Internal Audit’s Role: Navigating Risk During Times of Global...
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Internal Audit’s Role: Navigating
Risk During Times of Global
Volatility
Angela Witzany, CIA, QIAL, CRMA
Senior Vice Chairman of the Global Board
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• Organizations face complex
risks
• We have opportunity to add
value
• How do we get there
• A mission for internal audit
• Audit Never Sleeps
Outline
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IPPF FUN VIDEO
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The Global IIA in 2015
180,000+
MEMBERS
170+
COUNTRIES
100+
INSTITUTES
161
CHAPTERS
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InternalAuditorOnline.org Blogs
Awareness About Internal Audit Should Also Focus on the Future
5 Bold Steps to transform Internal Audit`s Image
Internal Audit's Relationship With Management Can Say a Lot About Organizational Culture
Proposed Changes to IIA Standards Will Raise the Bar Again
The FIFA Scandal: Five Lessons for Internal Audit
What 2015's Top 10 Blogs Tell Us About Internal Audit
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Organizations Face Complex Risks
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• Cyberrisk• Increased and evolving
regulation• Reputational harm• Technology advancements
and disruptive innovation • Global economic volatility
Organizations face complex
risks
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“Many executives
are declaring cyber
as the risk that will
define our
generation.” — Dennis Chelsey,
Global Risk Consulting
Leader, PwC
Cyber breaches and privacy/information security
continues to plague organizations
38%
36%
year-over-year
increase in
detected
information
security incidents
of corporate directors are not
satisfied with the quality of
information provided by
management on cybersecurity
and information technology risks
Sources: Turnaround and transformation in cybersecurity: Key findings from The Global State of Information Security Survey
2016. Survey of executives and IT professionals. 2015 NACD Public Company Governance Survey.
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Regulation’s impact is growing
Source: Regulation and Growth: IFAC Global Regulatory Survey, International
Federation of Accountants, September 2015.
Regulation affects costs, growth, and innovation…and regulation remains
complex.
said regulation’s impact on organization is
more significant compared to five years ago
significant impact on business costs
significant impact growth opportunities
significant impact on innovation opportunities
83%
80%
66%
63%
79%
said the regulation
impacting their
organization is
complex
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Reputation events can have outsized impact
Source: Deloitte Reputation@Risk Global Risk Survey, 2014.
87%of executives rate
reputation risk as more
important than other
strategic risks
Companies that experienced a
negative reputation event were
impacted in these areas:
41%
41%
37%
Revenue/Earnings
Loss of brand value
Regulatory
investigation
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Rapid speed of disruptive innovation and new
technologies
• Disruptive innovation
• Technological
advancements and new
technologies
• Artificial intelligence and
virtual reality
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Global economic volatility causes risks to emerge
at a faster pace
• Economic conditions
• Volatility in global
financial markets and
currencies
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Risks emerge at a faster speed
Among the top 10 risks in 2016: Economic conditions
Privacy and information security
Succession challenges, ability to hire/retain
talent
Rapid speed of disruptive innovation and new
technologies
Volatility in global financial markets and
currencies
Sustaining customer loyalty and retention
Source: Executive Perspectives on Top Risks for 2016, Protiviti and North Carolina State
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Imperative to Audit at the Speed of Risk
– Vast majority use risk-based methodologies when planning
– But, emerging risks present a challenge
– Risks often materialize with little or no warning
– Decades of accumulated value can evaporate
– We must be able to “audit at the speed of risk”
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We have opportunity to add value
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We have opportunity to add value
How satisfied are you in the value internal audit provides?
Source: 2015 Global Audit Committee Survey, KPMG’s Audit Committee Institute.
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We have opportunity to add value
Source: Seeking value through internal audit, KPMG International, 2016.
.
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The value of internal audit
Our work offers round-
the-clock assurance
that our organizations
are well-positioned to
meet the challenges of
a dynamic and
complex business
environment.
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Should internal audit go beyond the
basics?
Source: Relationships and Risk: Insights from Internal Audit Stakeholders in North America, 2016.
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Help meet the challenge
• Know the risks. Audit
the risks.
–Audit beyond
traditional areas
–Align with
organizational goals
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Our stakeholders rely on us
• They demand:
–No surprises
–Assurance and
advisory services
–Value
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10 Imperatives for Internal Audit
Driving Success in a Changing World: 10 Imperatives for Internal Audit
Available free of charge:
www.theiia.org/goto/CBOK
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Overview: The 10 Imperatives
Play a Leading Role1. Anticipate the needs of stakeholders2. Develop forward-looking risk management practices3. Continually advise the board and audit committee4. Be courageous
Beat the Expectations Gap
5. Support the business’s objectives
6. Identify, monitor, and deal with emerging technology risks
7. Enhance audit findings through greater use of data analytics
8. Go beyond The IIA’s Standards
Invest in Excellence
9. Invest in yourself
10. Recruit, motivate, and retain great team members
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How do we get there?
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How do we get there?
Fault-finder Trusted adviser
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Communicate well
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A trusted adviser communicates well
• Invest in
relationships
• Listen actively
• Respect diverse
perspectives
• Use formal and
informal channels
Source: North American Pulse of Internal Audit, 2016. Q.27. CAEs and Directors only.
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Become an integrated auditor
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A trusted adviser is an “integrated auditor”
• A diverse set of
competencies and
soft skills
– Invest in new
competencies
– Focus on
problem-solving
– Be able to
compromise
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Soft skills among internal auditors are
lacking
Source: North American Pulse of Internal Audit, 2016.
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Top 4 skills being recruited for internal
audit departments
• Analytical/critical thinking
is most important skill
globally, communication
skills is top for this
region
• While soft skills in the
region are important,
accounting is in
significantly higher
demand compared to the
global average.
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Do the right thing
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A trusted adviser is transparent
• The audit process:
– Approved by management,
board, audit committee
– Clearly defined judgement
and assessment
– Clear and precise
– Well-documented with
traceable evidence
– Tells the truth
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A trusted adviser acts with integrity
• Ethical
• Honest
• Diligent
• Responsible
• Respectful
• Trustworthy
• Objective
• Role model
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Be strategic and future-focused
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A trusted adviser is future-focused
• Keep informed
• Anticipate future needs
• Adapt your audit team’s
skillset
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A trusted adviser thinks strategically
• Understand key business
risks
• Align audit plan with
organization’s strategic path
• Be proactive to advise
stakeholders
• Collaborate inside, outside
organization
• Benchmark to peers
43% say audit plan is not well-
aligned with
organization’s strategy
Source: 2015 Common Body of Knowledge Study, © 2015 Q.57
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Action points for aligning with strategy
Source: 2015 IIA CBOK Report: Regional Reflections: Asia & Pacific
• Informal methods– Communicate with senior management as much as possible. Understand their
interests, especially in achieving strategic objectives and the risks that threaten those goals.
– Think form the perspective of the CEO and other senior management when you are planning and carrying out audit work t o keep what is important to them in the forefront.
– Think strategically—even when addressing daily issues—and share your point of view with colleagues.
• Formal methods– Conduct periodic (at least annual) strategic risk assessment and prioritization of
strategic risks confirmed in conjunction with management and the board.
– Have a scalable audit plan flexible enough to accommodate or adjust to the changing risk profile during the year.
– Align internal audit's risk assessment with the organization's risk management assessment.
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A mission for internal audit
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A mission for internal audit
“To enhance and
protect organizational
value by providing
risk-based and
objective assurance,
advice and insight.”
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Audit Never Sleeps