How well do you know your business? Companies with a robust internal audit function have a strategic asset at their disposal, with access to perspectives about emerging risks and opportunities to help management make well-informed decisions.
Today’s version of the internal audit function can be anticipatory by nature. It can, among other things, shed light on operational improvements, help to protect the company’s competitive advantage and open up the business to new markets. Offering a different viewpoint, internal audit may bring emerging risks to the forefront of management’s attention, as well as reveal new opportunities that capitalize on the organization’s strengths; these insights can have a direct effect on a company’s ability to reach its goals and continue to grow.
So, why doesn’t every company have an IA function? Some don’t have the resources or the specialized expertise to get one going. Since IA doesn’t have to be a truly “internal” team, many companies find that a co-sourcing arrangement can offer the level of strategic support they need from their internal audit team. A mix of in-house and outsourced expertise can bring out the best of an IA function, including these benefits:
- Better awareness of opportunities: Internal audit provides a critical need—it informs senior management about trends and ideas that can affect how the company attracts customers, innovates, curbs competition and strategizes. Learning about a new demand by a particular customer demographic could lead to the investment of an entirely new product line, for instance. Or getting wind of a weakness in the business model could prompt a directional shift in strategy.
- Fruitful discussions for decision-making: With internal audit experts asking the right questions, there’s a sharing of information about the issues and challenges affecting the company that need to be identified and processed for how they could impact the future of the business.
One part of the company, for example, may not realize the level of cybersecurity risk facing the industry. Another may not be aware of the lasting effect of super-low interest rates. And the main office may not fully understand customary business practices in some of the global regions that are tagged for expansion plans. Bringing up these topics, having these conversations, prods the various parts of the business to make priority decisions about their highest value projects. What should be tackled first? The IA function can help get these needed discussions going.
- Deep understanding of the business: Internal audit experts undertake a SWOT (strengths, weaknesses, opportunities and threats) analysis to provide a vantage point that those in the thick of running the business may not clearly see. They may suggest ways to build upon the company’s strengths, such as its solid reputation in the marketplace, and recommend ways to shore up weaknesses.
Taking an outward look, they’ll take note of opportunities, such as buying trends that could lead the company to market differently or expand its reach, as well as threats, such as a change in regulations or the economy.
Internal Audit: Viewpoints That Add Value
Internal audit pros may start out as gatherers, using their expertise to ask the right questions and collect data points and insights from various aspects of the organization and outside of it, to form a picture of what the major risks and opportunities are to the business. As companies grow fast, no one person knows everything about a company, what it is up against, and where improvements can be made. The internal audit function can fill in the gaps by informing and influencing how the company moves forward.
