Audit body argues that advanced analytics is the key to navigating an increasingly volatile risk landscape
The aftermath of the pandemic, the war in Ukraine and now a recession has all magnified and exacerbated a multitude of business-critical risks.
These major risk events are having compounding downstream effects on supply chains, inflation, growth, costs, forex rates, cybersecurity, and workplace mental health.
Together, these headwinds are creating an adverse business risk environment of a kind not seen for decades. Making it challenging for boards to keep pace with the myriad of risks they now face.
The Chartered Institute of Internal Auditors is urging internal auditors to embrace data analytics to better navigate the volatile landscape.
It has published a report aimed at encouraging internal auditors to fully embrace data analytics in the age of systemic risk.
John Wood, chief executive of the Chartered IIA, said: “Data is key for organisations to navigate more risky times ahead and it is key for the future of internal audit. Understanding what the data shows about risk resilience in today’s complex environment will help ensure organisations’ success.“
Richard Chambers, senior internal audit advisor of AuditBoard, added: “Given the warp speed at which risks can emerge and wreak havoc, embracing data-analytics is non-negotiable for boards and internal audit if they are to stay on top of the multitude of risks that organisations are now wrestling.
”Data analytics enables faster and higher quality assurance for boards to then act on. In stormy economic times a data-led approach has never been more urgent.”
Among other things the survey revealed:
- 60% of internal audit functions are already using some for of data analytics, an additional 7% having advanced to AI. However, this still leaves a third yet to adopt data analytics.
- The top three risk areas for using data analytics are financial (62%), fraud (17%), and legal and compliance (6%).
- The top three benefits of using data analytics include greater level of assurance (48%), 100% audit coverage (21%) and enhanced efficiency (14%).
- The top three barriers to fully embracing data analytics include lack of skills (49%), lack of resources (24%) and lack of time to implement (12%).
- Only 17% expressed concern that internal auditors could be replaced by robots in the future. Instead, data analytics and AI can free up internal auditors’ time to focus on strategic and systemic risks that could be coming down the track.
It makes several recommendations for boards and internal audit, including:
- Ensuring that senior management has defined the organisation’s top five risks, and that the data support this view and is correct and reliable.
- Ensuring that the organisation has its own data strategy in place.
- Working together to identify what data is available to improve risk assurance, and how data analytics could be applied to this data to improve assurance coverage across the organisation.
- Working together to champion a data analytics culture and promote a data-first mindset.