While they consider these questions, internal audit leaders are also struggling with adapting new technologies, methodologies, and governance approaches, as well as with recruiting people with the required skill sets that these changes bring. Establishing a strategic vision and plan is a leading practice mechanism for internal audit to deliver on its mission more effectively and achieve the value promised by transformation and innovation. If internal audit departments continue to do things the same way as they have been, odds are they will have greater difficulty coming to unique, valuable insights.
Internal audit should undertake exercises to define its strategic needs regardless of perceived limitations.
Developing a Plan
An innovative strategic vision for internal audit combines traditional planning with new ways of envisioning both the end state and how to get there. Innovation thrives in a culture that fosters an open mind and challenges traditional thinking, embracing the constructive benefit of failure in the service of discovery.
Methodologies may be borrowed from other industries and professions. For example, “design thinking” exercises have proven helpful in identifying the problems to be solved by the internal audit function and potentially successful ways to approach them. Internal auditors must keep in mind, however, that incorporating traditional planning steps and analysis is still valuable to staying on a well-defined, concrete path of implementation once the strategic vision is defined.
Key Areas to Address
Strategic planning can appear quite different among different internal audit departments, if it exists at all. There are, however, some characteristics that successful internal audit strategies tend to have in common:
- Alignment with the organization’s strategic plan. An internal audit department strategy does not exist in a vacuum, and cannot exist without a broader strategic plan in place. Internal audit’s mapping and alignment to the organization’s strategic plan is an important step toward understanding where the company is going, how it plans to change, and what may be required of internal audit to support that strategy. Internal audit can enhance the analysis by benchmarking its current resources and capabilities against anticipated changes in the organization’s strategic plan and identifying potential opportunities for improvement.
- Plan horizon. Often, strategic plans have a horizon of one to three years. Expanding that horizon can challenge the internal audit team to identify longer-term shifts required in resources, technology, and methodologies.
- SWOT analysis. Acknowledging threats and weaknesses helps drive the identification of current improvement opportunities. Internal audit innovators are taking a more forward-looking approach, applying this regimen to future strengths, weaknesses, opportunities, and threats (SWOT) in order to visualize future needs as part of internal audit’s strategic vision.
- Limitations and dependencies for innovation. Internal audit should undertake exercises to define its strategic needs regardless of perceived limitations, such as the cost and availability of talent. Once needs are defined, the process should identify action items to address them. These actions can be small in scope, such as committing to a proof of concept, as long as they serve the purpose of opening the door to more significant initiatives.
- Strategic initiatives. The internal audit team’s ultimate goal should be the identification of a plan that achieves the strategic vision. That plan is often categorized into strategic initiatives, or pillars, such as methodology, governance, stakeholders, technology, and talent. These strategic initiatives will, of course, depend upon the organization’s strategic vision and what is required to achieve it, including a consideration of available resources, cost, and relative prioritization. Assigning clear accountability and ownership within the internal audit department is important to achieving the strategic vision and to motivating team members to deliver achievements beyond their typical audit responsibilities.
Format and Frequency
An internal audit strategy should enable and encourage users to think and act differently. To do so, the plan needs to be flexible. A good strategic plan is a living document, as compared with many traditional plans, which may be point-in-time articulations of abstract goals lacking consideration of practical implementation. These usually end up gathering dust on a shelf.
Creative delivery mechanisms, such as webcasts, podcasts, and infographics, have been shown to improve awareness, retention, and application. Furthermore, initiatives should be evaluated on an ongoing basis and be flexible enough to accommodate changes without significant barriers.
Importantly, this is not a “set and forget” exercise. Once the plan has been developed and implemented, it must be sustained and operationalized by reviewing performance metrics regularly and updating the plan as needed. Results and progress need to be monitored and reported to stakeholders on a frequent basis.
A properly planned and developed strategic vision for internal audit should yield tangible benefits, including—
- a common understanding of the department’s direction and the context in which actions and initiatives are being undertaken;
- an appreciation for one’s role within the broader strategic plan for the organization, and thus one’s motivation to achieve part of a broader set of objectives;
- enhanced accountability throughout the organization once strategic initiatives have been defined and linked to individual goals and objectives;
- increased stakeholder support for internal audit’s change initiatives due to an alignment with business goals and objectives; and
- clarification of the next-generation internal audit technologies and skill sets that will be required to deliver on stakeholder expectations and support the organization’s broader strategy.
Planning for Success
The success of any strategic vision and plan depends on clarity, accountability, and the right people. Much is made of innovation—but without a strategic plan, innovation can become a diversion. Internal audit’s strategic vision should align to the organization’s broader business strategy; ensure that this strategy informs internal audit’s planning and any necessary changes to its technology, methodology, and governance techniques; and incorporate innovation where the value proposition to do so is clear and compelling.