I have always been on the lookout for clever ways to describe an internal audit role in an organization. Elevator speeches are fine when you have 60 seconds to describe the value your profession brings to an uninformed bystander. I even shared some ideas for the elevator speech in a blog earlier this year. However, an elevator speech doesn’t hold a candle to a well-crafted sound bite that will leave a lasting impression.
One of my favorites used to be “internal audit is the brakes that allow the organization to drive faster.” The reasoning behind this analogy is that brakes are a critical component in a vehicle. To be sure, they are used to prohibit a vehicle from moving. But more importantly, brakes are crucial to maintaining control of a vehicle. Of course, well-resourced, independent internal audit functions add little value if they impede an organization’s ability to take risks and achieve results. But they add value when, like brakes on a car, they empower management and the board with information to slow down or stop if critical risks lie ahead.
Over the years, I have come to view the “internal audit-as-brakes” analogy to be a bit outdated. It envisions internal audit as being primarily control-focused. Today, internal audit provides much greater value than merely a set of brakes. After all, a vehicle with an outstanding braking system can still end up in the wrong place. Brakes are great for stopping or slowing down. However, they do little to help change course. Internal audits in the 2020s must help create – not just protect value!
I believe a more powerful analogy is that an internal audit is a critical component of an organization’s navigation system. Consider the value of a modern navigation system. Once the departing and arriving locations are enter, a navigation system provides timely and crucial feedback on the progress of the journey. The friendly voice provides turn-by-turn advice on reaching the destination. It recognizes when a turn has been missed and quickly alerts the driver to “make a legal U-turn.” It can be program to recommend routes that are faster, less congested, or avoid tolls. Some alert the driver when the speed limit is being exceed, or the vehicle is being taken on unsafe roads.
Much like the navigation system in a vehicle, an internal audit shows its powerful value by:
- Providing assurance that the organization is progressing on the course charted by management and the board.
- Provide recommended corrective actions when the organization is of course (please make a legal U-turn).
- Identifying risks in advance (much like a navigation system warns of an accident or road congestion ahead).
- Alerting management and the board of compliance risks/failures (think excessive speed).
- Providing assurance that the organization has “arrived at its destination.”
To succeed, organizations in the 21st century must manage risks – both internal and external, whether related to finance, operations, strategy, technology, regulations, or reputation. While organizations are raising the bar on effective risk management, executives face extraordinary headwinds spawned by a turbulent environment in which risks materialize virtually overnight. In the past five years, we’ve faced the most extraordinary global pandemic in more than a century, more global financial turmoil, cybersecurity breaches that even target our infrastructure, corporate failures induced by toxic cultures, the #MeToo movement highlighting sexual assault and harassment in the workplace, and more. In the immediate future, we are facing the prospect of severe supply chain disruptions, inflationary pressures not seen in 40 years, and likely more nasty surprises from COVID-19. Relying on a good braking system will be inadequate to navigate the hills and valleys that lie ahead. Instead, organizations need strong navigation systems with well-resourced and independent internal audit functions fully integrated to succeed.
Granted, my updated analogy may be oversimplified. Strong internal audit functions add value in a multitude of ways, and we are never more critical than management and the board in navigating risks that our organizations face. However, I find it is useful to think through analogies such as this one so that I can better articulate the internal audit’s role in ways that everyone can understand.
I welcome your thoughts.