How can providing foresight help the organization compete?
Pundmann It’s important for internal auditors to take what they’re seeing from a historical perspective and apply it to the future of the organization. If they can identify an emerging risk or trend early and communicate that insight to stakeholders, they can help the business gain competitive advantage. Whether an organization is launching a new product or service or implementing a new technology system, internal auditors should be involved early to assure appropriate steps are taken, anticipate risks, and advise on controls and processes. Things change so fast — it’s important to ensure necessary capabilities and controls are built into major efforts long before launch time, and the organization maintains a regular pulse throughout the planning.
On the Horizon
Pundmann and Stewart say internal audit should be aware of, and ready to address, several emerging risks, including:
- Data and cognitive analytics
- Artificial Intelligence
- Robotic process automation
- The rapidly changing strategies of competitors
- Threats from alternative products and innovative business models
- Generational and social trends
- Climate change
- Geopolitical changes
- Government intervention and regulation
- Competition for investment dollars
- Fierce competition for talent
Stewart In the future, the success of an organization may be determined more often by an ability to anticipate change, to make the right decision within a compressed time frame, and to execute ahead of the competition. An ability to quickly contemplate the potential risks and benefits of multiple “what if” scenarios will become key to effective decision-making and execution. Internal audit has an opportunity to transition from its past of monitoring historic transactions and controls through more recent efforts to establish continuous monitoring where errors or deficiencies can be quickly corrected, toward a future of what might be termed predictive monitoring, theoretical monitoring, or simply forward-looking assessments, where outcomes can be anticipated, competing ROIs validated, and changes made proactively to enhance execution and improve outcomes. Those organizations that make the best decisions and execute on those decisions in this new paradigm will have an advantage over their competition.
What can internal auditors do to shift to a focus on foresight?
Stewart Internal audit professionals must become more aware of, and educated on, business trends, disruptive technologies, the movements of competitors, and alternatives and must be able to anticipate forward-looking risks. This will require greater industry perspective, stronger interactions between internal audit and the business, greater leverage of subject-matter experts, and advanced risk identification techniques. Internal audit must shift from the traditional and conventional to being more strategic and focused on what might impede the organization’s most important business objectives.
Pundmann Technology can help a lot. In the future, most internal audit functions will tap risk sensing, predictive analytics, robotic process automation, cognitive computing, machine learning, and — someday — artificial intelligence to help them look to risks and opportunities on the horizon.
What is the risk if internal audit doesn’t provide forward-looking assessments?
Pundmann Internal auditors who don’t offer forward-looking insights may diminish their relevance and their level of impact and influence within the organization. Internal auditors need to be proactive and anticipatory to help their companies gain and maintain competitive advantage. New technologies can help give internal auditors broader and deeper views into the risks they help manage, helping them deliver both insight and foresight.
Stewart An ability to adequately and quickly contemplate the potential risks, benefits, and capabilities of the organization to achieve its objectives for multiple “what if” future scenarios will become so important in decision-making that a failure to have this foresight will not be an option for most organizations. This will be particularly true for areas deemed to be most critical to the organization’s success. Management and audit committees will see value in the objective perspective in forward-looking assessments that internal auditors can provide and will seek to transform internal audit functions so they are capable of providing this foresight. Internal audit functions that fail to make this transition likely will find themselves in a less favorable position in the value chain of their organization, will have to deal with an unfavorable contrast to the more advanced internal audit functions of their peers, likely will see more of their budgets and opportunities repurposed to other functions that can support this need, and may ultimately be deemed obsolete and prime to be replaced.