Protiviti is attending, exhibiting and speaking at the 2018 Financial Services Exchange Conference, hosted this week by The Institute of Internal Auditors (The IIA) in Washington D.C. I’ve been attending some of the many sessions and speaking with clients and colleagues at the event, and I wanted to share some key learnings and takeaways from Day 1:
A Conversation With Senator Chris Dodd
Former U.S. Senator Chris Dodd spoke in the morning general session. Highlights of his comments:
- As we head into the midterm elections in the United States, there continue to be questions about what is going to happen to banking policy. Sen. Dodd noted that it is difficult to project what will happen. A lot depends on voter turnout – he is concerned that people may not show up en masse to vote considering what is currently going on.
- He would have supported the so-called Crapo bill (the nickname for Economic Growth, Regulatory Relief, and Consumer Protection Act, which rolled back parts of the Dodd-Frank Act). The biggest issue is the SIFI (systemically important financial institutions) threshold. Now set at $250 billion, this is too high in his view. He does not consider the bill to be sweeping reform.
- With regard to the financial regulatory reform law that bears his name (Dodd-Frank) that was passed eight years ago, he commented on a few things he wished he would have done differently. He would’ve done a better job with the Volcker Rule, and noted that some provisions should not have been in this act, but elsewhere, citing extractive industries as an example. He also wishes more provisions had been added around student loans and car loans.
- He is a huge advocate of internal audit functions, believing they should be a requirement for all public companies and not just those listed on the New York Stock Exchange. However, he recognizes this is a controversial idea given the current political climate and backlash toward the Sarbanes-Oxley Act and Dodd-Frank Act.
Internal Audit’s Pathway to the Future: CAE Panel Discussion
There were some interesting comments and observations expressed during a panel of chief audit executives, many of which are consistent with key points and guidance provided in Protiviti’s just-released white paper, The Next Generation of Internal Auditing:
- As virtually all internal audit leaders are now aware, their businesses are moving fast, and internal audit needs to keep pace through, among other things, people development and technology enablement.
- Chief audit executives must foster a culture of agility and innovation.
- Looking at doing things differently and innovating drives higher impact.
- Auditing process alone is not good enough. There are levers internal audit can pull to help drive the business forward. Focus on incentives that drive positive and negative behavior.
- Internal audit should create innovation teams, or “shark tanks.”
- The mindset should be one of adding value to the business. Clarity of thinking is critical.
- Internal audit also is being challenged to incorporating emerging risks into the risk assessment process. As the function does so, it needs to determine what data in the organization can be used to accomplish this. And with regard to data, internal audit needs to balance the quantitative with the qualitative, and apply judgment to data. Bottom line, continuous use of data is becoming critical.
- In financial services organizations, three lines of defense need to come together to develop a common taxonomy and definition around risk. This should be part of a broader effort to modernize the risk and compliance functions.
- There also should be a focus on training internal auditors to identify opportunities to automate different parts of their audits. Up to this point, the use of robotic process automation has been limited.
Creating Value Through Effective Third-Party Management Auditing
Protiviti Director Brian Kostek moderated a panel discussion on the role of internal audit and value creation through third-party risk management. Brian will cover this topic in a separate blog post.
Stay tuned and subscribe to follow the discussion from the FS Exchange this week, and other insights from Protiviti.
Listen to Protiviti Managing Directors Monica DeBellis and Rick Magliozzi share their impressions from the conference.