While conducting engagements, it is imperative to avoid any kind of conflict of interest that can hamper our objectivity

1. Handling Conflict of Interests in
Engagements
While conducting engagements, it is imperative to avoid any kind of conflict of
interest that can hamper our objectivity. A conflict of interest can arise in client
engagements as well as any situations in which we enter into business
relationships. Professional standards require us to take reasonable steps to
identify circumstances that could pose a conflict of interest and apply
appropriate safeguards to eliminate threats to reduce them to an acceptable
level.
There are various types of conflicts of interest. Let us look at each one of
them in detail.
1. Transactional conflicts:- Potential conflicts that arise from client
engagements involving the sale or purchase of a business and our
relationships with the counterparties are termed as transactional conflicts.
For example, if a firm is assisting a buyer in buy-side due diligence and the
target /seller is also a client of the firm, a transactional conflict prevails.
2. Relational conflicts:- Potential conflicts that arise from client
engagements involving counterparties that have a pre-existing relationship
are termed as relational conflicts. For example, in a joint venture between
companies X and Y, Co. X approaches the advisory firm to provide tax
advice related to JV. Later, Co. Y also approaches for similar service
related to JV. Here, JV is the pre-existing relation between the
counterparties.
3. Advocacy conflicts:- Potential conflicts that arise from client
engagements involving legal or other disputes and our relationships with
the counterparties are termed as advocacy conflicts. For example,
preparing valuations of assets for two parties who are in an adversarial
position with respect to the assets.
4. Personal conflicts:- Potential conflicts that arise from personal
relationships and/or financial interests of the firm’s staff or partners with
counterparties to the firm’s business relationship. For example, advising a
client to invest in a business in which, the spouse of a member of the team
has a financial interest.

2. 5. Competitive situations:- Potential conflicts that arise from our
relationships with parties who are in competition with one another. For
example, representing or advising two clients at the same time who are
competing to acquire the same target where our advice might be relevant
to both parties.
The first step in accepting any engagement is to look for potential conflict of
interest among the parties involved. This can be achieved through a search in
internal databases regarding prior engagements done, existing business
relationships, etc. Once a conflict of interest has been identified, appropriate
safeguards are to be taken. Examples of safeguards include:
1. Using separate engagement teams to maintain confidentiality (ring-
fencing).
2. Using separate areas (geographical ring-fencing) in the office that act as a
physical and electronic barrier to the passing of confidential information.
3. Disclosure, acknowledgment, and consent from the parties involved in
engagements.
In today’s globalized environment, we should identify and manage potential
conflicts of interest as quickly and effectively as possible. By taking the above
measures, we can be confident that risk levels will be reduced to the
minimum.
Conflicts of interest must be managed appropriately and HLB HAMT
understands that. We ensure that the issue is addressed at the correct time
and it doesn’t escalate to a serious level. We have the right strategies in place
to manage conflicts, be it transactional, relational or any other form of conflict.
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3. Handling Conflict of Interests in
Engagements
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PO Box 32665
Dubai – United Arab Emirates. Tel: +971 4 327 7775
E-mail: dubai@hlbhamt.com
www.hlbhamt.com