Internal Audit

Building from within:
Internal Audit as a mechanism for

Organizational (Biz) growth
PICPA
Manila
1st December 2009
PICPA 2009 Annual National Convention – Manila 2009 December 2009
Building from within
The New Way to Grow your

Business
And your People
at the same Time

What I want to
share?
1. Internal Auditing
2. The Changing Role of Internal Audit
3. Coaching the Biz to plot the right course

& grow?
4. What approaches & tools are there to

support this coaching role?
What I want to
share?
5. From Internal Auditor to biz
Coach/Consultant
6. What needs to be true for this

coaching?
7. Questions & Next steps

1. INTERNAL AUDITING:
Adding Value Across the
Board
The Institute of Internal Auditors

www.theiia.org
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What is Internal Auditing?
Internal auditing is an independent,
objective assurance and consulting activity
that adds value to and improves an
organization’s operations. It helps an
organization accomplish its objectives by
bringing a systematic, disciplined approach
to evaluate and improve the effectiveness
of governance, risk management and
control processes.

Internal Auditors’ Roles
• Governance, Risk management & Control,
processes
– Financial analysts
– Risk evaluators
– Improving operations
– Supplying analyses, suggestions, &
recommendations
– Adding Value

Evaluating risks and controls
Risks
Inputs Outputs
Suppliers
Controls Customers
Process

Analyzing Operations
• Internal auditors:
– Review operations, policies, and procedures
– Help ensure goals and objectives are met
– Understanding of “big picture” and diverse
operations
– Make recommendations to improve economy
and efficiency

Assuring Safeguards
• Evaluate procedures
to safeguard assets
• Technological
safeguards
• Emerging issues

2. The Changing Role
of Internal Audit

The Changing World
of Internal Audit
The New Business Environment Changing Views of Management
 Global economic crisis  Real focus control and risk
 Loss of trust by investors  New roles for management and directors
 Lack of economic growth  Expense control as a way of life
 Constant change  Focus on business strategy and customers
 External customer focus
 Want early warning of issues and
 Bigger not necessarily better emerging risks
 Sarbanes – Oxley

Internal Audit Migration Model
Value Balanced Shareholder Value Enhancement
Protection & Business Coaching
Process
Controls Improvement Collaborating
Remediation with Management
Enabling
Transaction Risk & Control
Focus/Asset Self-Assessment
Protection
Financial Risk Limited Relative Risk Coverage Comprehensive Enterprise

Management Risk Management
Financial/ Continuous
Compliance Risk
Auditing Management
Fraud Risk
Detection Process Analysis Consulting
&
Best Practices

The Internal Audit Expectation Gap
AC:
MGMT:
IA:
Assurance Business
Auditor Coach
Current
Optimum

3. Where do we want Business
growth & improvement?
• Shareholder value
• Revenue, Profits before Tax and Cash
• Strategy development and implementation
• Performance management & KPI’s
• Compensation Packages
• Talent development & retention

To prepare for our work on plotting the right course,
please think about and answer the following questions.
What do we offer?
What products and/or services do we

offer?
Who do we serve / What are our markets?

Who are our customers? Which of their needs will we meet?
How have we outperformed our markets?
Why are these markets attractive?
How do we succeed?
How do we add more value for customers Which of our strengths can we leverage in the
than our competitors do? market?
What are our challenges & Success factors
How do we protect our position? How do we serve new opportunities?

To prepare for our work on defining the Mission,
What is our strategy?

What is our Strategy?
How are we making the strategy a reality?

How do we deliver value?
How do we measure value creation? What is driving our revenue growth?
How have we used the cash generated? What are our KPI’s?
How do we succeed into the future?

How are we modelling our future? What financial numbers matters most to us?
How do we protect our position in the How do we manage inovation and

future? creativity?

To prepare for our work on defining the Mission,
What do we offer?
What products and/or services do we offer?
Agrochemicals
Who do we serve?
Who are our customers? Which of their needs will we meet?
Users of Agrochemicals Help Indian farmers increase their yield per hectare
How do we succeed?
How do we add more value for customers than our Which of our strengths can we leverage in the market?
competitors? Our knowledge about market and distribution
By delivering value for money through continuous
innovation
How do we protect our position? How do we serve new opportunities?

By improving our ability to continuous innovation to By being first in the market
bring down manufacturing cost

Overview Our strategy in action
02 What do we do? 26 All Weather Beacons
04 What’s our strategy? • Market competitiveness
05 How are we doing? • Operational excellence
06 Have we outperformed our markets? • Outlook
08 Chief Executive’s statement 34 Global Positioning Systems
Our markets
Our delivery of value
14 What are our markets?
40 How do we measure value creation?
•Maritime all weather beacons
40 Have we created value in 2007?
•Boat positioning systems
41 Overview of our economic performance
15 Why are these markets attractive?
42 What’s driving our revenue growth?
•Growth in leisure boat sales
43 Modelling the future
•Products fitted into new boats
45 How have we used the cash generated?
16 Challenges and success factors
Our group strategy

20 How are we making the strategy a reality?
22 Strategy progress statement
•Key performance indicators
•Performance vs targets

If I don’t know where the coy is going,
How can I help plot its direction to get
there! Mission
Why we exist
Values
What’s important to us
Vision
What we want to be
Strategy
Our game plan
A GAP
A GAP Existed
Existed Between
Between Mission-Vision-Strategy
Mission-Vision-Strategy and
and Employees’
Employees’ Everyday
Everyday Actions
Actions
ACTION
ACTION PLANS/PERSONAL
PLANS/PERSONAL OBJECTIVES
OBJECTIVES
What
What II need
need to
to do
do
QUALITY
QUALITY MANAGEMENT
MANAGEMENT
What
What must
must wewe improve
improve

MISSION
Why we exist0
VALUES
VISION
What we want to be
BALANCED SCORECARD
Translate, Focus and Align
ACTION PLANS/PERSONAL OBJECTIVES

What I need to do
QUALITY MANAGEMENT
What must we improve
STRATEGIC OUTCOMES
Satisfied
Satisfied Delighted
Delighted Efficient
Efficient &
& Effective
Effective Motivated & Prepared
Motivated & Prepared
SHAREHOLDERS
SHAREHOLDERS CUSTOMERS
CUSTOMERS PROCESSES
PROCESSES WORKFORCE
WORKFORCE

Increase S/H Value
Financial
Revenue Growth Strategy Productivity Strategy
Perspective:
the drivers of
Value from
Value from New
New
Increase
Increase Customer Improve
shareholder Products and
Products and
Customer Improve Cost
Cost Improve
Improve Asset
Asset
Value
Value Structure Utilization
value Customers
Customers Structure Utilization
 New Revenue Sources  Customer Profitability  New Revenue Sources  Asset Utilization
 Customer Acquisition  Customer Retention  Market Share
Product Leadership
Customer
Complete Customer Solutions
Perspective:
the Customer Value Proposition Value for Money
differentiating Product/Service Attributes Relationship Image

value proposition
Price Quality Time Function Service Relations Brand
 Customer Satisfaction
Internal Perspective: “Be

“Increase
“Increase “Achieve “Be a
a Good
Good
how value is “Innovate”
“Innovate” “Achieve Operational
Operational Neighbor”
Customer
Customer Value”
Value” Excellence” Neighbor”
created and Excellence”
(Customer
(Customer
sustained (Operations (Regulatory
(Regulatory &&
(Product
(Product and
and Services
Services
Management
Management (Operations & & Environmental
Creation Processes) Logistics
Logistics Processes) Environmental
Creation Processes)
Processes) Processes) Processes) Processes)
Processes)
Learning & Growth A Motivated and Prepared Workforce

Perspective: role for intangible
assets-people, systems, climate and Strategic Strategic Climate
Strategic Strategic Climate for
for
culture Competencies
Competencies Technologies
Technologies Action
Action
Financial Revenue Growth Strategy Productivity Strategy
Perspective
“Products and Services that Expand Existing Performance Boundaries into Highly Desirable
Customer New customer

First to market
Perspective segments
“Innovate” “Manage Customer Relationships” “Achieve Operational Excellence” “Be a Good Neighbor”
Internal SHE
Perspective compliance
“Find, Motivate, Grow, and Retain the Best Talent”
A Motivated and Prepared Workforce

Competencies Technology Climate for Action
Learning &
Deep functional Creative, versatile Facilitate knowledge Capture best
Growth employees; cross- sharing – internal and
expertise Ideas from external
Perspective functional teamwork external innovators

• A simple representation of your business
• Where you make revenue
• Where you incur costs
• How your cash flows
• Your optimisation/ trade off parameters

4. What approach can I use
and Where can I get support?
• Action Reflection Learning (LIM
International)
• Earning while learning to grow –Develop biz
& people at the same time
• Outcomes at 5 levels
• Cycle of change

Design Flexibility: Outcomes on 5 levels
Each program is custom designed to achieve results
on 5 levels to ensure learning that lasts:
Business
• Address the Corporate Business
Challenges
• Solve Personal Business Challenges
Team Organization
• Develop High Performing Team Skills • Shape Organizational Culture
• Discover Leadership in a Team • Align Organizational Differences
Setting
Personal Professional
• Increase Self Awareness & Purpose • Work on Core Business Competencies
• Identify Personal Strengths & Developmental Areas • Develop Leadership Skills
• Create Personal Development Plan

The Cycle of Change
6 - New Action
5 – Plan: Let’s figure 2 – Feedback:

out what I have to do… What is this telling me?
1.Action
3 – Awareness:
4 – Need: Do I NEED What does this mean for
to change? ME? What is MY role?

5.From Internal Auditor to Biz Coach
From Let me
Gotcha! Coach
to Ya

6. What needs to be true for this
Coaching?
• High level Trust –in God we trust, the rest

we audit!
• Respect and believe in one another
• Teamwork
• Shared recognition and rewards
• Sponsor must be the CEO
• Appreciative feedback and support

What’s stopping the Auditors from
Coaching?
• Nobody asked
• No Coaching skills/ experience
• Management mindset
1. IA not capable to contribute – no proven track
record
2. Does not have business acumen
3. IA more talk than walk
4. Not part of the biz team
5. Cannot solve real biz challenges

Auditor mindsets
• Better stick to what we know best

• What if we went wrong?
• May be risky to coach them into failure
• Never in the driver’s seat before
• May be blamed for business failure
• Not worthwhile
• Audit committee won’t support it

Appreciation & Thanks to;
• PICPA
• CIMA
• IIA Inc
• Lim Inc
• Kaplan
• PWC

It is not over Yet.
Where are your
questions?

LEARNING PRINCIPLES
• Relevance
• Reflection
• Tacit Knowledge
• Self Awareness
• Social Learning
LEARNING PRINCIPLES
• Systems thinking
• Integrated learning
• Challenge mental models
• Repetition and Reinforcement
• Facilitated learning
If I don’t know where the coy is going,
How can I help plot its direction to get there!
Mission
Why we exist
Values
Vision
What we want to be
Strategy
Our game plan
A GAP Existed Between Mission-Vision-Strategy and Employees’ Everyday Actions

What I need to do
QUALITY MANAGEMENT
What must we improve

Link Vision and Strategy to Employees’
Everyday Actions
MISSION
Why we exist
VALUES
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SCORECARD
Translate, Focus and Align
STRATEGIC INITIATIVES
What are the priorities

What I need to do
QUALITY MANAGEMENT
Product Leadership What must we improve
Operational excellence
Customer intimacy
STRATEGIC OUTCOMES
Satisfied Delighted Efficient & Effective Motivated & Prepared
SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
The Balanced Scorecard Strategy Map
Increase S/H Value
Financial
Perspective: Revenue Growth Strategy Productivity Strategy
the drivers of
Value from New
shareholder Products and
Increase Customer Improve Cost Improve Asset
Value Structure Utilization
value Customers
 New Revenue Sources  Customer Profitability  New Revenue Sources  Asset Utilization
 Customer Acquisition  Customer Retention  Market Share
Product Leadership
Customer
Complete Customer Solutions
Perspective:
the Customer Value Proposition Value for Money
differentiating Product/Service Attributes Relationship Image

value proposition
Price Quality Time Function Service Relations Brand
 Customer Satisfaction
Internal Perspective: “Increase “Be a Good

“Innovate” “Achieve Operational
how value is Customer Value” Neighbor”
Excellence”
created and (Customer
(Regulatory &
sustained (Product and Services Management (Operations &
Environmental
Creation Processes) Processes) Logistics Processes)
Processes)
Learning & Growth A Motivated and Prepared Workforce

Perspective: role for intangible
assets-people, systems, climate and Strategic Strategic Climate for
culture Competencies Technologies Action
Product Leadership Strategy Map Template
Increase S/H Value
Financial Revenue Growth Strategy Productivity Strategy
Perspective
Revenues from Gross margins: Manage total life
new products New products Cycle product costs
“Products and Services that Expand Existing Performance Boundaries into Highly Desirable
High performance
Customer products: smaller, faster, lighter New customer
First to market
Perspective cooler, accuracy, storability, segments
brighter,…
“Innovate” “Manage Customer Relationships” “Achieve Operational Excellence” “Be a Good Neighbor”
Educate Flexible,
Disciplined, high-
customers about Robust Rapid
Internal Performance product
complex new products/ processes Introduction SHE
development
Perspective services of new products compliance
Supply
Capture customer capacity for rapid
Product development growth
time: from idea ideas for new In-line
to market products/services experimentation &
improvement
“Find, Motivate, Grow, and Retain the Best Talent”
A Motivated and Prepared Workforce

Competencies Technology Climate for Action
Learning &
Deep functional Creative, versatile Facilitate knowledge Capture best
Growth employees; cross- sharing – internal and
expertise Ideas from external
Perspective functional teamwork external innovators

Business models
• A simple representation of your business

• Where you make revenue Identifying
drivers
• Where you incur costs
• How your cash flows
• Your optimisation/ trade off parameters

Internal Audit

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Internal Audit

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Building from within:

Internal Audit as a mechanism for

The New Way to Grow your

PICPA 2009 Annual National Convention – Manila 2009 December 2009

2. The Changing Role of Internal Audit

3. Coaching the Biz to plot the right course

4. What approaches & tools are there to

6. What needs to be true for this

7. Questions & Next steps

The Institute of Internal Auditors

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

Financial Risk Limited Relative Risk Coverage Comprehensive Enterprise

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

What products and/or services do we

Who do we serve / What are our markets?

How do we protect our position? How do we serve new opportunities?

PICPA 2009 Annual National Convention – Manila 2009 December 2009

What is our strategy?

How are we making the strategy a reality?

How do we succeed into the future?

How do we protect our position in the How do we manage inovation and

PICPA 2009 Annual National Convention – Manila 2009 December 2009

How do we protect our position? How do we serve new opportunities?

PICPA 2009 Annual National Convention – Manila 2009 December 2009

Our group strategy

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

ACTION PLANS/PERSONAL OBJECTIVES

PICPA 2009 Annual National Convention – Manila 2009 December 2009

 Customer Acquisition  Customer Retention  Market Share

differentiating Product/Service Attributes Relationship Image

Internal Perspective: “Be

Learning & Growth A Motivated and Prepared Workforce

Customer New customer

“Find, Motivate, Grow, and Retain the Best Talent”

A Motivated and Prepared Workforce

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

5 – Plan: Let’s figure 2 – Feedback:

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

• High level Trust –in God we trust, the rest

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

• Better stick to what we know best

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

PICPA 2009 Annual National Convention – Manila 2009 December 2009

• Challenge mental models

• Repetition and Reinforcement