United Arab Emirates
Key Emerging Challenges and Role of Internal Audit as Strategic Business Partner
Businesses are consistently evolving due to technological innovations, change in operational models, stakeholder expectations, digitalization, automation and regulatory amendments. Current economic conditions due to recent impacts of Covid – 19 are making the businesses to reconsider their strategies and business operating models. Where all of these changes and evolutions have some pros and cons, it also exposes the businesses to emerging risk and challenges of new era. At Premier Brains we continuously and diligently look after the future risk exposure which the businesses may face and provide wide variety of internal control and risk management services as a strategic business partner.
GET A FREE CONSULTATIONIn order to make the business aware, we have jot down some of the key emerging challenges to help them meet these new challenges by the help of internal audit function before the risk actually knock the door.
DATA PRIVACY
Data privacy is also known as information privacy, that deals with security of trusted data with the businesses. As businesses over the globe are seeing extensive data transmission through their systems comprising sensitive particulars such as personal details, shopping habits, health care profile etc. Many organizations would be struggling to keep the data safe from unauthorized hands. We will see that there would be different evolving privacy regulations at the state and national level which organizations would be required to comply with.
How Internal Audit Can Help
Internal audit (IA) function can help the organizations in understanding the developments in the privacy regulations. As part of privacy efforts, IA can validate the existing data protections policies (if any) and also develop robust controls around the data transmission by reviewing the processes of collecting, analyzing and storing of shared data.
DIGITAL BUSINESS TRANSFORMATION
Business are moving to digital world and switching from traditional ways of doing things to more innovative and automated systems. Organizations would see an ongoing digital transformation, by implementing new technologies and processes to make the business more efficient like, robotic process automation (RPA), Artificial Intelligence, Block Chain etc. Technological changes will bring number of risks such as process integration, conversion of data to information, access rights, data security, malfunctioning, user experiences, performance monitoring, down time etc. So, in order to be in the technological evolution race, organizations have to evaluate their readiness for change.
How Internal Audit Can Help
Making significant digital transformation, impact all the areas of business and have to be evaluated carefully. As internal audit function goes through all the business process and hold the in-depth understanding which can make the organizations understand better that how the process would be reengineered and redesigned. IA can conduct early risk assessment of technological and come up with the risk mitigation strategies for the successful transformation.
CYBERSECURITY AND PROTOCOLS
Cyber threats are continuing to increase in frequency and complexity, with each day bringing the potential of another data breach. In past we have seen that how critical financial and personal data has been hacked and sold over the illegal networks like dark web. In future E-transactions would increase and expose the organizations to cybersecurity threats if controls over the network domains, wireless, devices, shared network, servers etc. would not be robust enough to have strong defense against the innovative hackers. Such cybersecurity issues would not only comprise the electronic information but also damage the reputation of the organization and may impact over the marketability.
How Internal Audit Can Help
The IA function can help the organizations in developing enterprise wide security policies, plans and procedures to put an effective control over the electronic data. Internal audit function can guide the organization about the implementation of well know cyber security frameworks and can also help the organizations understating data security public disclosures.
INTEGRATED RISK MANAGEMENT
Considering the current economic shift, now businesses would reconsider their objectives and come up with new targets which requires joint effort by all the organizational department. So, where the efforts from the departments would be required at centralized level, organization would see a challenge of integrated risk management (IRM)as well. Departments have to come out of their Silos and look forward that how each departmental output can become useful input for other department and what the associated risks they are exposed of which may hamper the performance and achievement of departmental objectives.
How Internal Audit Can Help
Internal audit can work as the driving force behind these IRM programs due to their ability to identify risks and controls and recommend actionable solutions. With the help of IRM, internal audit can break down departmental silos and gives audit the opportunity to streamline processes, centralize business assets, and ensure all departments work in unison.
THIRD PARTY RISK MANAGEMENT
In the modern age cross business transactions are heavily increasing and reliance on third-party vendors for essential business functions continues to grow. As per a research approximately 59% of companies are of the view that they’ve experienced a data breach in the past year due to a third party or vendor. Third party risk would continue to grow as the transaction’s increases, organization has to sure that where their data goes or who has access to it once it is shared with a third party. As non-compliance to this can end up the company with penalties, legal action, and reputational damage.
How Internal Audit Can Help
When it would come to third party risk management, internal audit function can be of best use for the development of effective third-party risk management program. Internal audit can assess processes and controls, including third-party selection, contract negotiation, ongoing monitoring, contractual obligations, and vendor termination mechanism.
REALIGNMENT OF BOARD THOUGHT PROCESS
With the increase of economic and technological changes, risk profile of the organizations would be keep evolving. The role of Board of directors would become more critical as they need to be on their best to stay updated about the upcoming business challenges and the operational performance of the organization. Board members and C-suite level management would be requiring the view of risk both inside and outside of the organization. Now board has to focus over the annual attestation of the effectiveness of the organization controls.
How Internal Audit Can Help
Internal audit function, can help board and work as a bridge between the executives and the board to provide an independent view of the company risk profile. Utilizing their knowledge of industry trends, risk management best practices, and business strategies, the IA team can recommend solutions to board to handle any detected risks before they become too large to address.
TALENT MANAGEMENT & CAPACITY BUILDING
Human capital management would be one of the key challenges in the upcoming days. Companies may face sever challenge with regard to employee’s knowledge updates, change management, remote working behavior and capacity building. As the technology and current economic situation moves further employees have to cope the change at the fast pace and learn new ways of doing things with the attitude of adaptability.
How Internal Audit Can Help
Internal audit is not the direct talent hunting platform but has always been very useful for the companies in lying down the policies and identification of required skill set to meet the organizational needs. Based on the organizational process understanding IA can assist in capacity building, employee motivation and talent management techniques.
CRISES MANAGEMENT
Considering the current cyber security threats and Covid-19 impacts the importance of Crises Management planning has vastly increasing across the businesses. Now organization would be looking for plan B in case of crises and requiring readily available disaster recovery plans and business continuity procedures that can be implement in the hour of need. Recovery plans has to be updated regularly to cope up key risks such as IT-system outrage, data breach, disease outreach, financial crises and reputational risk etc.
How Internal Audit Can Help
IA can conduct an independent review of the entire crisis management system, including governance, processes and risks, and evaluate the quality and extent of coverage of various crises. Further, IA can also assess the leadership readiness for the crisis situation by conducting surveys with key questions to determine the level of preparation.
WORKING CAPITAL MANAGEMENT
Due to Covid – 19 economic activities have been almost stopped and business are suffering with sever cash flow constraints. As this epidemic disease will take time to recover up and expose the business to working capital management issues to run day to day operations of the company. Now organizations may have to focus over the customer retentions and find way outs for reduction in some fixed cost, receivable collections, credit facility management, stimulus benefits, remote operations, stock turnover and sophisticated modes of supply chain.
How Internal Audit Can Help
Internal audit can review the effectiveness and efficiency of management, monitoring and reporting of working capital, focusing on the three core processes accounts Payable, Accounts Receivable and Inventory. IA function can help the organization that how fixed costs can be reduced and different stimulus package may be leveraged for business sustainability.
GLOBAL BUSINESS AND REGULATIONS
Global economics is continuously changing due to certain events such as Covid – 19, Brexit, sanctions over some countries, oil prices, tech war etc. As all of such changes are evolving and giving rise to new tax laws, data privacy policy, social distancing regulation, business geographical access, visa laws, business licensing requirements, money laundering legislations etc. So, the business may face compliance challenges leading to fines, penalties and other severe consequences if not well updated and abide by the laws.
How Internal Audit Can Help
IA can best help the company by updating about the recent updates in the laws and assess the impact of the same over the business. Internal audit function can early involve in the strategic business decision making process for the identification of legal risk so the same can be avoided or mitigated to the possible extent.
MERGERS AND ACQUISITIONS
Due to the current disruptive and devastating effects of Covid-19 over the business, organizations today are under strong pressure to deliver sustainable results to all stakeholders. One of the future options for number of organizations could be to create value by engaging into merger and acquisition activities. Mergers and acquisition would bring number of challenges like effective due diligence, mode of capital investment, culture alignment, process integration etc. which may require in-depth focus of senior leadership.
How Internal Audit Can Help
Being a strategic business partner internal audit can help the business in due diligence, business forecasting and valuation so the merger and acquisition transaction can be converted into solid valuable output. Further, IA can lead the risk assessment of process and cultural role alignment and identify the similarities which can be leveraged to create the synergy.
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Article prepared by: Moin Ibrahim – Manager (Business Advisory)
This document is only for information purposes and should not be construed as advice. It does not necessarily cover each aspect of the topic with which it deals. If you would like to discuss any related matters, please drop us an email at info@premier-brains.com or call us at + 971 4 3542959.