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Internal Audit. Expected More.
www.pwc.com/vn
Xavier Potier
Director, Risk Assurance Services
Managing your risk, creating value: The role of Internal Audit and emerging technologies
13th April 2018
With us today
2PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
France, Denmark, Belgium, Singapore, Vietnam
Internal Audit
Risk Management
Internal Control
Corporate Governance
Financial Services
Industry Public Sector
Insurance, Manufacturing, Consumer, Logistic, Big 4 Firms
CEO, CFO, Financial Controller, Legal, Risk Advisor
Different level of risk management and Internal Audit experience / expertise
3
Agenda
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Setting the scene
01
What does the market say?02
How talent and technology can help Internal Audit?03
4
Section 1
Setting the scene
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
The foundational concept of Risk Management
5PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Enterprise Risk Management (ERM) is as "a process, effected by an entity's board of directors, management and other personnel, applied in strategy-setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives”
Source: COSO
The definition of Internal Audit
6
Internal Audit is an independent, objectiveassurance and consulting activity designed to add value and improve an organisation’s operations.
It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.
Source: Institute of Internal Auditors
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
All successful enterprises take risks!
7
No Risk, No Reward
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
8
Section 2
What does the market say?
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Risks are changing: how and why?
9
“Today’s fast changing world creates more uncertainty for organisations – and makes it harder for them to understand where new risks are going to come from.”
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Disruption – A source of challenge and opportunity
10
58%New regulation
44%Changes in business model
or strategy
37%Cybersecurity and
privacy threats
36%Financial challenges
34%Technology advancement
The top five disruptions experienced by global companies in the last 2 years.
Source: PwC, 2017 State of the Internal Audit Profession Study, 2017
Specifically in Vietnam, investors should beware of the following top 5 challenges
Emerging country with developing regulatory landscape
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Transparency and Visibility
Risk management awareness
Changing Banking system landscape
Adaptation of infrastructure and technology
Regulatory landscape in Vietnam
11PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Insurance Banking Securities Investment Fund
Public Companies
Joint Stock Companies
• Decree 73/2016/ND-CP Implementation of the Law on insurance business and certain amended articles
• Circular 50/2017/TT-BTC on guidelines for Decree 73
• Law on Credit Institution 47/2010/QH
• Circular 44/2011/TT-NHNN on Internal Control system and Internal Audit of credit institutions, foreign bank's branches
Circular 210/2012/TT-BTC guidance on the establishment and operation of securities company
Circular 212/2012/TT-BTC guiding the establishment, organization and operation of fund management company
Decree 71/2017/ND-CP on Corporate Governance applicable to public companies
• Law on Enterprise 68/2014/QH13
• Draft Decree on Internal Audit
12
Section 3
How Talent and Technology can help Internal Audit?
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
What defines a strong Internal Audit in the eyes of stakeholders?
13
Position
Vision
Business Alignment
Communication
Business understanding
Manage change
Strategic plan
Collaborate
ProactiveAdding value
Mandate
Unwavering Strategic thinker
Courage
Stakeholder expectation
Trust
Relationships
Integrity
NegotiateTalentTeam building
SourcingTalent development
Mentor
Flexible
Executive presence
RespectListenConfident
ConvictionInterpersonal skills
Business knowledge
Business acumen
Influence
Passion
Motivate
Key challenges of Internal Audit in Vietnam
Potential overlap in scope of workbetween Internal Audit, Internal Control, Risk Management and Compliance
Need for consolidation of 1st & 2nd
line of defence
Compliance vs added value
Emerging legal framework over Internal Audit and Risk Management
Internal Audit maturity
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Talent shortage, specifically in non-FS sectors and need for training
Need for tools and technology capabilities
The Agile IA function
14
Source: PwC, 2017 State of the Internal Audit Profession Study, 2017.
18%of the nearly 1,900 respondents to the survey report that their internal audit function plays a valuable role in helping their companies anticipate and respond to disruptive events.
We call these Agile IA functions.
Agile =Distinctive behaviors
1. Build the likelihood of disruption into planningand risk assessment
2.Meaningfully collaborate with other lines of defense
3.Invest in and elevate business and technical IQ
Prepared Adaptive+Distinctive behaviors
1. Create more flexible processes and reporting mechanisms
2.Drive the use of data analytics and technology
3.Implement flexible talent models
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Key considerations for optimising the talent management
15
Source: PwC, 2016 State of the Internal Audit Profession Study, 2016.
1
Rethink talent
acquisition strategies
4
32
Focus on mentoring and
development
Transform performance management
Re-evaluatesourcing
relationships
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Of very effective leaders develop people with business acumen to create future business leaders vs. 48% of effective leaders
Of very effective leaders co-source to supplement internal talent vs. 59% of effective leaders
Of very effective leaders are agile in resourcing so as to complement the organization’s strategic direction vs. 52% of effective leaders
71%
84%
73%
Facing a technology inflection point
16
Source: PwC, How can boards tackle the Essential Eight and other emerging technologies?, 2017.
Robotics
Internet of Things
Augmented Reality
Virtual Reality
Blockchain
Artificial Intelligence
3D printing
Drones
“PwC’s 21st Global CEO Survey finds that the speed of technological change is a top concern among CEOs. And risk professionals must help their organizations make sure that processes and controls are effective while not slowing the pace of innovation.”
The essential eight
emerging technologies
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Link between Technology and Talents
17
Source: PwC, 2018 State of the Internal Audit Profession Study, 2018.
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Evolutionary or Revolutionary? Leap forward when possible
18
Source: PwC, 2018 State of the Internal Audit Profession Study, 2018.
Le
ve
l o
f a
do
pti
on
Collaboration tools Data tools Analytics Automation PredictiveTime to adoption
Today’s future is tomorrow’s foundation
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Evolvers – Successfully fusing Technology and Talent
19
Source: PwC, 2018 State of the Internal Audit Profession Study, 2018.
Evolver Traits
90%
Technology Talent
73%
Use advanced technology collaboration tools and rate well in cost optimization
Utilize analytic and monitoring tools
Experiment with predictive risk indicators
82%
28% 66%
72%
Invest specifically on technology training
Have correct mix of technology, operational and financial skills
Have team members with advanced technology skills
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Action to take today!
20
Source: PwC, 2018 State of the Internal Audit Profession Study, 2018.
Assess where Internal Audit stands with its tech-nabled foundation
Fuse technology and talent into a single strategy
Consider revolutionary over evolutionary whenever possible
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Discussion
21PwC Vietnam | Eurocharm
Discussion
22
Appendices
PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
PwC’s 2018 State of the Internal Audit Profession Study
23PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Click here to access the full report
PwC’s 14th Annual State of the Internal Audit Profession Study
2,500+ survey respondents,
including CAEs, CFOs, Audit Committee members, and more than 1,200 stakeholders across 92 countries
More than 50 stakeholder and CAE interviews conducted across North
America, Europe, Australia, Africa and Asia to gain further insights.
North America
Europe
Australia
Africa
Asia
Internal Audit & Risk Management International Standards
24PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
The COSO “Enterprise Risk Management-Integrated Framework” is one of
the world’s most widely used risk management frameworks, developed by COSO co-ordinated with PwC.
The International Professional Practices Framework (IPPF) is the conceptual framework that organizes authoritative guidance promulgated by The IIA. A trustworthy, global, guidance-setting body, The IIA provides internal audit professionals worldwide with authoritative guidance organized in the IPPF as mandatory guidance and recommended guidance.
The PwC Global Network is at your service
25PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Imagine the power of more than 236,000 people sharing a common purpose: building relationships that create value for you and yourbusiness. This is PwC. Every day, our people work with you to build the value you are looking for. PwC is one of the world’s largestproviders of advisory, assurance, tax and legal services. Our work with leading companies across multiple industries helps make businesshappen in over 158 countries around the world.
PwC VietnamVietnam Audit Firm of the YearAcquisition International, 2016
PwC GlobalRanked Number One
Financial Consultants GloballyKennedy’s Financial Consulting
Marketplace, 2010-2013
PwC VietnamTax Controversy Leaders
International Tax Review, 2013-2017
PwC Vietnam OfficesHo Chi Minh City8th Floor, Saigon Tower29 Le Duan Street, District 1Ho Chi Minh City, VietnamTelephone: + 84 28 3823 0796
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PwC Risk Assurance Services
26PwC Vietnam | Eurocharm | Managing your risk, creating value: The role of Internal Audit and emerging technologies
Risk Assurance Services
Help you make well-informed decisions
The world of risk is changing. Challenging economic times, volatile world events and fast-changing technology are leaving organisations more vulnerable than ever. It’s much harder to predict where new risks will come from. But, you are adapting and so have we, helping the world's leading businesses to create value in a turbulent world. Many organisations have processes in place to manage risk. But, they are often not as robust as they need to be or they are more focused on yesterday’s risks rather than being forward looking. Our view is that boards need to start taking a holistic approach to risk, moving from being reactive and compliance-driven to being proactive, and using risk as a strategic driver of performance.
Risk Assurance helps management make well-informed decisions. The insight and independent assurance we bring provides an invaluable safeguard in today’s complex operating environment. We look at your processes, policies, systems and controls with a fresh eye. Internal audit, Business Resilience, Business Control Advisory, Performance Assurance, Corporate Treasury and Commodity Solutions - We cover it all with a focus on the details of your risks.
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Thank you for your kind attention!
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
© 2018 PwC (Vietnam) Ltd. All rights reserved. “PwC” refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
Xavier Potier
Director, Risk Assurance Services
Email: [email protected]
Tel: +84 28 3823 0796 Ext. 1010
DID: +84 938 131 446
