Kastuv Ray uses a fictitious case study to show how issues identified

Kastuv Ray uses a fictitious case study to show how issues identified by leaders and teams can be translated into risks and form the basis of an effective strategic internal audit plan

The world has produced many great leaders. What do they have in common? The key ingredients are willing followers and the ability to articulate a vision. Successful leaders usually have effective teams. Many people believe that a leader is only as good as his team. If the team is good, this reflects on the leader; if the team is bad, the leader will take all the flak. Currently, in internal audit, the risk register is used to drive the strategic internal audit plan. The fictitious case study below illustrates how such a plan can be created by an assessment of the organisation, the leader and the team.

Case study
Backwater Ltd is a small regional consultancy, composed of a small team of five people. It has been in existence for five years and has only recently managed to break even. It is a subsidiary of another company, which decides to sell it to a similar service provider Traditional Ltd. The deal goes through quickly, with some of the employees being kept in the dark until the last moment.

At a meeting after the buyout, the managing director of Traditional Ltd meets the team of Backwater Ltd. He sets the stage by making the following comments to his new employees:

  • "None of you will make managing director, directors or managers in Traditional Ltd."

  • "You will all get a pay rise except for Mr Keen."

  • "Nothing will change, but I want to you to do your work more efficiently and deliver on time."

  • "I do not intend to look at new sources of business, I am happy with what I have."

    After the meeting, Mr Keen questions his manager (Mr Laidback) about the way the organisation is headed. The response he gets is that the manager does not care so long as he receives his Audi TT under the company's fleet management plan.

    Someone in the organisation senses that trouble may be brewing, and an independent consultant is brought in. The team (from Backwater Ltd) is summoned and asked to state their feelings about the managing director and the organisation in writing. The managing director is similarly asked to state his feelings about the team of Backwater Ltd.

    Feelings and issues
    The following is what the team had to say:

    The managing director

  • Uninspiring

  • Singles out staff and is a bully

  • Politically naive

  • Lack of strategic direction - he has no idea where the organisation is headed

    The organisation

  • Flat management structure

  • No scope for progression

  • Where will the future income come from if current work dries up?

    The manager

  • Lazy

  • Selfish

    The team also thought that there were communication problems between central administration (at Traditional Ltd), their manager, the managing director and themselves. Staff felt undervalued, and there was poor morale. Moreover, the employees did not believe that they would receive the necessary training to develop their skills professionally.

    The following is what the managing director had to say about the team:

  • Poor time management
  • Staff undisciplined
  • Staff overpaid
  • Staff charge too much on their expenses
  • Common sense is not applied correctly

    Risks
    These feelings can be translated into risks:

  • Flat organisation structure impeding prospect of career progression
  • Lack of strategic direction for the organisation
  • Poor leadership skills
  • Negative focus on staff/insecurity of managing director
  • Laziness traits in managers
  • Poor staff morale
  • High staff turnover and inadequate assessment of staffing requirements
  • Poor communication of results
  • No training, leading to underskilled staff
  • Assignment overruns
  • Staff paid too much, so the salary structure may not be according to organisation needs
  • Padding of expense claims
  • Reputational risk
  • Risk of work drying up
  • Failure to identify markets, customers and products

    Audits
    These risks can then be put in a basic risk register, with audits assigned to cover them. (FIGURE 1)

    The case study illustrates how a group of individuals can identify issues, which can then be translated into risks and used to create an internal audit plan. It is important to remember that such a plan is not set in stone. It should be a living breathing document like a risk register.

    Kastuv Ray is a journalist, E-mail: kastuv@kastuv.fsnet.co.uk

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