View from the top: Resilience lessons – time to celebrate and prepare
A global pandemic was on our risk register, but it wasn’t a flashing red light in 2019. When lockdown began in the UK, it was as if someone flicked a switch. One moment we were planning the week’s work, the next moment our stores had closed and most of our colleagues (including the group internal audit and risk team) were furloughed, while the rest had to be equipped to work from home.
We had urgent supply chain concerns – one consignment was on a ship from China and we had no idea whether it would be returned or delivered. We had to embark on a massive communications initiative to contact all of our employees and let them know the situation and how it affected them, and all our customers to manage expectations and discuss potential delays.
Most of our contingency plans focused on what we would do if one supplier failed or there was a shortage of a particular material. We hadn’t expected disruption on this scale, but I’m proud to say, looking back, that we prioritised colleagues’ welfare and the response was fantastic.
We were well-prepared and we’ve been lucky – we were in a strong financial position with cash reserves, which helped us weather the first UK lockdown, and demand for our products has held up well. We were delighted that so many customers proved happy to buy our furniture online. We are now seeing strong demand as people want to improve their homes and many have saved money from not going on holidays or socialising.
However, we cannot rest on our laurels. Like others, we have adapted and evolved our operations and our internal audit and risk processes. Much has changed and we have learnt a huge amount that we need to assess and embed to make us more resilient in future crises.
We have seen many positive developments. Internal audit was in the middle of a development initiative when everyone was furloughed, so we had to stop just when people were enthusiastic and motivated. I’m incredibly proud of the team’s agility and flexibility, and we’ve learnt and changed so much.
One important lesson was that the audit plan can be flexed far more than I thought possible. Everyone has had to switch projects to meet new priorities. Some parts of the plan had to be pushed back and we’ve taken on more advisory and due diligence work. Changing the plan at short notice has highlighted where parts of the process could be standardised, so it’s enabled us to create efficiencies across our four brands that we may not have noticed previously, or would have taken far longer to implement.
The guidance and expertise we have provided has been good for internal audit and risk’s reputation and the crisis made everybody focus on risk in a new way, which is helpful for us. Our risk database has never been busier with active engagement from risk and control owners, and more people are thinking about how risk could affect them and their area of the business. In addition, management is taking other risks that seem remote or unlikely far more seriously.
I feel that internal audit and risk has been on a journey. The business always respected us, but risk is not the sexiest subject and not everyone is as passionate about it as we are. Now people are coming to us and highlighting potential risks and asking questions, so there’s a huge educational value.
On the operational side, we developed our online retail capabilities and introduced technology that enabled customers to do almost everything they could in a showroom, apart from sit on a sofa. We were worried about supply shortages, but we were less affected than we feared. Many of our suppliers have suffered more than, or differently from, the way we have and we are trying to use all our emotional intelligence to build stronger relationships and understand their needs – if their colleagues are poorly, the issue is not whether a sofa will arrive on time. We’ve built a lot of valuable goodwill this way.
We always think about how we can boost resilience and our experiences with COVID-19 have moved us forward and given us lots to consider. We’re now putting together a piece of work on the challenges and opportunities from the pandemic. It’s a great time to ask what did we learn? what would we do differently? And, what would we do more (or less) of?
We’re also looking at our horizon scanning and planning for future disruption to ensure we can celebrate our response to the pandemic now without neglecting things we should put in place to protect us if things change. There is clear potential for disruption around environmental, social and governance issues (ESG) and we are building these into our assurance mapping and reporting and disclosure. We need to look at our materiality risk assessments and ensure that our reports are checked and assured independently.
It’s about constantly being proactive, analysing what could happen and asking investors what keeps them awake at night. It’s vital to talk openly about risk and to get understanding and accountability from risk owners, because they set risk tolerance. We can be partners, but internal audit is not the babysitter of risk.
The DFS internal audit and risk team won this year’s Audit & Risk Award for Outstanding Team – Private Sector. A case study on DFS is available in the Chartered IIA’s disruption hub.
This article was published in July 2021.