View from the institute: Leadership – great leaders need great internal auditors
Leadership has been in the news throughout the summer. As Conservative Party MPs debated the various merits of their chosen candidate for UK prime minister, the focus has been on the perfect storm of crises now besetting us. Rising inflation, the cost of living, staff shortages, supply chain failures, war and escalating geopolitical tensions, energy tariffs and climate change have made the news grim reading for all of us, let alone those aspiring to make crucial national decisions.
Those leading companies are likely to have had similarly stressful summers. Even without the political uncertainty in the UK, myriad other concerns and the prospect of danger on the horizon mean that few senior managers are likely to have relaxed on the beach this year. Even if delays, strikes and cancellations enabled them to get on holiday, many will feel that the dangers circling their businesses make Jaws look like a sardine.
How then can internal audit – and the Chartered IIA UK and Ireland – help? Information is vital to good decision-making. We may not be able to head off the sharks, but we can find out where they are swimming, in what direction and how fast. We can also advise organisations where they have gaps in their defences, warn those heading out into dangerous waters and make sure people know what to do when they see ominous fins heading their way.
Amid all the sources of anxiety, there is also good news. Many in our profession are doing exciting and innovative work – they rose to the many challenges presented by the first two years of the Covid pandemic and have changed and adapted the way they work so they are now better equipped to help organisations tackle the next crisis (or crises).
In June, we celebrated many examples of excellent internal audit work done by superb internal auditors at our Audit & Risk Awards ceremony in London. This celebration followed our Leaders’ Summit, where we examined many of the key risks now facing us – and explored the ways in which internal audit can help to address these, from fraud and culture problems to fractured supply chains and macroeconomic risk.
The Chartered IIA is committed to helping all our members through these next months, however difficult they prove to be, with ever more information, practical guidance and other forms of support. This month, we publish our annual Risk in Focus research report, which will highlight the risks rising rapidly up the agenda and should help us to focus on the most significant current and emerging dangers.
We also have a busy season of events for audit leaders in all sectors and for our new Audit Committee Service, looking at everything from cyber crime to human capital and the rising cost of living. We will publish thought-leadership papers on artificial intelligence and on geopolitical risk in the next few months and have also launched new courses on understanding geopolitical risk and on behavioural risk.
Of course, the Chartered IIA and its members do not work in isolation. In late July the FRC announced a consultation to consider how the new regulatory body, the Audit, Reporting and Governance Authority (ARGA), will be funded. We will continue to work closely with the FRC (and, in future, the ARGA) to ensure we keep abreast of changes to audit regulation – and, importantly, make our voice heard about anything affecting the internal audit profession and corporate governance.
However overwhelming the immediate risks and concerns for the future of our organisations may be, we must also always remember the bigger picture. Internal auditors must not only provide the information that leaders need to deal effectively with risks and emerging risks, we must also ensure that we keep a sense of perspective and use our judgment to help organisations work out which risks they should prioritise and which are less significant, or better understood already. When you are in a perfect storm, it can be hard to differentiate between different magnitudes of lightning strikes.
Furthermore, we must not lose sight of the long-term risks. This summer’s heatwave and hosepipe bans across Southern England and Wales are a reminder that climate change is real and already escalating risks at a global level. We must not become so fixated with immediate dangers that we ignore those that are even bigger, just a little further away. We will not help our organisations (or our customers and employees) if we survive now but do it in a way that makes our future prospects even tougher.
Having recently become a grandfather, I am now even more aware of the need for great leadership to ensure that we have a better governed, more sustainable future. Great leadership, at internal audit, organisational and governmental level, has never been more important than it is now. And internal audit must be there to help leaders make great decisions.
This article was first published in September 2022.