In nature, every animal is faced with risks, both large and small. Similarly, every organization faces risks, regardless of its size, industry, or expertise. It brings to mind the story of the lion and the gazelle.
Every morning in Africa, a gazelle wakes up and it knows it must run faster than the fastest lion, or it will be killed.
Every morning in Africa, a lion wakes up and it knows it must run faster than the slowest gazelle, or it will starve to death.
It doesn’t matter if you are a lion or a gazelle, when the sun comes up, you’d better be running.
Both the lion and the gazelle face risk, and both need a swift plan to manage those risks to avoid detrimental effects. Similarly, organizations need assurance that the risks they face are managed as they emerge. Within this objective lies the opportunity for internal audit to leverage the power of integration and collaboration and unlock impactful results for the organization.
As organizations become more globalized, complex, technologically advanced, and focused on regulations, stakeholder demand is sure to increase. To manage this complexity and elevated level of risk, each organization is driven toward risk transformation; that is, the recognition that traditional models of risk management audit, specifically integration, and collaboration, needs to be reviewed and revised to ensure continued success.
The role of internal audit is critical to providing assurance on the effective identification and management of risks that organizations face; a landscape that appears to change dynamically nearly every day.
What is the role of internal audit in risk management?
The integration and collaboration of internal audit with other functions can help to improve risk management while providing a greater level of assurance to the organization's stakeholders.
With integration and collaboration, the internal audit function can work closely with other assurance functions such as Risk Management, Compliance, and IT Departments to ensure there is a consistent understanding of, and approach to, the risk management framework. Key components of this risk management framework include:
- Regular-to-continuous risk assessment
- Data-driven risk assessments
- Regular, automated risk reporting
- Closely monitored risk mitigation plans
In addition, each assurance function would share the output of risk assessments and the assurance work performed that offers greater visibility and a better understanding of risks. The risk response taken by management would also help to ensure that the organizational assets remain safeguarded and that the threats to organizational strategy are managed carefully and with limited impact.
What are the value propositions?
Integration and collaboration between internal audit and other assurance functions offers several advantages to the organization, including:
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Improved risk identification
Risk information that is shared across assurance functions improves both the individual and combined ability to identify risks. Risk that is often and easily overlooked could be better identified when each function shares its perspective on the risk, its impact, and its management. -
Better alignment of objectives and strategies
When aligning the objectives and strategies between internal audit and other functions, the common goal is clear — internal audit can coordinate with other assurance functions regarding efforts and resources to deliver the greatest value for the organization. -
Enhanced communication and information sharing
Internal audit can advance relationships with other assurance functions through enhanced communication and sharing of information. These strong relationships help to build trust while enhancing existing partnerships with other assurance functions. -
Increased efficiency and effectiveness of the process
By collaborating with other assurance functions, internal audit can reduce or eliminate any duplicated efforts and ensure that resources are focused on those risks that are most critical to the organization. -
Collaboration with stakeholders in risk management and governance
When stakeholder confidence in internal audit increases, it often leads to swifter action by management, and thus improves the overall risk management of the organization. This confidence can be a direct result of internal audit working closely and aligning themselves with other functions to reduce internal audit resistance.
