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THE current global crisis being experienced is a direct result of the failure by companies to manage risk, internal auditors have said.
Speaking at the Institute of Internal Auditors Annual Conference in Victoria Falls last week, the IIA Global president and chief executive Mr Richard Chambers said there was need for internal auditors to follow risk in order to avoid the consequences of risk management failure.
“Up to 60 percent of the time, when a company goes down, it is because of strategic risk. Strategic business risk presents the greatest threat to shareholder value yet internal auditors are only spending only 5 percent of their time looking into it,” he said.
He said there was need for internal auditors to follow change in the industry so that they can be able to identify areas of risk that need attention.
“For the past 10 years, financial risk and controls have been causing the collapse of some large companies and this is what internal auditors need to move towards because the existence of companies is at stake,” he said.
Mr Chambers said for internal auditors to remain relevant in corporates, there was need for their skills focus to change.
“We are not an arm of the accounting sector. The reason why I am pointing this out is because there are people who believe that somehow internal auditing is a profession that should be reserved for people with an accounting background. Only 20 percent of internal audit is in accounting so there is need to change focus,” he said.
He noted that when corporates employ internal auditors, their accounting skills only came sixth on the list of required skills.
Speaking at the same event, ICSAZ chief executive Mr Farai Musamba said there was need to increase focus on risk assessment in order to ensure the survival of corporate.
“The corporate sector is the engine of growth and it underpins the foundation of economies. They must be run properly for them to be sustainable,” he said.
He said the high rate of corporate scandal was a result of poor corporate governance.
“Every organisation must develop a compliance programme tailored to its needs, business strategy, operational complexity, product diversity, market circumstances and risk profile. Sound compliance management, like other operational management, depends on establishing a comprehensive programme of risk controls and reviews,” he said.
Mr Masamba said companies had to ensure strict observance of all statutory provisions contained in the various legislations and regulations that govern the industry in which the organisation operates.
He said boards bear the ultimate responsibility for the ethics and standards that make up a company’s culture.
“Leading by example is a concept which should be easily understood by everyone. Leaders hip through actions and commitment tends to set the tone for translating ethical principles into concrete behaviour,” he added.
He said it was important to realise that corporate governance, compliance and ethics, should be about doing business in the right manner and contribute to adding value to the organisations.
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