Strategic risk: where is the audit plan?
When was the time you heard a Vice President of Internal Audit discuss a company’s strategic risk? The head of audit discusses financial risk, compliance risk, and operational risk. But not often do audit teams monitor and audit strategic risk.
Based on our experience recruiting Audit Executives, the portfolio of responsibilities rarely includes “conduct regular audits of the company’s strategic risk.”
One could ask: Are auditors even equipped to examine and audit strategic decisions made by the CEO and the executive committee, and approved by the board of directors. Certainly a review of past strategic decisions and the execution of those decisions could be in their wheelhouse. What about looking forward? Should auditors be tasked with assuring senior management of the soundness of their strategic plans?
We think so.
Auditing strategic risks is a nontraditional responsibility for internal auditors.
Many might find themselves asking what a strategic risk audit plan consists of. Which processes and activities should be included? Certainly the strategy creation and execution processes should be audited. What do best-in-class internal audit teams include in their strategic risk audit plans? There aren’t many benchmarking targets so VPs of Internal Audit may find themselves in virgin territory.
They can start with the mission: Provide senior management with a long-term strategic risk audit plan that will ensure that the company’s strategy is on sound footing, and is being effectively operationalized and achieved. Add to that a provision for on-going monitoring and evaluation of processes, systems and activities that impact the development and execution of the company’s strategic plan.
Nota bene: Many audit departments may lack the skills to develop and execute a strategic risk audit. Acquiring the right talent is critical for success.
Auditors, like all financial executives, should continually look for ways to add value. We view this as a transformational approach worth pursuing.
And if you're ready to start your next executive search, find out how our experienced consultants at GAAP Executive Search can help you recruit top-performing financial executives.