The Four C’s in Overseeing Internal Audit

This week, Protiviti is joining the best and brightest thought leaders from Fortune 500 companies at The Institute of Internal Auditors’ 2017 General Audit Management (GAM) Conference in Orlando, FL. For nearly 40 years, GAM has been the premier experience for internal audit leaders to explore emerging issues and exchange leading practices for positive outcomes. The theme for the 2017 conference is Fostering Risk Resilience. Two Protiviti leaders, Brian Christensen and Jordan Reed, will be conducting panel discussions on stakeholder expectations and the Internet of Things, respectively. We are covering these events and more from the conference here on our blog and on Protiviti’s social media platforms. Subscribe to our blog and follow us on Twitter for timely podcasts and analysis of this year’s conference topics.

 

By Brian Christensen, Managing Director
Internal Audit Global Leader

 

 

 

In 2016, The Institute of Internal Auditors and Protiviti conducted the world’s largest ongoing study of the internal audit profession — the Global Internal Audit Common Body of Knowledge (CBOK) study — to ascertain expectations from key stakeholders, including board members, regarding internal audit performance. Several imperatives for internal audit emerged from the responses of the participants in the study. Among them: focus more on strategic risks, think beyond the scope of the audit plan, and add more value through consulting.

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Assessing the Expectations of Internal Audit Stakeholders at The IIA GAM Conference

This week, Protiviti is joining the best and brightest thought leaders from Fortune 500 companies at The Institute of Internal Auditors’ 2017 General Audit Management (GAM) Conference in Orlando, FL. For nearly 40 years, GAM has been the premier experience for internal audit leaders to explore emerging issues and exchange leading practices for positive outcomes. The theme for the 2017 conference is Fostering Risk Resilience. Two Protiviti leaders, Brian Christensen and Jordan Reed, will be conducting panel discussions on stakeholder expectations and the Internet of Things, respectively. We are covering these events and more from the conference here on our blog and on Protiviti’s social media platforms. Subscribe to our blog and follow us on Twitter for timely podcasts and analysis of this year’s conference topics.

 

Panel Session at the 2017 IIA GAM Conference:
Stakeholder Expectations (Updates from CBOK Stakeholder Studies)

Today at The IIA 2017 GAM Conference, Brian Christensen, Executive Vice President, Global Internal Audit for Protiviti, participated in a panel discussion before more than 1,000 conference attendees, on the expectations of internal audit stakeholders and how internal audit can continue to improve its performance. The panel was moderated by Paul Sobel, Vice President and Chief Audit Executive, Georgia-Pacific LLC. Panelists were Angela Witzany, Chair, IIA Board of Directors and Head of Internal Audit at Sparkassen Versicherung AG; Larry Harrington, Vice President, Internal Audit at Raytheon Company; and Brian Christensen, Executive Vice President, Global Internal Audit at Protiviti.

Following are some highlights from Brian’s comments:

  • Are we in the so-called “golden age” of internal audit? Membership in The IIA is at an all-time high. Conferences and programs are near capacity. As internal auditors, we are part of the conversation in the boardroom and management circles. And internal audit has been rated one of the 10 best professions to start a career. But, it’s important to ask, what can we do better? How do we remain relevant and serve our constituents better? Answering these questions was the goal of the 2016 Global Internal Audit Common Body of Knowledge (CBOK) Stakeholder Study.
  • Stakeholders agree that internal audit is focused on the most significant areas in their organizations. Internal audit is keeping up with changes in the business and is communicating well with management and the board.
  • Internal audit needs to further leverage its positive reputation for quality in other areas of the business where it can add value.
  • Management and the board want internal audit to “move beyond its comfort zone” to help organizations bring internal audit perspective on strategic initiatives and changes – digitalization, cybersecurity, Internet of Things and more. Change is all around us. In light of these many changes, what are new and emerging risks that organizations need to understand and manage? Internal audit can and is expected to provide information and insights to board members and management on these new risks.

Brian also offered some calls to action:

  • As internal auditors, we need to rise up to the expectations of our stakeholders. We’ve been told we’re doing a great job, but we can do more, and our stakeholders want us to do more.
  • We need to break out of historical thinking and approaches. We’ve earned a solid reputation – we now need to build on it.
  • We need to focus on and embrace the four C’s – Culture, Compliance, Competitiveness, Cybersecurity.
  • We need to ask ourselves: Where do we want to be in five years? In 10 years? How do we continue our “golden age”? The answer: Take on bold ideas and new concepts.
  • Finally, we need to own the discourse to fulfill the expectations of our stakeholders.

We have a great opportunity – not just for ourselves, but to create a path for those behind us. Stakeholders have given us a road map to success. Let’s fulfill our destiny and continue our golden age.

Listen to Brian Christensen summarize the highlights:

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Data Security Alarms Should Be Sounding for Oil and Gas

By Tyler Chase, Managing Director
Energy and Utilities Industry Leader

 

 

 

Oil and gas industry executives don’t need to see a new Wikileaks story about secret CIA hacking tools or hear more about the electronic penetration of presidential campaigns to understand the seriousness of a potential digital hack to their operations.

But it’s a large step from knowing a risk exists to being ready for it. Achieving confidence in the ability to manage such risk can involve substantial new investments and operational adjustments, even for an industry accustomed to meeting regulatory, operational and market challenges.

Protiviti’s recently released 2017 Security and Privacy Survey indicates that oil and gas companies are facing their cybersecurity challenges in ways similar to other industries. The survey’s main findings include:

  • Nearly one in five companies cannot confidently identify or locate their “crown jewels,” or most valuable data assets, because they lack an effective enterprisewide data classification scheme and policies.
  • How well companies manage their vendors’ security practices marks a notable difference between top security performers and the rest.
  • Companies with a high level of board engagement in information security issues rate considerably higher than those without such involvement in nearly all facets of information security best practices. These companies also report a higher level of confidence in their ability to prevent an opportunistic data breach.

These findings largely correspond to what we have seen among our own energy clients. One difference we have noticed, however, is that energy companies tend to have little to no formal documentation on testing of security incident response plans, compared to other industries. This could mean that energy executives have not substantiated a basis for the same level of breach-prevention preparedness as some other industries. I would argue that as a critical infrastructure, they should.

Although Protiviti energy clients indicate they are committed to security, we see about the same 38-percent level of compliance with implementation of the five core information security policies identified in the Protiviti survey: acceptable use, records retention/destruction, data encryption, information security, and social media policies.

In addition, energy companies, specifically those in exploration and production (E&P), have been hesitant to invest in tools to identify where their “crown jewels” are stored, apparently on the basis that many do not feel their company is much at risk because it does not retain much sensitive data. However, many common processes at E&P companies (i.e., escheat and royalty owner payments) do involve sensitive information protected by state privacy laws (e.g., individual tax ID numbers are actually Social Security numbers). Further, company confidential information, such as reservoir data, land acquisition data, and merger and acquisition activity, would be considered data that requires identification and protection. Very commonly, even where these processes are mostly manual, this information is digitized (e.g., scanned documents) or entered into a system. If the company does not know what data exists and where, it will have a difficult time protecting it.

Energy executives and boards would be wise to ask themselves some worst case scenario questions and know the answers now rather than having to discover them under fire later:

  • If our data assets were compromised, could they be reconstructed, and how long would it take?
  • If field operations were disrupted by an attack on the operational control system, how much revenue would be lost per week? Per month?
  • If competitors or counter-parties were able to learn confidential details of our strategies and plans, where would our company be most vulnerable?

The bottom line is that what you don’t know, such as where your critical data is, can, and eventually will, hurt you. With all issues of cybersecurity, it’s only a matter of time.

Alyssa Brister and Luis Castillo from Protiviti’s Technology Consulting practice contributed to this post.

Board-Level Cybersecurity Discussions Must Be Proactive, Have Substance, and Inspire Real Change

By Gordon Tucker, Managing Director
Technology, Media and Communications Industry Leader

 

 

 

Cybersecurity is a hot topic in most boardrooms today. Not a shocking revelation, certainly. But keep in mind that, in many organizations, it has taken a long time for this issue to even become an agenda item for the board. Among them are technology, media and communication companies, which should be helping to set the standard for cybersecurity best practices. Many of these companies are doing that, of course, but others still have a lot of work to do.

While it is good news that more boards of directors are talking about cybersecurity, there is a problem: These discussions are too often prompted by a headline-grabbing data breach or hack that has rattled the business or its peers in the industry. This reactionary approach needs to change if boards and executive management truly want their organizations to be prepared to weather a cyberattack or other disruptive cyber event, and its potential consequenses.

Success in a digitized world hinges on effective cybersecurity

Taking a more proactive view toward cybersecurity will also help businesses to succeed in a digitized and hyperconnected Internet of Things (IoT) world. At the World Economic Forum’s annual summit in Davos, Switzerland, this year, cybersecurity experts discussed how this rapidly emerging world will help businesses to reach new heights of productivity — provided they build effective cybersecurity.

This future is not far off, which is why there is an urgent need for boards and executive management to change how they talk about cybersecurity. They need to focus less on worrying about the potential reputational or financial risks of a single embarrassing cyber incident, like a phishing campaign that targets the CEO, and focus more on helping the business define and develop an overarching set of activities that will help it create a stronger, more resilient security environment.

Board engagement as a cybersecurity success factor

For those boards that still view cybersecurity as primarily an “IT problem” — and they are still out there — Protiviti’s 2017 Security and Privacy Survey presents some findings that should help to change at least a few minds. The research found that organizations that are top performers in terms of adhering to security and privacy best practices have two critical success factors present:

  • Their boards of directors have a high level of engagement in, and an understanding of, information security risks that the organization faces.
  • They have a comprehensive set of information security policies in place, including acceptable use policies, data encryption policies, and social media policies.

One-third of businesses surveyed describe their boards as highly engaged with information security risks. This is a five-point increase from the 2016 survey. Protiviti’s survey report notes that this positive trend “reflects the fact that the [information security] issue is not merely about technology, but rather represents a top strategic risk” for today’s businesses.

Fostering more meaningful discussions

In addition to seeing security as just an IT’s problem, another reason many boards fail to have meaningful cybersecurity discussions is the sheer complexity and tremendous scope of the issue. Technology touches almost every aspect of the business, and cyberthreats that target systems and data are growing in sophistication. IT teams themselves struggle to understand the rapidly evolving cyber risk landscape.

Another problem: Boards are often provided information about cybersecurity risks that is far too technical. Cyber risks and recommended solutions for addressing them are not being described by technology leadership in business terms that the board can swiftly analyze and make decisions on.

In our 2017 Security and Privacy survey report, we recommend that technology leaders take care to clearly communicate relevant security matters to all stakeholder audiences. For boards, in particular, they should provide information in nontechnical terms to the extent possible, and prioritize discussion of issues based on the business risks that each risk poses to the organization.

By the same token, Protiviti’s security experts who authored the survey report advise boards to start “asking more, and more detailed, questions about organizational security efforts.” These questions, which should be posed to business, technology and internal audit leaders alike, should include:

  • Do we know how the company’s critical data is collected, stored and analyzed?
  • What framework or activities does the business have in place, or is it developing, to help protect our data and our intellectual property?
  • How is the success of those activities measured?
  • If the organization experiences a significant breach, what is the response plan?
  • How are employees trained on cybersecurity issues, how often and by whom?

These are just some examples of baseline questions that can help boards at technology, media and communication companies begin to have more productive and forward-looking conversations about cybersecurity with the business. More important, these questions will help to lay the groundwork for proactive discussions about emerging risks around digitization and the IoT — the next major technological challenges that technology, media and communication businesses must be fully prepared to face if they are to survive.

Building Cyber Resiliency Is the Path to Better Brand Protection for Consumer Products and Services Companies

Rick ChildsBy Rick Childs, Managing Director
Consumer Products and Services Industry Leader

 

 

 

Last week, I wrote about customer loyalty, and how a strong cybersecurity program can help ensure the trust of consumers. Here are some fresh stats about the business impact of cyber threats that consumer products and services executives should know about: In 2016, one in five businesses lost customers due to a cyber attack. Nearly 30 percent lost revenue. About one-quarter lost business opportunities. And when a breach occurred, brand reputation was one of the top areas of the organization to be affected, right behind operations and finance.

These unsettling findings are from the Cisco 2017 Security Capabilities Benchmark Study, featured in Cisco’s latest cybersecurity report. Combine these data points with all the news about recent hacks and breaches involving major retailers, restaurants, hotels, and other consumer products and services companies, and it becomes crystal clear why industry executives are extremely concerned about cyber threats.

In the latest Executive Perspectives on Top Risks Survey from Protiviti and North Carolina State University’s ERM Initiative, which I referenced in my recent post, respondents from consumer products and services businesses also cited the following risk among the top five for their industry group in 2017:

Our organization may not be sufficiently prepared to manage cyber threats that have the potential to significantly disrupt core operations and/or damage our brand.

The research also shows that the risk score for this concern increased significantly from the 2016 survey.

Consumer respect and trust are at stake

For consumer products and services companies that spend millions of dollars annually to cultivate and promote their brand image, a hack or a data breach can be devastating to their reputation — and their bottom line. These events can lead not only to long-term brand damage, but also the loss of the public’s respect and trust. This is especially true if customer data is compromised or stolen, leaving people at risk for financial loss and identity theft. Even if a company can recover quickly from such an event and make things right with its customers, its image will likely remain tarnished for some time to come.

Unfortunately, cyber threats (and privacy concerns) will become only more severe as businesses and consumers increase their reliance on technology in all aspects of their lives; digital commerce and mobile payments continue to grow; and the emerging Internet of Things (IoT) expands. Over time, consumer products and services companies will need to significantly increase the data they collect to provide highly customized products, services and experiences to their customers.

These trends underscore why consumer products and services businesses must make improving cybersecurity and building cyber resiliency even higher priorities — starting now.

Developing a world-class response to a high-profile crisis

Most executives today understand that a cyberattack is not a matter of if, but when, for their organization. Taking steps to prevent hacks or breaches should always be a high priority for any business, of course. But what is even more important is creating a well-thought out and tested action plan that will allow the company to respond swiftly to a cyber incident, mitigate the impact of that event on the business and its customers, and protect the brand.

A recent issue of Protiviti’s Board Perspectives: Risk Oversight offers some insight that can help consumer products and services companies better protect their brand reputation in an increasingly treacherous cyber threat landscape. One of the “10 essential keys” to risk management outlined in the document —developing a “world-class response to a high-profile crisis”— is particularly relevant to the cyber threat discussion.

Creating a world-class response requires that the board of directors and executives ensure, long before a crisis hits, that:

  • The risk assessment process has been designed to identify areas where preparedness is needed.
  • A crisis management team is in place and prepared to address a specific sudden crisis scenario; otherwise, a rapid response will be virtually impossible.
  • Response teams are supported with robust communications plans that emphasize the importance of transparency, straight talk and effective use of social media.
  • Response teams update and test their rapid response plans periodically.

These actions can strengthen organizational resiliency. When developed with cyber threats specifically in mind, they help to build cyber resiliency. Preparing to reduce the impact and proliferation of a cyber event is paramount for any modern business. For consumer products and services companies, it can make all the difference in maintaining their customers’ trust, preserving the long-term health of their brands, and being able to confidently face the future.

Cybercrime, Brand Damage Among Top Risks for Technology, Media and Communications Companies, Executives Say

gordon-tucker-3By Gordon Tucker, Protiviti Managing Director
Technology, Media and Communications Industry Leader

 

 

 

If improving brand protection isn’t a top-line agenda item in the cybersecurity discussions happening at the highest levels in your organization, it needs to be. In today’s era of lightning-quick social media sharing, brand protection has become even more important — and far more challenging — for technology, media and communications (TMC) companies. Two factors play a role:

  • Expanding use of social media and mobile applications by customers and employees: It is all too easy for outsiders to acquire and misrepresent personal and proprietary information.
  • The relentless tide of cyberthreats: The Identity Theft Resource Center (ITRC) reports that the number of U.S. data breaches reached an all-time high in 2016. Several leading TMC companies were among the businesses hit with high-profile, far-reaching, costly and reputation-damaging breaches last year.

In the face of these realities, including growing public disclosures of data leaks and breaches, many TMC companies are beginning to re-evaluate how they interact with other organizations and how they safeguard against breaches. Most C-level executives in this industry group also now realize that they themselves could be targets for hackers and other malicious actors seeking to gain access to personal records and other sensitive data.

There is no doubt that TMC executives, in general, are thinking a lot more about brand protection these days. In the latest Executive Perspectives on Top Risks Survey from Protiviti and North Carolina State University’s ERM Initiative, TMC executives ranked the following risks among the top five for their industry group in 2017:

  • Social media, mobile applications and other internet-based applications may significantly impact our brand, customer relationships, regulatory compliance processes and/or how we do business, and
  • Our organization many not be sufficiently prepared to manage cyberthreats that have the potential to significantly disrupt core operations and/or damage our brand.

On the cyber-risk front, it is important for TMC companies to recognize that the customer and financial data they handle are not the only targets for hackers. An organization’s intellectual property (IP) can be even more valuable to some threat actors, including nation states. The loss or theft of IP not only could undermine a company’s ability to compete but damage its brand and reputation in unanticipated ways.

Without question, loss or theft of any type of high-value data can have lasting, negative effects on an organization from both operational and brand perspectives. Everything negative that happens to a company and becomes public can damage its brand – and cyber breaches and loss of IP are some of the fastest ways for this damage to occur. Given these considerations, management and the board must work together to manage the brand and make brand protection one of the company’s top priorities.

To engage in effective dialogue on this topic, a recent issue of Protiviti’s Board Perspectives: Risk Oversight offers some guidance: Executives should take the lead in deciding what type of interaction they would like from the board and define how they want to involve the board in the brand protection process. And if the executives haven’t done this yet, then the board should waste no time in asking for their input.

Taking a Global Look at IT Audit Best Practices – ISACA/Protiviti Survey

infographic-6th-annual-it-audit-benchmarking-survey-isaca-protivitiProtiviti and ISACA, a global business technology professional association for IT audit/assurance, governance, risk and information security professionals, have released the results of our joint annual IT Audit Benchmarking Survey. Key takeaways from this year’s study include the following:

  • Cybersecurity is viewed as the top technology challenge.
  • There appears to be more executive-level interest in IT audit.
  • More CAEs are assuming a direct leadership role for IT audit.
  • Most IT audit shops have a significant or moderate level of involvement in key technology projects.
  • Most IT audit shops perform IT audit risk assessments, though a majority do so annually or less frequently.

Take a look at our infographic and video here. For more information and to download a complimentary copy of our report, A Global Look at IT Audit Best Practices – Assessing the International Leaders in an Annual ISACA/Protiviti Survey, visit www.protiviti.com/ITauditsurvey.