Companies of all industries and sizes look into using procedures and systems that can help them identify risks to their operations. By finding these risks, a company has a better chance in figuring out how these problems will impact their operations, systems, and employee productivity. They can also figure out how often these risks could occur to their companies while developing disaster recovery procedures and protocols that employees can implement to bring their operations back to full capacity.
Enterprise Risk Management, or ERM, is one valuable tool that companies are using in a range of industries including finance, banking, medical, and energy. This tool is actually a framework that is developed by management, stakeholders, and the board of directors that can be used throughout the company to identify strategic risks and develop business practices to avoid any surprises that can cause their operations to fail.
Internal Auditing Role in Enterprise Risk Management
How can a company determine the types of risks that may hamper its operations? Internal auditing comes into play at the start of every enterprise risk management endeavor. The major role of the internal auditor is to analyze existing reporting tools and risk management practices to determine if any gaps in risk management and mitigation processes could impact the company’s critical control systems. Yet internal auditors have found their roles expanding when involved in enterprise risk management programs.
When auditing risk management processes and protocols, internal auditors also work with management to review existing risks to determine if those risks have been properly evaluated. They are assessing emerging risk reporting to determine if there are any gaps in reporting policies, and are defining new risk tolerances with stakeholders.
Two key role expansions for Internal Auditors
In addition to the above job roles, there are two other key role expansions that internal auditors may be taking in their companies while working with management, stakeholders, and the board of directors. These two roles are:
Verifying new emerging risks
During the start of the company, there will be many risks that have already been identified by management and stakeholders due to the frequency of the events occurring and the previous impact that the risks have had on operations. Yet as the company grows and expands operations, new risks can form that have not been previously identified. An internal auditor can help an organization find these new risks whenever there are changes to the company’s operations.
Engaging in enhanced reporting activities for enterprise risk management
Internal auditors are finding themselves in a new reporting role when it comes to working with enterprise risk management programs. In addition to evaluating risk management reporting, they are also coordinating reporting activities with the right governance committee, performing comparisons of the company’s results of key performance risk reporting with applicable peer groups, and managing and consolidating information that is received from all areas of the business in regards to risks that will later be placed into the program’s result reports.
These two key roles place internal auditors in a unique position of opening up the lines of communication throughout a company. Instead of just working with managers in auditing critical controls in risk management programs, internal auditors are speaking with front-line employees, managers of line employees, and the risk management team. It is a unique opportunity to create a dynamic company team with everyone identifying, evaluating, and reporting risks when they emerge.
Each department of the company may now share these communication reports with other departments, managers, and the internal auditor whereas in the past the risk information and reporting were kept separate. The internal auditor, management, and stakeholders may receive more timely and accurate risk reporting information that can be acted upon quickly, and can properly monitor risk mitigation processes to evaluate how effective the procedures are throughout the company.
Risks to Expanding Internal Auditor Roles
Yet while there are immense benefits to expanding the roles of internal auditors in enterprise risk management programs, there is still one major caveat to the process. Internal auditors may find themselves pushed into the position of managing the actual risk management process.
They may find themselves taking the management’s role in the decision-making process where their advice is now seen as recommendations from a leadership standpoint that must be implemented throughout the company’s operations. Internal auditors have to be careful to not take the decision-making process away from the management’s hands for implementing risk mitigation procedures and policies in the company.
With the internal auditor’s new expanding role, they must walk an interesting balancing act in becoming an integral part of the enterprise risk management team without stepping on the toes of the management or stakeholders who need to create and operate this risk management program. Having a detailed understanding of the internal auditor’s duties can allow them to provide the appropriate level of assessment work for the given situation.
Related article: Top 4 Types of Risk that Manufacturing Companies Face.
I.S. Partners Providing Enterprise Risk Management Auditing Services
For companies that are creating an enterprise risk management program and need their procedures evaluated to determine if processes and controls align to the company’s objectives, I.S. Partners can help. We are experienced and certified internal auditors (CIA) who have worked with companies in a range of industries to help them with their enterprise risk management programs. We can assess your risk management procedures and provide advice that can help you build a robust critical control system and processes that will allow your company to handle any risk that may occur.
Contact I.S. Partners today by sending us a message or calling us at 215-675-1400 to learn more about the internal auditor services that we provide to help you create strong operations that can minimize possible risks.