Risk in Focus: The power of knowledge

Risk in Focus is a forward-looking thought-leadership report that highlights the emerging risks and challenges that internal audit functions need to factor into their plans for the year ahead. It is the flagship research project of the European Institutes Research Group (EIRG), a consortium of Institutes of Internal Auditors across Europe, and is published each September – when chief audit executives (CAEs) generally put together their audit plans for the year ahead. It is intended to be an essential tool for shaping, enlightening and inspiring the thinking around these.

From modest roots, “Risk in Focus” has grown in size and scope each year. The latest edition involves collaboration between European institutes in Austria, Belgium, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Spain, Switzerland, Sweden and the Uk and Ireland.

The size and scope of the project creates many advantages. In this year’s edition, “Risk in Focus 2022”, more CAEs took part in the international survey than ever before – 738 contributed their insights on the top risks their organisations face.

What’s more, in addition to the survey, we carried out 50 in-depth interviews with CAEs, audit committee chairs and CEOs to ensure that the report offers more comprehensive understanding of the new and emerging risks, hot topics and issues that should be on the radar than a survey alone could capture. These direct conversations with internal audit professionals enrich what we learn from the survey, supplementing the qualitative data with a “feel” for the wider risk landscape.

The broad range of interviewees means that when CAEs and heads of internal audit draw up their plans for the year ahead, they can tap into the knowledge and insights of other senior internal audit professionals across sectors. We select the key observations and perspectives that arise in the interview process, so, wherever you are, “Risk in Focus” offers you access to the insights of leaders based anywhere from Madrid to Dublin or from Athens to Luxembourg. It creates a link with likeminded professionals, many of whom are facing similar challenges whether they are in Yorkshire, Malmö or the Dordogne.

Inside “Risk in Focus 2022”

What does this year’s report have in store? Uncertainty is part and parcel of all risk professionals’ work, but even for them the context of “Risk in Focus 2022” is unusual: organisations and their internal audit functions face a dizzying pace of change and unprecedented uncertainty. The pandemic has destabilised operations and labour, disrupted supply and demand, and undermined previously sound business models to an extent few would have thought possible.

These issues are widely recognised, but what struck me particularly was that this year’s findings show the extent to which the more “human” risks have changed, and are likely to remain a pressing issue in the coming years. Certain risks have risen up internal audit’s agenda. Human capital, diversity and talent management, organisational culture, and health, safety and security have all gained positions in the survey ranking and more of the overall vote over the past year, demonstrating that CAEs are concerned about the effects of the pandemic and homeworking on the workforce.

Alongside the survey data, interviewees from all sectors and from across Europe consistently expressed concerns about the degradation of organisational culture and “cultural erosion”.

A major benefit of the fact that we repeat this research annually is that it highlights creeping changes in the risk landscape. Nowhere is this clearer than in the case of climate change and environmental sustainability, which has moved steadily up the agenda, so that it is now ranked four places higher than it was in the first survey, with
41 per cent more CAEs viewing it as a top five risk.

What does this mean for the Chartered IIA?

“Risk in Focus” encourages the Chartered IIA and our collaborators across Europe to consider our own work programme. To remain effective, the institute must keep up with the changing needs of the profession. We carry out “Risk in Focus” primarily to help CAEs understand the risk landscape and to inform their audit plans, but, as a result, we also increase our understanding  of our role within the wider context in which we operate.

The annual research helps us to reflect on what more we need to do to support the profession. What emerging issues need more attention? What do our members need and how can we serve them better? These questions aren’t hypothetical – they shape the choices we make, from the types of technical guidance we produce, to the subject matter experts we invite to inform our conferences and webinars and the training and networking events we deliver. When new and emerging risks come to light (and innovative ways to audit them) the institute must support and encourage the profession.

This brings us to one further advantage of the “Risk in Focus” research. The survey uncovers data not simply on what we perceive as the most serious risks, but also on the time we spend auditing these. On occasion, this reveals a gap between what organisations identify as business-critical risks and the time and resources their internal audit functions spend auditing them. Where this occurs, the Chartered IIA will step up and take a leading role, shaping our work programme to help steer the profession.

How to use it

There are other impactful reports that help risk professionals as they prepare their audit plans – the World Economic Forum, the Federation of European Risk Management Associations and all the big accountancy firms publish research and predictions on the issues organisations will face in the year ahead. Yet no other piece of research is geared specifically to internal audit and weaves tangible questions for internal auditors to ask when facing the world’s most pressing uncertainties.

“Risk in Focus” is not a prescriptive guide to what should appear in your audit plan, but it does have clear practical uses. We want it to spark discussion in audit committee meetings, and it deserves its own place on the agenda. We urge all our members – whether newly qualified or at the top of the profession – to consider the report and its findings. In doing so, they tap into a wealth of knowledge, understanding and insight from all sectors across Europe. 

“Risk in Focus 2022” will be published on Tuesday 21 September 2021.

Sophie Malleson is the senior policy and external affairs executive at the Chartered IIA and the project lead for its annual thought-leadership research report, “Risk in Focus”.

This article was first published in September 2021.