Internal audit — how to drive it effectively and boost the value of financial institution?
Optimize processes, increase the company’s competitiveness — that’s what we are hearing all the time nowadays. And we will in the future, as new technologies disrupt areas of companies’ operations one by one. Tech innovation has also arrived in the field of audit and thus help organizations to be more responsive to market issues.
Improving flow of information, managing audit recommendations and enforcing their implementation, new digital solutions are currently pouring into what used to be a rather conservative area. Introduction of innovative audit solutions is especially applicable in financial institutions, as they are in constant need of real-time reviewing of their progress to meet market regulations and synchronize information of their multi-level structure.
Financial institutions are extraordinary business entities due to their multilevel organization, as well as always-changing landscape of regulations they are subject to. According to Deloitte Audit Value Survey, 91% of audit committees members agree that audits of their companies’ financial statements reveal things that their companies could be doing differently or better. Moreover, 46% of C-suite executives and 62% of audit committee members say they would miss important information about market or industry insights, inefficiencies or risks if not for the audit. In addition, 79% of C-suite executives and 94% of audit committee members assert that making audit findings from financial statements more transparent within their organizations would improve their companies’ performance.
End of paper or excel sheets era
Traditional methods of collecting, synchronizing and analyzing information no longer fulfill their role. Paper reports or exchanging e-mail correspondence in order to check the progress of works related to the implementation of audit recommendations are inefficient.
Advising or monitoring and periodic reporting on the risks and effects of actions taken, are just some of the processes that are subject to analysis in terms of efficiency and limitations. So far, we used to work on standard tools requiring creation and maintenance of many different working documents for which data is collected by phone, e-mail, or during direct control.
Introducing recommendations into the Excel file after each completed audit and sending to individual units in the organization responsible for their implementation is a very time-consuming process. In addition, e-mail communication, describing applications, typing a task performance in separate documents or manual creation of reports for the management team — all this makes the whole process ineffective and causes irritation or frustration among employees and managers.
Financial institutions before big changes
Globally — for one-third of banks it is the last chance to introduce new business models, improve inorganic growth or carry out a thorough restructuring. Profitability of the industry isn’t growing any more, clients’ confidence in traditional financial institutions is weakening; the increase of sales volumes has already slowed. All this indicates that the financial sector is facing an end to economic conditions.
What does this mean for the market? Potential economic downturn and rising costs of regulatory changes mean that only the capital-strong, cost-effective and innovative institutions have a chance to maintain in adapting to customer expectations.
According to the McKinsey Global Banking Annual Review 2019, the Polish banking sector above all needs the selection of tools that help optimize costs. The basic issue is to find an answer about the current stage of development and about their role in the whole environment. Compared to agile fintechs, the banking sector has a bit of catching up to do.
Growth of GRC solutions market
Modern technologies are racing to respond to the needs of management boards. The report published by MarketsandMarkets on the development of tools aimed at automating the areas of GRC (Governance, Risk, Compliance) shows that in the next few years this market segment will almost double its value. In 2019, it amounted to 31.5 billion dollars, and forecasts indicate that in 2024 we can expect an increase to 51.5 billion dollars.
It is worth to mention, that GRC automation processes in the areas of internal audit and company-wide compliance processes could create additional business value. Why? Processes are flexible, more efficient and could respond faster to the digital disruption created by lots of fintechs.
Advanced analytics improving operation and cost effectiveness
Automation of monitoring of audit recommendations, collecting all the necessary data in one place or direct access to reports — these are just some of the reasons it’s worth to consider implementing applications helping to manage audit recommendations. Holistic knowledge about progress of work and ability to analyze changes in time periods allows for effective risk management.
Systems supporting audit processes significantly improve the current process of monitoring audit recommendations and maintaining data files based on which they were created so far becomes unnecessary. Notifications automatically sent by the system at specified dates streamline the process for both the auditor and the entities implementing the recommendations.
The implementation of tools that allow for appropriate configuration and management of processes allows organizations to effectively support or replace existing manual activities, and thus provide a base for accurate decisions in a relatively shorter time.