Three ways internal audit can outmaneuver the talent problem – and win

In recent years, countless studies and articles explored disruptive talent trends in the business community. The shift to hybrid and remote working environments has created complex issues that continue to challenge leaders across every industry sector and business function.

Additionally, generational changes have exacerbated these concerns, including an evolution in employee values. Organizations expecting employees to regularly work overtime are likely to be faced with resistance, as employees place more value on personal time. Pay increases, bonuses and additional benefits and perks may no longer be impactful motivators. In fact, they have simply become expected by many employees in a market where employers fiercely compete for a shortage of workers and skillsets.

While the recent layoffs in the technology sector could be interpreted as the talent market shifting, we anticipate the dynamics of the current talent market to continue longer term due to forecasted labor and skillset shortages. Put simply, the challenges companies have experienced recently will likely be sustained for the foreseeable future.

Complex issues require diversity in thought to solve. They require intellectual curiosity and demand better questions be asked. And oftentimes, they require outside thinking and fresh perspective. Progressive internal audit functions are well-positioned to help their organization address the challenges of today’s talent environment, and internal audit functions themselves can be leaders by being first movers to adapt and change.

Internal audit functions must seek to help the business understand and address the talent risks

If you were to review the internal audit plans of the vast majority of internal audit functions across every sector, you would be hard-pressed to find ones in which the audits themselves did not center predominantly around business processes or systems. Internal auditors are known for being well-versed and adept at auditing processes and systems, but people-focused topics are a different story. Many functions have steered clear of risks related to human resources in favor of financial risks, core operational risks and regulatory compliance, but times have changed, and so must internal audit’s focus.

According to AuditBoard’s “2023 Focus on the Future” e-book, “Difficulty in attracting and retaining quality talent” is the No. 1 risk internal auditors identified for 2023. Internal audit functions must tackle this risk head-on. When every business executive is being faced with the problem of delivering on their mission and functional responsibilities without consistent teams or without the talent specializations that they need to compete, internal audit must be engaged as a partner to help address the talent shortage.

For some organizations, the chief audit executive (CAE) may need to have direct conversations with the audit committee and C-Suite about the scope of internal audit’s activities. At other organizations, the CAE may need to push the function to step outside of their comfort zone and collaborate with the right subject matter resources to effectively address talent risks. Through more advisory focused audits, the business can proactively address risk in an ever-changing and dynamic environment. It will require internal audit functions to take off their assurance hat and put on their business partner hat, considering the importance of enhancing and protecting their company’s value.

Internal audit functions must adapt their own talent models to be agents of change

In AuditBoard Senior Internal Audit Advisor Richard Chambers’ blog, “Six internal audit resolutions for 2023,” he listed “Develop and implement a talent management strategy to build internal audit’s next generation” as one of those resolutions. It is true that internal audit functions must demonstrate leadership and help their companies build momentum for broader organizational change. A key question all internal audit functions have asked themselves is ‘how do we continue to bring the right skills and capabilities to our organization at the right time to help the company anticipate and respond to a rapidly changing risk environment?’ Now, they must ask this question with the added complexity of the current talent environment. 

The solution to this nuanced question will require a multi-faceted approach—not a one-size-fits-all solution. However, some key levers companies should pull, include:

1. Maximizing productive time – with employees placing more value on personal time, organizations will accelerate and enhance the use of variable cost models, including co-sourcing, contingent workers and business rotation programs. All of these options will maximize time spent on core audit activities and less on administrative activities, while also increasing the function’s ability to bring in specialized skillsets and capabilities as point-in-time resources.
2. Decreasing the cost of traditional audit activities – advancements in technology will continue to allow companies to automate activities that today are performed by humans and better leverage more sophistical analytics solutions to increase risk coverage. In addition, companies will continue to challenge their operating models and integrate in centers of excellence and near / offshore teams to more cost effectively perform key audit activities, including controls testing.
3. Enhanced integration with other risk and compliance functions – as second-line functions and the business continue to better manage risks, internal audit functions will increase audits of second-line risk and compliance functions and their risk management processes—something that will also require more specialized resources. As a result, the internal audit function will become more comfortable placing reliance on the second line, freeing up resources to focus on new and emerging risk areas.

The current talent environment has no doubt made every organization take a step back and think about the value of its employees. It has challenged every executive to think about how they must evolve in this new normal. Those internal audit functions that rise to the challenge will be best positioned to support their businesses as they navigate forward, and those companies that are able to navigate through the change most effectively, will be best positioned to succeed in the marketplace.

 Is your internal audit function ready to help unleash and amplify talent across your organization?

For more information or help choosing the right sourcing model for your organization, contact our industry-specialized Value Architects™.