The road to innovation starts with small steps:
Reimagining the Internal Audit function
In today’s era of exponential change—when risks are evolving faster than ever before, and in an unpredictable and non-linear fashion—many of the legacy approaches of the Internal Audit (IA) function are swiftly becoming outdated. Increasingly, IA is expected by its stakeholders to move beyond the reactive, rear view methods of examining the past. Instead, to remain relevant, IA teams must continually uncover new ways to help their organizations proactively anticipate and prepare for future risks.
This transformation of roles—from historian to fortune-teller—will require a newfound commitment to innovation. At least some of this innovation will come from leveraging tools such as data analytics, cognitive technologies, and robotic process automation. But this doesn’t have to be a budget-breaking exercise. Rather, innovation should help drive efficiencies in the audit process while allowing IA to deliver greater insights. In fact, according to Deloitte’s recent global research survey, The innovation imperative: Forging Internal Audit’s path to greater impact and influence, while respondents expect to increase their functions’ investment in innovation, almost half reported that their innovation investment budgets will not exceed $250,000.
Whether you invest a lot or a little, technology alone will not deliver true value from innovation. That requires the creation of a collective mindset that’s open to change, experimentation, and even fearless failure. While this kind of undertaking is undoubtedly challenging, its potential upside is worth the effort. An innovative IA mindset can lead to an enhanced value of internal audit work, stronger stakeholder relationships, greater auditor satisfaction, and a clearer mission for the function. It’s also something any organization—regardless of size or budget—can start developing today, simply by implementing a number of small, straightforward changes.
A new approach
Forward-thinking Internal Audit leaders should look beyond the traditional assurance activities to incorporate a more advisory mindset—one that seeks to understand the varying needs and goals of the function’s stakeholders and collaboratively uncover new and innovative ways to help achieve organizational objectives while managing risk. While this requires reimagining the role of IA, it doesn’t mean reinventing all aspects of your IA planning, execution, and reporting processes. Instead, it’s about fostering small and simple changes that will help improve current audit activities, establish better methods of working, deepen stakeholder relationships, deliver deeper and more timely insights, and better enable the organization to identify and manage both current and emerging risks.
There are countless different things you can do to create a more innovative IA culture. Leading internal audit functions:
- Ask the right questions. A good way to begin shifting mindset is by posing questions that will encourage your team to challenge the status quo and invite opportunities for innovation. These can include: What steps are we taking to examine the way we work? Are there better ways of doing things? How are we currently evaluating our performance? Are we soliciting input from internal and external stakeholders? Are we empowered to help drive organizational change?
- Brainstorm. Before launching a new project, take an hour or two to brainstorm as a team on how to potentially approach the project in a different way than you may have in the past.
- Launch prototypes. Once you’ve culminated an idea for a new method or process, try it in a small controlled way—perhaps within a small team—to assess if it’s something that should be adopted on a larger scale. Don’t be afraid to fail.
- Form study groups. One of the best ways to see the organization—or the IA function—through a new lens is by collaborating in non-traditional ways. For instance, consider meeting with other professionals—either within your organization or within the community at large—to exchange ideas, gather new perspectives, learn about emerging technology developments, or discuss different ways of working.
- Host ideation challenges. An ideation challenge involves bringing an entire department together to solve a common problem—or build on existing, smaller ideas. These types of activities are ideal for encouraging people to challenge the status quo, explore new ways of working, and, occasionally, find answers to pressing stakeholder challenges.
- Showcase innovation. Innovation begets innovation. With this in mind, you may want to consider dedicating time, perhaps in your town halls or team meetings, to talk about what innovation means to your company and showcase examples of how different colleagues or departments are doing things differently.
- Involve different stakeholders. Before you start an internal audit project, consider including different stakeholders in your scoping—or even invite an external stakeholder to participate in your project. This will strengthen stakeholder buy-in by helping them understand the audit process, allow them to better identify the risks and issues associated with their activities, and promote greater collaboration.
Creating a fail-fast culture
Regardless of the steps you incorporate into your function, you need to understand that innovation only thrives amid experimentation—which means you’re going to get things wrong from time to time. Senior executives must not only recognize this, but they must take strides to create a culture where employees feel comfortable taking chances, knowing that if they fail they simply have to learn from the failure and move on.
Similarly, every innovation investment should be set up as an experiment—meaning you need to identify the key performance indicators (KPI) that will allow you to accurately measure results. As new innovative measures are introduced, this will enable you to swiftly determine if they’re a good investment worth pursuing—or if it’s time to fail fast.
The first step
While innovation investment is integral to the future of the IA function, you don’t have to limit your investments to technology adoption to positively impact your organization. By taking steps to reshape your department’s mindset, and foster innovative thinking, you can dramatically transform the quality of IA work, increase the value delivered, deepen stakeholder relationships—and help your organization better manage and respond to risk in the process.
To learn more about how to embed innovation into your IA function, download The innovation imperative: Forging Internal Audit’s path to greater impact and influence.