INTERNAL AUDITWILL WE LEAD, OR
BECOME IRRELEVANT
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QUESTION #2
How many people are sitting together watching
this webcast…
(a) 1
(b) 2
(c) 3
(d) 4
(e) More than 5
WILL WE LEAD OR BECOME IRRELEVANT?
Agenda
• The Case for Change
– Why we must think and act as business owners
– Complacency is our enemy
– Why we must rethink business models
– Why we must change personally
• How do we make the changes?
– For the Profession
– For your Department
– For you Personally
CHANGE COMES MORE QUICKLY WITH
INCREASINGLY DEVASTATING IMPACT
• Think about this decade alone
– 3 economic bubbles
– 3 market crashes
– A major terrorist attack in the US
– 2 major wars being fought
– Increasing cyber attacks
• IP and industrial espionage
• Privacy information
– Increasing regulations
– FCPA
• These events have impacted every company and
every person.
Our customers increasingly face:
Competitive and stakeholder pressure
Recession
Increasing regulatory oversight
Budget constraints
Leading to:
Greater need to understand GRC
Reducing cost and simplifying business
Questioning the effectiveness/cost of risk management
THESE ARE UNPRECEDENTED TIMES
Internal Audit must adapt.
Our failure to identify, align to, and support our organization’s
key initiatives will lead to diminished value and respect.
THE CHANGE MANDATE
• IBM: Enterprise of the Future - 3rd Biennial Study
– 1000 Global CEO’s/Public Sector leaders
– 80% say change is accelerating; change is the new norm; status
quo is our enemy.
– Unfortunately, they believe our need to change far exceeds our
ability to change.
– So what is some of their advice?
IBM STUDY (CONT’D)
• Leaders Must Hunger for Change
• It’s a white water world; change is coming from
everywhere.
• Lead and shape change rather than react to it.
• Market and industry shifts provide opportunity to move
out head.
• Reward innovators/successful change managers.
IBM STUDY (CONT’D)
• Innovate Beyond Customer Expectations
• Customer expectations are increasing daily; we must
surpass their expectations.
• Deep collaborative customer relationships allow you to
surprise customers with innovation that makes them and
you successful.
Look at Apple
IBM STUDY (CONT’D)
• Become Disruptive by Nature
– Challenge the value proposition; overturn the delivery
approach; and reinvent the company and the industry.
– Radically challenge the business model to disrupt competition.
• Be Genuine, not Just Generous
– Companies now go beyond philanthropy and compliance.
– Companies worry about society/environment in all actions.
INTERNAL AUDIT AND THE
CHANGE MANDATE
• Per a 2009 Booz & Company study, leading
organizations fund innovation despite the economic
slowdown.
• What does this have to do with Internal Audit?
– EVERYTHING
• Are we a leading organization?
– Reinventing ourselves? Our profession?
– Making our organizations successful?
– Fighting the status quo?
• The moment is here today
– Will you seize it?
Will you create your customer’s expectations, or
react to their expectations?
WHAT DOES THE FUTURE HOLD?
Change must be our mandate
Our value will be based on what we do today and the
vision we set for tomorrow.
Protiviti: Biggest Challenges:
• Risk-based vs. transaction-based
• Harness data analytics
• Ensure GRC is an integral part of the risk model
• Smarter use of technology
• Continuous auditing
• Integrate fraud and prevention into audit strategies
OTHER POTENTIAL CHALLENGES FOR
INTERNAL AUDIT
• Capital projects and key
initiatives (e.g., IFRS)
• External business
relationships
– Key suppliers
– Distributors/agents
• Working capital
• Reputation
• Return on investment
• Cost reduction program effectiveness
• PwC State of the Profession Study
What do you think your challenges will be,
and how do you plan to address?
OUR CHANGE MANDATE
STARTS WITH RISK
• Are you auditing the right things at the right time?
• Do your audits cover COSO rings besides Financial?
• Are you providing overall opinions to your Board?
• IIA Practice Guide: Formulating and Expressing Internal
Audit Opinions
• Are you leveraging all GRC groups within your
company to avoid duplication and improve your risk
assessment?
• Who is leading the effort to collaborate GRC?
• OCEG tools to assess effectiveness
The best audits in the world are of limited value if they are in the wrong area
In today’s environment, can you afford not to share?
WE MUST SHARE
• Think for a moment…
– What have been your most successful projects?
– Could others benefit?
– Have you shared the scope, approach, program?
• How can you contribute?
SHARING HOW RAYTHEON IS MOVING TO
THE RIGHT
• Continuous risk assessment process
• ERM, Enterprise Preparedness, Anti-Fraud, Record
Retention etc.
• Focus on business risks:
– Large programs/initiatives
– Acquisitions
• Business process improvement:
– Cost reduction
– Reducing controls
• Increased data analysis including embedding in the
business
The
Basics
Driving
Insight
Strategic
Value
Focused
Raytheon Internal Audit:
Creating Positive Change
With A Sense Of Urgency
SHARING HOW RAYTHEON IS MOVING TO
THE RIGHT (CONT’D)
• Leveraged IIA and others for best
practices/benchmarks
• Assessed resources; skill sets; added business
rotations, etc.
• Enhanced training, including Six Sigma and change
management
• Partnered with the business in areas like IT
• Enhanced our leadership skills and visibility
The
Basics
Driving
Insight
Strategic
Value
Focused
Raytheon Internal Audit:
Creating Positive Change
With A Sense Of Urgency
SHARING HOW RAYTHEON IS MOVING TO
THE RIGHT (CONT’D)
• Use Audit reports to create change
– Broad distribution of reports within 10 days of fieldwork
– Brief, focused on root cause
– Using the language of the customer
• Active participant in Raytheon strategic planning
sessions
• Networking to develop insight into strategy and
competitive issues
The
Basics
Driving
Insight
Strategic
Value
Focused
Raytheon Internal Audit:
Creating Positive Change
With A Sense Of Urgency
THE LEADER OF TOMORROW
The diversity of skills needed for the future:
Do You Have What It Takes?
Strategic Thinker
Excellent Grasp of
Business Risks
Influential
Motivator
Arbitrator
Team Builder
Ethics/Integrity
Networker
Risk Taker
Boardroom Presence
Breadth of Experience
Courageous
Visionary
Highly Certified
Strong Leader
Innovative
Creative
QUESTION #4
I spent at least $____ personally on my continuous
learning activities in 2009…
(a) Zero
(b) $100
(c) $200
(d) $500
(e) More than $1,000
QUESTION #5
I spent at least _____ hours in training activities in
2009…
(a) 40 hours
(b) 80 hours
(c) 120 hours
(d) 160 hours
(e) More than 160 hours
SEIZE THE MOMENT BEFORE IT SEIZES
YOU
• Understand and set customer expectations
• Change is our mandate
• Today is tough, tomorrow will be even tougher
• We must move to the right
• Lead through sharing
• Change starts with you
"The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic."
— Peter Drucker
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