View from the institute: 2022 challenges – change, learn, adapt and improve

One thing is already clear about 2022 – there will be multiple challenges for organisations and much need for the internal auditors who support them. Some of these are already with us. We are seeing rising inflation, soaring fuel costs, an acute shortage of staff in all sectors and regions and we are still not free of the effects of COVID-19. Others are likely to come into focus over the next 12 months, in particular climate change risk and related regulations.

However, there is much to feel positive about. As a profession, we have learnt huge amounts from the crises we have faced in the past couple of years and we have moved at a pace that no one would have previously thought possible, let alone likely. We are not in the same place we were before the pandemic.

Few things demonstrate that more clearly than our Internal Audit Conference last November. For the first time, this was both a physical and an online event and the numbers who attended – plus the positive feedback we received – testify to its success. Not only did 250 delegates attend in person, but a further 750 signed up to attend online, far more than we have ever been able to host at a physical event in the past.

In addition, both groups of attendees were able to watch all the key sessions and all the break-out sessions online when it was convenient for them. While this was useful to those who attended virtually, particularly if their work schedule made it impossible for them to attend in person, it was equally valuable for those who were physically there, since no one can be present in several break-out sessions simultaneously. Importantly, those watching from a distance were able to ask speakers questions, so, if they were watching in real time, they were just as involved as those in the room.

The flexibility of this kind of approach is phenomenal, since it means that delegates who can’t attend on specific days still have access to the same information and discussions and can still accumulate their CPE points. This is one way in which the conference was the culmination of so many lessons we have learnt during the pandemic about the best ways to communicate, share and network with each other and we fully intend to build on this to provide this year’s conference via just as many channels. Hybrid working is here to stay.

However, we cannot rest on our laurels. The pandemic is not over yet and other challenges may prove even more testing. Agreements during the COP26 climate conference suggest that further regulations regarding climate change are imminent and internal auditors must help to prepare their organisations both for the risks of climate change and to comply with new rules and stakeholder expectations.

Our recent report Harnessing internal audit against climate change risk: A guide for audit committees and directors suggests questions that audit committee chairs and directors should be asking of their heads of internal audit. This means that internal audit leaders must ensure that they can provide the answers to these questions. Much guidance is already available on our website and more will follow as the government’s direction becomes clearer.

In other areas, there are concerns that work on legislation proposed in the BEIS consultation White Paper on Restoring Trust in Audit and Corporate Governance is not progressing as rapidly as expected. I recently wrote to Kwasi Kwarteng, Secretary of State for Business, Energy and Industrial Strategy, to emphasise that the institute supports moving reform forwards as quickly as possible and would not be in favour of making director accountability for corporate governance part of the UK Corporate Governance Code, instead of writing it into specific legislation on internal company control requirements. My letter was picked up and referenced in an article in the Financial Times on 17 November.

Further risks and issues will emerge and develop throughout this year and we will need everything we have learnt so far – and more – to help our organisations develop the resilience they will need. Supply chains, inflation, a lack of skills and people will continue to threaten business operations. It is notable that people are beginning to talk about “long Covid” in terms of the pandemic’s long-term effect on the economy and businesses as well as on the health of individuals.

Fraud is another key area that is likely to prove increasingly problematic for organisations and, therefore, for internal auditors throughout 2022. Although dishonest practices are nothing new, the risk of fraud has gained an unprecedented level of attention recently and internal auditors are being asked to assess what has changed. The perfect storm of weaker controls, remote working, short staffing and rapidly changed processes, cultural shifts and new opportunities and incentives for shady deals will create new work for stretched internal audit teams and new demands for assurance about how management is dealing with this risk.

We cannot prepare for everything. Resilience is as much about being able to roll with the punches and recover quickly, as it is about being immune to the effects of a crisis. However, the institute will continue to provide guidance and support to help our profession develop and build resilience in their own organisations. We will share what we learn from unfolding events, just as we also try to influence the way legislation and regulations   develop by responding to consultations and challenging the government to keep a steady course on reform.

And we will also celebrate the excellent work that our members do wherever we see it. In particular, the Audit & Risk awards offer internal audit teams across the UK and Ireland the chance to shout about their own successes and hard work and share what they’ve learnt in the process. Nominations are open now and will close on 16 February – so tell us what you’ve been doing and we’ll do the rest.

2022 is likely to be bumpy. There are storm clouds overhead, but we should be confident that what we have already learnt puts the profession in a better position to deal with storms than it was two years ago. So, whatever it brings, have a happy and resilient new year. 

This article was first published in January 2022.