Embracing data analytics ‘non-negotiable’ for businesses to stay on top of increasing risks

The use of data analytics could help businesses keep pace with the increasingly uncertain trading environment in which risks are developing “at warp speed” following the pandemic and Russia’s invasion of Ukraine, an accountancy body has said.

In a report published on Tuesday, the Chartered Institute of Internal Auditors (CIIA) said global events have created “an adverse risk environment of a kind not seen in decades”, compounding “downstream effects on supply chains, inflation, growth, costs, [foreign exchange] rates, cybersecurity and workplace mental health”.

Against this backdrop, the body is calling on Irish auditors to embrace data analytics that can help company boards “identify, manage and mitigate emerging risks during rapidly evolving situations”.

Based on a survey of 298 internal audit executives in Ireland and the UK, the CIIA report indicates that a third of organisations are yet to adopt any data analytics functions for internal audits.

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Survey respondents said that the top three barriers to adoption were lack of skills (49 per cent), lack of resources (24 per cent) and lack of time (12 per cent).

In a case study included in the report, the institute highlighted the example of An Post, which has an internal audit team of seven people, who until three years ago were using Excel and Idea to manage internal audits with no formal data analytics training.

“That changed after Caroline Derham joined as head of internal audit in 2019 and established a new strategy to advance the function,” it said, with the company building out its analytics capacities since then.

“In October 2022, An Post established a centralised data analytics team to uncover operational and commercial insights and support data-driven decision-making within the organisation. This is a major development and internal audit will work closely with this new team to complement its risk assurance activities and the work of the existing analysts.”

Commenting on the report, Richard Chambers, senior internal audit adviser of AuditBoard, said: “Given the warp speed at which risks can emerge and wreak havoc, embracing data analytics is non-negotiable for boards and internal audit if they are to stay on top of the multitude of risks that organisations are now wrestling.

“Data analytics enables faster and higher quality assurance for boards to then act on. In stormy economic times, a data-led approach has never been more urgent.”