Internal Audit’s Role in Managing Emerging Risks

All companies are affected by inherent risks as a result of the ever-changing business environment. Whether a company is large or small, the effects of ignored or mishandled risk can be detrimental to the achievement of business goals and objectives desired by the organization. Risks can come from external, internal, and changing conditions. This article will aim to explore three of the major external risks faced by organizations, big or small, and how internal audit can play a vital role in protecting organizations.

Cybersecurity

Internal audit has a critical role to play in helping organizations in the ongoing battle of managing cyber threats. Internal audit can provide an independent assessment of existing and needed controls, which, in doing so, helps the audit committee and board understand and address the diverse risks of the digital world.

Laws and Regulatory Compliance

Ever-changing laws and regulations present a compliance risk to organizations. The ability of an organization to navigate these concerns can be difficult based on the industry, size, or abilities of the organization. Failure to adhere to applicable laws and regulations can result in severe consequences, including fines, legal action, damage to reputation, and even the suspension of operations. Also, certain regulations can fluctuate in their need or impact to an organization based on the current environment. The changing environment can be very challenging for an organization to keep up with and requires individuals dedicated to analyzing and responding to the current issues.

Supply Chain

Supply chain remains one of the top risks faced by organizations and will continue to be for years to come. It can profoundly impact a company’s operations, profitability, and reputation. These impacts are not specific to public companies alone. Delays in sourcing raw materials, transportation bottlenecks, or disruptions in manufacturing can lead to production slowdowns or stoppages, causing missed deadlines and customer dissatisfaction. Fluctuating costs due to changes in tariffs, currency exchange rates, or unforeseen expenses can have a significant impact on an organization’s bottom line. These are just a few of the possible risks that supply chain has seen over the last few years and will continue to see moving forward.

How Internal Audit Can Help

Internal audit can play a crucial role in responding to risks faced by all organizations. By conducting systematic reviews of the internal processes, controls, and procedures, internal auditors can provide independent and objective assessments, identify potential gaps, and provide consultation to management in risk mitigating efforts. Additionally, internal auditors can view the organization from a broader view allowing them to create frameworks and recommendations based on the overarching goals and factors affecting the organization.

For more information on ways to identify process risks and controls, improve process effectiveness, achieve legal and regulatory compliance, and any additional information on how internal audit can benefit your organization, be sure to visit our Internal Audit Services page, and do not hesitate to contact Victor Kong with further questions.

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