Maximize clarity with more effective risk assessments
Today’s audit teams frequently find themselves in a bind. In a business environment defined by emergent risks, boards and executives expect the highest level of assurance possible — without increasing costs or adding time to an already-busy audit calendar. In other words, audit teams must learn how to do more with less.
How can they rise to the challenge? How can they act on this drive for assurance in such a way that elevates their posture within the organization and maximizes clarity within top levels of leadership?
With the proper data collection and analysis procedures, audit teams can identify, track and provide actionable guidance on a wide range of risks — from financial and operational to reputational risks associated with cyberattacks. Even better, this advanced level of analysis embeds key audit priorities within high-level decision-making, solidifying audit's central role in risk strategy.
This blog provides a roadmap for leveraging risk assessments to deliver clarity to company leadership by taking advantage of time- and cost-saving audit software.
Leveraging risk assessments for maximum clarity
Audit teams have the opportunity to make a meaningful impact on how top leadership approaches risk. But in order to accomplish this, they must ensure that their risk assessments align with their company's specific risk profile and resonate with the concerns of the board and leadership.
Auditors must:
- Align stakeholders on a common set of criteria for evaluating and communicating risk
- Assign values to specific risks that correspond to plans of action
While goal #2 often takes center stage when performing a risk assessment, it bears noting that goal #1 should be treated with equal importance. The data collected and analyzed in risk assessments is only as useful as the objective tools in place for understanding and communicating that data. In addition to keeping everyone on the same page regarding priorities, this approach ensures that the audit team and the board are speaking the same language. This clear, direct communication is key to elevating the role of the company's audit function.
Align on answers to key questions. Are certain areas of the organization prone to more risk, or risk that poses a unique threat? What is the ideal outcome of the risk assessment in terms of your organization’s short-term and long-term goals? Which risks must be accepted and which can be mitigated or even exploited?
Identify the risks facing your organization. Don’t be picky at this stage: Identify as many risks as possible. Then, once a full list of risks has been assembled, evaluate them based on a few key criteria. Is a given risk…
- Unique to your organization?
- A priority issue for the organization?
- Something that requires continuous monitoring?
- Contingent on market conditions?
- Associated with a third-party?
Answering these questions will help you set the scope and limits of your risk assessment. It’ll also help you devise a risk scoring system that translates risk into objective data. There are multiple ways to do this. Some companies create a heat map out of their risk profile, while others list them using a hierarchical system. Still others aggregate individual risk distributions into a cumulative loss probability distribution.
Defining a robust system of standards and repeatable procedures at the outset of your risk assessments saves time and resources and establishes continuity within your organization’s risk program. Moreover, it integrates the audit team into proactive risk management by providing the maximum amount of clarity to the board.
Post-assessment activities
The work really starts after your assessment is complete. Turning your team’s newfound insights into a course of action is where the rubber meets the road. If executed properly, this is where your organization will recognize the concrete effects of its elevated audit strategy.
Software makes this task more efficient and more effective. With the right digital tools, audit teams can continuously monitor sources of risk and keep the board in the loop by flagging potential issues. Advanced analytics leverage machine learning to perform predictive analysis, alerting leadership to issues they may not have been aware of prior to the preliminary risk assessment.
Reporting features that come with this software are the key to driving home the significance of important data and can be a secret weapon when it comes to elevating audit's posture within the organization. Customizable reports, which are a core feature of Diligent Audit Management, put data into context and allow board members and executives to see the real-time impact of risk management on key performance indicators. What's more, customizable reports present this crucial information in stimulating, easily digestible formats (graphs, charts, etc.) that make an immediate impact on the board.
An integrated governance platform also keeps the audit team’s work from getting siloed away from other key business functions: With all teams working on the same platform with a single source of truth, the organization’s audit function can collaborate more effectively with IT, compliance, finance and other relevant teams.
Together, these discrete benefits help your audit team do more with less, generating a new standard of clarity sure to impress the organization's top leadership.
Elevating audit with strategic technology
Better, broader and more continuous risk assessments are just one example of how business leaders and boards demand more from internal audit today. These growing demands put pressure on audit leaders, but they also present a big opportunity to step up from a purely compliance function and into a strategic advisory role.
Modern audit technology provides the catalyst for elevating the role of internal audit. But navigating a tech-driven audit transformation is a daunting challenge. A new Diligent executive brief provides four critical guideposts for evaluating and implementing modern audit technology to quickly and reliably deliver the clarity your board and C-suite expects. Read the executive brief here.
