Change management is becoming an increasingly core skill for Internal Audit.
Faced with an increasingly competitive environment, the banking sector is currently being forced to adapt their business models and product mix in order to meet evolving customer demand. Therefore, Internal Audit (IA) functions of European banks are similarly impacted by such business changes – they must continue to work hard to maintain their audit quality, recruit and retain skilled staff, monitor risks and respond to on-site inspections. As a result, change management is becoming an increasingly core skill for Heads of IA.
The IA functions of European banks find themselves in an increasingly prominent - and pressurised - situation. IA teams face challenges from supervisory scrutiny, the rapid evolution of technology and the difficulty in adapting to the changing product offerings by banks driven by shifting commercial demands.
It was against this background that KMPG ECB Office recently hosted its second European Internal Audit roundtable. These events aim to provide Heads of IA with a forum in which to share the challenges facing their functions, and to discuss potential strategies or solutions in response to this changing environment.
On this occasion, the key challenges discussed included the scarcity of talent, the pressure for cost effectiveness, the intensity of supervision by the ECB and national authorities, and new risks emerging from innovation and digitalisation. The debate centred on the following four themes:
Overall, the message is clear. Despite the challenges of recruitment and resourcing, the ECB expects more rigorous and intense remediation of their findings. In short, IA functions are facing greater challenges than ever when it comes to balancing the competing requirements of maintaining a diligent third line of defence, responding to supervisory remediation demands, as well as retaining enough talent to perform all these activities. Change management and strategic thinking are becoming vital disciplines for Heads of IA.
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