Within the current dynamic business environment, innovation has become a core competency for organizations. The ability to innovate is crucial for your organization to be able to adapt to constantly changing market conditions and trends and remain fully aligned to customers’ needs. Failing to keep up is a significant strategic risk that organizations can mitigate by implementing a wide-ranging innovation management approach. A sound innovation process helps organizations stay ahead of the game and embed innovation in all layers of their organization.
However, investing heavily in innovation initiatives comes with its own risk of failure. Organizations may be trying to develop too many initiatives simultaneously and not be able to achieve their intended objectives. It is imperative that organizations understand where investments could be allocated most effectively, secure a healthy return on investments and know when to pull the plug on unsuccessful innovation projects.
Furthermore, organizations are increasingly entering into partnerships with businesses and startups with the aim of accelerating their innovation initiatives. However, these third-party relationships also increase exposure to new risks and potential compliance failures that may result in fines, lawsuits or reputational damage. For instance, partnering with start-up companies that may not have a sophisticated risk management system increases third-party risks.
As a result, the Board of Directors and its Audit Committee should expect their Internal Audit function to provide meaningful insights and unbiased opinions on the organization’s innovation process, as part of their role in adding value and improving the organization’s operations. Ensuring that the organization is well-equipped to respond to a changing environment, emerging competitors and game changers, such as the economy 4.0, should be one of the top concerns of the Chief Audit Executive and, by extension, the entire C-level. The Internal Audit function should not only be able to respond to the risks brought about by these changes, but must also be able to assess whether the business is using its innovation initiatives in the best possible manner.
Hence, the innovation process should be part of the internal audit plan of organizations that see innovation as an important element of their risk strategy. By conducting an internal audit of the innovation process, the internal audit function can assess whether senior management invests in new products and services, technologies, business models and organizational approaches that are robust and create value, as well as suggest potential improvements.
Internal Audit’s activities not only provide assurance of the company’s financial records, but also deliver insights into the business, which may be leveraged to improve business processes or gain a competitive advantage.
Internal Audit can identify an innovation process that may initiate and execute expensive (and potentially unhelpful) innovation strategies and programs. Having an effective innovation management process in place encourages the proper deployment of time and money and helps employees better understand company policy.
Internal Audit provides independent, reasonable assurance that the Third Party Risk Management Program controls are designed properly and operate as intended, with regard to the services performed by the innovation partner.
Each organization needs to define an innovation strategy in accordance with its business strategy. By enabling companies to meet their innovation objectives, Internal Audit can help an organization stay on track and see its strategy succeed.
Innovation has become a business process commonly implemented by organizations over the past years, yet we noted that no comprehensive audit program with regard to the innovation process existed up to now. We therefore assembled a multidisciplinary team of KPMG professionals with expertise in internal audit, as well as innovation management to develop our Innovation Internal Audit Work Program. This audit program is based on the Innovation Maturity Model developed by KPMG Innovation Advisory and in line with the ISO 56000:2020 standard for Innovation Management. In addition, our internal audits are carried out in accordance with the KPMG audit methodology, which takes into account the international internal audit standards as prescribed by the Institute of Internal Auditors (IIA).
KPMG has profound experience and a tested methodology to deliver solutions across the spectrum of internal audit, as well as innovation advisory services. We differentiate ourselves by our:
Expertise. Our subject matter professionals, with expertise in internal audit as well as innovation management, have the skills and knowledge to provide internal audit services that focus on and meet varied needs across a wide range of industries.
Multidisciplinarity. We have access to a wide range of competencies within KPMG. Our experienced and highly qualified core team can always seek the advice of appropriate Subject Matter Professionals within the KPMG network, as needed. In addition, KPMG can serve as a one-stop-shop and support organizations for the implementation of areas for improvement recommended by the Internal Audit.