Heads of Internal Audit Virtual Forum
16 December 2020
Please note:
- All Institute responses are boxed and highlighted blue.
- Where the chair comments in that capacity, this box is highlighted in yellow.
- The comments from the President/CEO of IIA Global are highlighted in heather.
- For confidentiality, the identities of all delegates/attendees are anonymised.
Chair's opening commentsWelcome to our 27th forum since we started in March! This is a macro-level presentation. It is important that internal auditors understand the world that we operate in. Simon will provide a business overview, which will include Brexit as one of the many influences on our organisations. |
Participants
Chair: Derek Jamieson - Director of Regions, Chartered IIA
Institute: John Wood - CEO, Chartered IIA
Institute: Liz Sandwith - Chief Professional Practices Advisor, Chartered IIA
Speaker: Simon Hart - International Partner, RSM UK
Key takeaways
• “No vaccine. No recovery.” Joe Brusuelas, RSM US Chief Economist, July 2020.
• Economists think that 2021 will be as challenging as 2020.
• Historic data sources are too slow, find new sources, source real time data sets, be imaginative (eg Apple mobility trends, Google Covid-19 community mobility reports, Purchasing Management Index).
• Economists are talking about a ‘swoosh shaped’ recovery, with the K model a possibility for retail as traditional bricks and mortar lag behind digital channels. The Bank of England and the Office for National Statistics (ONS) currently forecast that GDP will be 5% down at the end of 2021.
• There are broader issues and risks in Europe than Brexit which organisations need to consider.
• Depending on the outcome of Brexit negotiations, some of the current undecided issues for organisations to think about may include passporting (ie freedom of establishment), free movement of goods and people, freedom of capital, along with labour laws, mutual recognition of professional qualifications, and the flow of data.
• The risk outlook if there is no Free Trade Agreement with the EU includes unintended illegalities, access/movement issues and rules of origin (final product and components).
• Aside from Brexit, other global trade issues to consider for 2021 include COVID-19, digital taxation, new US administration, aero tariffs and World Trade Organisation changes.
• The closer to failure organisations get, the harder it is to effect change. We need to reimagine our thinking as there are points along the curve of decline where opportunities to innovate and reimagine take place. Internal audit has a role to play in supporting organisations to identify and effect change in order to survive and be successful.
• Supply chain challenges and consumer sentiment may cause organisations to re-evaluate their operating models in future by increasing domestic sourcing to improve ESG commitments and minimise offshore risk.
• Four key slides to reflect on
13 | Trouble in Europe, key risk factors to consider
14 | Quick reference guide of European trading arrangements by country
25 | Anatomy of a crisis, a visual guide to the shocks and responses
31 | Reactivate strategies - agile working
• React – Resilience – Reactivate - Reimagine
Click here to access the presentation slides from today's forum.
Institute's commentsInternal auditors need to be mindful of everything that has been presented here. These are all areas where internal audit can provide assurance. 2021 is a perfect storm of risks and as heads of internal audit you need to be supporting your organisations through these challenging times. Brexit is just one of these. Many of the areas resonate with our Risk in Focus 2021 report, such as rising nationalism and social tensions amid unprecedented economic volatility, supply chain disruption and vendor solvency and talent management, staff wellbeing and diversity. Internal audit have a key role in providing assurance that supply chains are effectively mapped to enable decision making and effective risk management; we have all seen the images of chaos at our ports. There is also basic compliance with labour laws and potential new regulations and legislation. Internal audit need to question organisational preparedness. The pandemic caught us all off-guard, but all of the other risks and issues have been on the radar for some years. Are they on your radar? We encourage you to read the presentation again - it is filled with information and insight. Take time to reflect and consider how best to support your organisation through 2021. |
Chair's closing commentsThe issues presented here affect every single one of us. We just don’t always think about them in detail. We started these forums to respond to the pandemic, to initiate discussion, reinvent what we do and become more agile. This way of thinking is now very much the new way in terms of how internal audit will work going forward. Thank you for your attendance this year, especially those of you who have been with us since the beginning. If you haven’t already, we encourage you to enter our 2021 Audit & Risk Awards. There are five categories to choose from and deadlines for nominations close on Friday 29 January 2021. For more details, click here Please contact me if you are interested in sharing your experiences on a particular topic with this forum. There is real benefit in sharing as collaboration helps us all to develop and improve.
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Future meetings
2021
13 January | Data Analytics – there is huge momentum for this topic. We will use this meeting to update on the data analytics working group, share the agenda for the year and seek further participation in this key initiative.
10 February | Looking forward - thoughts from an Audit Committee Chair.
3 March | Cybersecurity and fraud - the Institute will also be publishing its cybersecurity report.
14 April | ESG - including climate change
May | Board governance and the role of internal audit
June | Inspiring leadership
Chat box comments
Q You mentioned that recovery will depend on a vaccine. Vaccines will probably not become equally available across the globe – thus impacting certain markets quicker than others. Are there any projections on which markets might recover quicker than others, and what the implications could be on an average company’s risk landscape and where internal audit should be looking?
A Until a globally distributed vaccine is available, we are not going to be going back to normal. There will still be disruption regarding travel and supply chains.
Q Our business is in packaging distribution and we source some products from the EU that will attract tariffs based on WTO/UK Global Tariffs in the event of a no deal. Do you have a view on what sort of deal might be struck? We are also starting to see inflationary pressures are likely to ramp up in the new year. What economic effects do you see that having?
A We will all see inflationary pressure, particularly food, in the short term. In terms of the type of deal, there is some alignment, but who knows! I would certainly recommend mapping out the supply chain for the flow of goods in relation to tariff risks.
