From Brakes to GPS to Telematics: The Evolution of Modern Internal Audit
As professionals in risk management and internal audit, we're no strangers to the power of using analogies. It's often the simplest way to distill complex notions into ideas that can be readily understood and acted upon. This is why Richard Chambers' recent analogy, depicting internal audit as an organization's “GPS” or "navigation system," is thought-provoking and timely. As someone who has known Richard for many years, I have the utmost respect for his insights into internal audit's evolving landscape. However, in the spirit of constructive discourse, I would like to extend the car metaphor further to encapsulate the modern complexities of the internal audit function. I propose the telematics car insurance tracker as a fitting analogy for today's internal audit.
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The Genesis: Internal Audit as 'Brakes'
Let's start by paying homage to the original analogy that likened internal audit to the "brakes" of an organization. Internal audit was primarily seen as a risk control function in its nascent stages. It acted much like a car's brakes—enabling an organization to slow down when needed, preventing mishaps, but primarily considered a control system. The analogy encapsulated an essential aspect of internal audit but failed to consider its increasingly multidimensional role.
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Transition to a Navigation System
Richard's analogy of internal audit as a "navigation system" marks an important milestone in its evolving perception. The analogy is a testament to how the role of internal audit has expanded over the years. No longer are internal auditors merely "brake operators;" they have become guides, offering navigation through the complex landscape of corporate governance and risk management. It captures the function's ability to provide real-time feedback, make course corrections, and identify risks, similar to how a car's navigation system advises on the optimal route to reach a destination.
Telematics: A More Fitting Analogy?
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While Richard's analogy is compelling, it tends to suggest that internal audit offers continuous, real-time guidance akin to a navigation system that constantly advises you to "turn left" or "exit right." Such a role, while invaluable, may not always be practical, nor is it universally welcomed across corporate functions.
Unpacking Telematics
For those needing to become more familiar, telematics marries telecommunications and informatics to gather, process, and transmit data. In the context of car insurance, a telematics device records various driving metrics like speed, distance, and braking patterns. These data points then inform insurers, allowing them to adjust premiums and provide targeted driving advice for safer practices.
The Unique Attributes of Telematics
What sets telematics apart is its dual role of monitoring and intervening at strategic moments. Telematics systems operate unobtrusively, gathering data in the background, similar to internal audit functions. They don't guide you at every turn but collect information that becomes invaluable for targeted timely interventions.
This is why telematics may be the analogy we need to encapsulate the multifaceted role of internal audit in today's increasingly complex and fast-paced environment.
Integrated Risk Management: The Common Denominator
Both internal audit and telematics shine when they are part of an Integrated Risk Management (IRM) framework. Telematics data on its own is just that—data. It becomes actionable intelligence only when integrated into a broader risk management system. It can interact with other data points, from traffic conditions to driver history, to create a nuanced risk profile.
Internal audit gains its full strength and scope when it is part of an overarching IRM strategy. It can offer insights contributing to everything from immediate operational adjustments to long-term strategic planning. The internal audit function is no longer just about 'checking the boxes' but becomes a critical part of the organization's immune system, identifying vulnerabilities and opportunities in a cohesive, integrated manner.
The Evolutionary Implications
The progression from seeing internal audit as 'brakes' to a 'navigation system,' and now potentially to a 'telematics system' serves as a testament to the function's ever-evolving nature. This metamorphosis is crucial given the accelerating changes in the global business environment. Regulatory landscapes are shifting, technological advancements are continually emerging, and the risks and threats organizations face have never been more multifaceted.
Final Thoughts: Beyond Analogies
Analogies are powerful because they take us beyond the literal and into the conceptual realm. They provide us with frameworks to understand complex systems and ideas in an accessible manner. The journey from 'brakes' to 'navigation system' to 'telematics' offers a narrative arc that mirrors the evolution of the internal audit function. As someone who has spent over three decades in risk management, finance, and audit, our analogies must evolve just as dynamically as the roles they aim to describe.
As we look toward the future, let's consider the value of capturing internal audit's complex, integrative, and dynamic nature. A telematics-based approach offers a nuanced yet powerful way to understand how this function contributes to organizations in today's volatile, uncertain, complex, and ambiguous world.
