The RMC Advisors

The Keys to Enterprise Risk Management

How does your organization's ERM program compare to best practices? What is the maturity level of your ERM program? What value are you receiving from the ERM program? Aon's , Global Enterprise Risk Management Survey '10 describes data collected regarding the extent of ERM implementation across organizations, the effect on organization needs, stakeholder requirements, and how ERM is used to balance risk, opportunity, and value.

Respondents benchmark their progress based on Aon's five-stage ERM maturity model.  The five phases in the maturity model are: 

1. Initial/lacking, 
2. Basic, 
3. Defined, 
4. Operational,
5. Advanced.  

Fifty-five percent of organizations surveyed classify the organization as defined or operational, which is an increase from Aon's prior survey in 2007.

Responses for primary drivers for ERM include; improving governance and transparency, adopting best practices, and improving performance and decision making.  Organizations with mature ERM programs noted value in areas including enhancing shareholder value, optimizing/reducing total cost of risk, strengthening business resiliency and increasing operational efficiency.  In addition, respondents noted the value of ERM increases greatly as the ERM program matures.

Internal Audit – The New Normal: Rewire Your Thinking

During this slow economic recovery, organizations are developing a new normal. The dilemma: the requirement to do more with less, keep up on the trends, and plan to adjust to this new normal. The Internal Audit profession is not exempt from this impact. How are executives and staff dealing with this new normal? Many studies are addressing this issue.

 

To assist you, we developed this series of blog articles to summarize and highlight the key points from the studies conducted by the experts in Internal Audit. The first article is from the Institute of Internal Auditors (IIA) (2010), A Glimpse Ahead: CAEs Look Beyond the Recession.

The report summarizes the discussion at the IIA’s General Audit Management Conference (GAM) attended by 25 CAEs from fortune 250 organizations. The following highlights the forward thinking outcomes of the conference and key items for consideration as Chief Audit Executives (CAE) rewire their thinking to the new normal.

The report provides ten items for forward thinking executives to consider:

1. Recognize that the job market will get better. Stay in tune with your best people and take steps to keep them.
2. Asses the skill needs in your department. Does your team have the skills necessary to provide services in the emerging areas of data mining and enterprise risk management? What other areas are emerging within your organization?
3. Look for affordable ways to meet your team’s training needs. Examples of cost effective training are free or low cost webinars, staff-led training, and business unit mentoring.
4. Obtain the skills you need in various ways such as using guest auditors or staff rotation programs with the business units. Another excellent way to accomplish the audit plan and to train your staff is to co-source with a third party vendor who will do on-the-job training for your staff.
5. Perform dynamic audit planning. Business is changing at a rapid pace and an annual audit plan may go stale quickly. Collaborate with management to develop an agile audit planning process that will respond to the changing business needs.
6. Leverage technology. Look for ways to automate your audits. This is the way of the future; train your staff to recognize automated auditing opportunities. Co-source or train your staff on automated auditing implementation techniques.
7. Add value to your organization by making sure you are proactively involved in strategic initiatives. Correcting control issues is always less expensive during design instead of after implementation.
8. Stay informed.  Are you keeping abreast of legal, public affairs, and regulatory issues? Have you leveraged social media to obtain early alerts versus depending upon others in your organization?
9. Monitor Disclosures. Are you monitoring your organization’s public disclosures? Do you know what is out there in the booming world of social media? Do you or someone in your organization proactively monitor all forms of social media?
10. Maintain open communications with your stakeholders as the economy emerges from this recession. Make sure they understand how Internal Audit is evolving and adapting to the new normal emerging from the economic crisis.

Two of the main items noted at the GAM conference were (1) the social media risks and (2) the opportunities for automation of your audit processes. Making sure you are proactively pursuing these trends will increase the value of the Internal Audit department to your organization.

Please respond to the blog or direct questions and comments to Elaine Nissley, MBA, CISA, PMP, CCSA, Principal, McKonly & Asbury, ENissley@macpas.com.