ARLINGTON, Va., Jan. 10, 2017 /PRNewswire/ -- CEB (NYSE:
CEB), a best practice insight and technology company, has
identified the major risks that boards, Audit Committees and
executives need to prepare for this year. The increase in business
complexity and the associated, often hidden, implications of it
contribute to several risks that Chief Audit Executives (CAEs) plan
to watch closely.
"The smallest Fortune 500 company is now five times larger than
in 1990, and as organizations have grown, they have seen
significant cost savings," said Malcolm
Murray, Audit research leader, CEB. "However, increasing
size and geographic spread also lead to complexity, which in turn
increases the cost of coordinating activities across the
organization. But the implications of complexity are often hidden,
making them difficult for executives to assess and manage."
The increase in complexity contributes to several risks that are
top of mind for CAEs in 2017:
- Third-party relationships: Vendors' access to company
data continues to grow and organizations struggle to gain
visibility into their vast vendor networks, which now often include
a dense thicket of third, fourth and fifth parties. This makes
oversight of third-party relationships increasingly difficult.
Although the use of third parties is critical to organizations'
success, especially in an era of digitization, only 20 percent of
organizations have an established or world-class third-party
governance framework.
- Strategic decision-making and execution: As
organizations have grown in size and complexity, their structures
have also become flatter and more matrixed. Although speed of
execution is a stated goal for many executives, the costs of
coordinating activities and collecting high-quality, usable data
across large organizations impede agility. This makes strategic
decision making and execution more difficult, with core business
activities taking, on average, 20-40 percent longer than five years
ago.
- Pace of innovation: Rapid digitization has opened the
marketplace to new competitors, making innovation critical for
incumbent companies. But years of cost-cutting initiatives have led
to risk aversion – in fact, 77 percent of finance executives cited
more risk aversion in project funding in 2016. This risk aversion
combined with increasing complexity means companies have a
difficult time fostering innovation.
- Change fatigue: The size and scale of global companies
also lead to more change initiatives that are increasingly
difficult to manage. Seventy-three percent of executives expect the
current rapid pace of change to increase further over the next
three years, and employees already experience 70 percent more
change events today than they did five years ago. The workforces of
many organizations, exhausted and overextended after all of this
change, are at risk of change fatigue, which can lead to a five
percent drop in productivity.
"Most executives aren't surprised by these risks, but they
struggle to understand what to do about them," Murray said. "The
CAE can strengthen corporate assurance by identifying and tracking
these risks in the business and help management prepare to mitigate
them."
In addition to the hidden costs of growth and complexity, the
other risk themes CAEs are watching this year include digitization,
volatility in the macro environment and heightened public
scrutiny.
CEB creates its annual Audit Plan Hot Spots report by combining
input from interviews, surveys and audit planning documents from
across its network of member companies. For more information and to
download an excerpt of the report, visit CEB.
About CEB
CEB is a best practice insight and technology company. In
partnership with leading organizations around the globe, we develop
innovative solutions to drive corporate performance. CEB equips
leaders at more than 10,000 companies with the intelligence to
effectively manage talent, customers, and operations. CEB is a
trusted partner to nearly 90% of the Fortune 500 and FTSE 100,
and more than 70% of the Dow Jones Asian
Titans. More at cebglobal.com.
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SOURCE CEB