for these goods represents the transfer price. This pricing decision affects not only tax obligations but also cash flow management, customs and duties, performance measurement, and overall business strategy. 

Companies establish transfer prices for various strategic reasons: 

Tax Planning and Optimization 

• Structuring transactions to achieve tax-efficient outcomes across jurisdictions 
• Aligning transfer pricing with business substance and economic reality 
• Supporting long-term tax planning strategies 

Business Operations 

• Measuring subsidiary performance accurately 
• Allocating resources efficiently across the organization 
• Managing cash flow between entities 
• Supporting operational decision-making 

Risk Management 

• Addressing potential tariff and customs implications 
• Preparing for due diligence in M&A transactions 
• Building defensible positions for tax authority interactions 

Learn more about our Transfer Pricing services

Strategic Tax Planning Through Transfer Pricing 

Effective transfer pricing serves as a powerful tool for tax-efficient structuring that aligns with genuine business needs. Organizations can develop transfer pricing models that support their cash management strategies while ensuring economic substance backs their pricing decisions. 

Modern transfer pricing planning considers the broader business context, including supply chain optimization, intellectual property strategies, and regional expansion strategies. Companies increasingly integrate transfer pricing considerations into their overall business planning process, ensuring that tax efficiency supports rather than conflicts with operational objectives. 

The key lies in developing sustainable models that reflect the real value creation within the organization while achieving legitimate tax benefits. This approach requires understanding how different jurisdictions approach transfer pricing and designing structures that work effectively across multiple tax systems. 

Operationalizing Transfer Pricing Models 

Once established, transfer pricing policies require efficient implementation and ongoing administration. Technology plays an increasingly important role in managing the complexity of intercompany transactions across multiple entities and jurisdictions. 

Successful operationalization includes: 

Process Integration 

• Embedding transfer pricing considerations into standard business processes 
• Automating documentation and reporting where possible 
• Creating clear governance frameworks for pricing decisions 

Technology Solutions 

• Implementing systems that support consistent pricing across transactions 
• Utilizing data analytics to monitor compliance and identify opportunities 
• Streamlining documentation and reporting processes 

Ongoing Management 

• Regular review and updating of transfer pricing policies 
• Monitoring changes in business operations that may affect pricing 
• Maintaining current documentation to support pricing decisions 

Transfer Pricing in Transactions and Due Diligence 

Transfer pricing models and documentation play a critical role in M&A transactions, both as a due diligence item and as a factor in valuation. Robust transfer pricing documentation demonstrates good governance and reduces potential liabilities for acquirers. 

During exit planning or acquisition processes, well-documented transfer pricing practices can: 

• Reduce due diligence timelines and costs 
• Minimize potential adjustment risks 
• Support valuation arguments 
• Demonstrate operational sophistication to potential buyers or investors 

Organizations planning for eventual transactions should ensure their transfer pricing models and documentation meet institutional-grade standards well in advance of any transaction timeline. 

Compliance and Risk Management 

While strategic planning drives much of transfer pricing’s value, compliance remains essential for protecting that value. Tax authorities worldwide continue to focus on transfer pricing as they work to help ensure appropriate tax collection in their jurisdictions. 

Transfer pricing violations can carry significant penalties, with the IRS imposing penalties of up to 40 percent of additional taxes owed in cases of substantial understatement. Beyond financial penalties, transfer pricing disputes can trigger lengthy audits and create administrative burdens across multiple jurisdictions. 

However, for many organizations, particularly smaller companies, the compliance risk may be manageable with proper planning and documentation. The key lies in building defensible positions through: 

Comprehensive Documentation 

• Economic analyses supporting chosen transfer prices 
• Comparisons with similar transactions between unrelated parties 
• Clear explanations of business rationale behind intercompany arrangements 

Proactive Planning 

• Regular review of transfer pricing positions 
• Updates reflecting changes in business operations or tax law 
• Integration with overall tax planning strategies 

Building Effective Transfer Pricing Programs 

Successful transfer pricing programs balance strategic objectives with compliance requirements. Organizations should consider transfer pricing as part of their broader business strategy rather than viewing it solely through a compliance lens. 

Effective programs typically include: 

Strategic Foundation 

• Clear understanding of business objectives and value drivers 
• Integration with overall tax and business planning 
• Consideration of operational and financial factors 

Robust Documentation 

• Transfer pricing studies that support chosen methodologies 
• Regular updates reflecting business changes 
• Documentation that supports both planning and compliance objectives 

Ongoing Management 

• Regular monitoring and updating of policies 
• Proactive identification of planning opportunities 
• Efficient administration through process and technology 

Working with BPM 

Transfer pricing requires specialized knowledge of complex regulations and strategic planning considerations that vary across jurisdictions. BPM’s tax professionals understand both the compliance requirements and the strategic opportunities that effective transfer pricing can provide. 

Our team helps companies develop comprehensive transfer pricing strategies that support business objectives while maintaining appropriate compliance standards. We provide technology-enabled transfer pricing analyses, documentation, operational transfer pricing support and automation, ongoing advisory services, and support for transaction-related transfer pricing needs. 

To schedule a consultation with our transfer pricing team to review your current practices and identify opportunities for improvement, contact us. 

California is raising the bar on climate accountability. Two landmark laws—SB 253 and SB 261—are reshaping how companies report on greenhouse gas emissions and climate-related financial risks. If your company does business in California and meets certain revenue thresholds, these requirements apply to you. 

While the California Air Resources Board (CARB) continues working on final implementation rules, the statutory deadlines haven’t changed. That makes now the right time to prepare. This isn’t just about checking a compliance box. It’s about building transparency, demonstrating resilience, and strengthening trust with stakeholders who increasingly expect companies to take climate action seriously. 

What You Need to Know About SB 253 and SB 261 

SB 253 – Climate Corporate Data Accountability Act 

This law applies to companies with annual global revenues exceeding $1 billion that do business in California. Here’s what it requires: 

• Disclosure of Scope 1 and Scope 2 emissions by June 30, 2026 
• Scope 3 emissions reporting starting in 2027 
• Independent third-party assurance of all disclosures 

SB 261 – Climate-Related Financial Risk Act 

This law casts a wider net, applying to companies with annual global revenues of $500 million or more that do business in California. It requires: 

• Biennial public reports on climate-related financial risks starting January 1, 2026 
• Clear strategies for mitigating those risks 

For complete legislative details, visit SB 253 and SB 261. 

Learn more about ESG Advisory Services

Does This Apply to Your Company? 

You don’t need to be headquartered in California to fall under these requirements. Any organization “doing business” in the state that meets the revenue thresholds is in scope. 

CARB has published a preliminary list of companies they believe are covered under these laws. You can review it here (September 2025). 

Why Early Preparation Matters 

It’s tempting to wait for CARB to finalize all the implementation details. But here’s the reality: the statutory deadlines aren’t moving, and these reporting requirements are complex. Companies that start preparing now will be positioned for success. 

Here’s what early action gets you: 

Getting your data systems and processes ready takes time, especially for Scope 3 emissions that reach across your entire value chain. Starting now gives you the runway you need. 

Companies that demonstrate proactive compliance and sustainability leadership stand out. Early preparation shows stakeholders you’re serious about climate accountability. 

CARB’s initial enforcement will likely focus on good-faith efforts. Being prepared protects you from penalties and positions you as a responsible corporate citizen. 

Understanding the Stakes 

Non-compliance carries real consequences. SB 253 authorizes penalties of up to $500,000 per year for failure to report emissions. SB 261 imposes fines for missing climate risk disclosures. CARB will oversee enforcement, with an initial emphasis on transparency and good-faith efforts before escalating penalties. 

Meeting Assurance Requirements 

Independent verification isn’t optional; it’s required. Your disclosures must meet recognized assurance standards such as ISO 14064 or AICPA attestation frameworks. 

We recommend engaging with assurance providers early in the process. They can help validate your methodologies, strengthen your internal controls, and ensure your reporting systems are audit-ready from the start. 

What Makes This Challenging 

Let’s be honest about the hurdles ahead. Preparing for these disclosures isn’t quick or simple. 

• Scope 3 is complex. You’ll need to map emissions across your entire value chain and potentially work closely with suppliers who may not have this data readily available. 
• Climate risk connects to everything. Your climate disclosures need to align with enterprise risk management and governance structures across your organization. 
• Many companies lack the right systems. ESG data management often requires new technology and processes to produce reports that meet assurance standards. 

These challenges are real, but they’re not insurmountable. Companies that start now will have time to address them methodically. 

How to Get Started Today 

Here’s what we recommend to position your organization for success: 

• Conduct a comprehensive emissions inventory. This includes all Scope 3 categories. Understanding your current baseline is the essential first step. 
• Align with recognized frameworks. Global standards like the Task Force on Climate-related Financial Disclosures (TCFD) and the IFRS Sustainability Disclosure Standards (IFRS S2) provide proven approaches that will serve you beyond California’s requirements. 
• Engage assurance providers now. Early involvement helps validate your approach and identify gaps before you’re up against tight deadlines. 
• Build the right governance structures. Climate risk oversight needs clear ownership and integration into your enterprise risk management processes. 
• Invest in technology. ESG data management and reporting automation will be critical for producing accurate, timely disclosures that meet assurance standards. 
• Leverage CARB’s draft resources. CARB has published a Scope 1 and Scope 2 GHG reporting template and a Climate-Related Financial Risk Report Checklist. These tools provide clarity on expected disclosures. You can review it here (October 2025). 

Moving forward with confidence 

SB 253 and SB 261 represent a significant shift in corporate climate accountability. But they also create an opportunity. Organizations that embrace these will strengthen stakeholder trust, improve operational resilience, and position themselves as sustainability leaders. 

At BPM, we understand that navigating these new requirements can feel overwhelming. That’s why we’re here. Our team brings deep expertise in assurance, ESG strategy, and sustainability reporting. We’ve helped organizations like yours build robust climate disclosure programs that meet regulatory requirements while creating real business value. 

Looking for a team who understands where you’re headed and how to help you get there? Let’s talk about preparing your organization for California’s climate disclosure requirements.