Reputation management: Internal audit on the front lines 

An organization’s reputation can take years to build but it can be destroyed by just one control breakdown, scandal or other unanticipated incident.

In this context, the Institute of Internal Auditors Canada held a leadership symposium in October to discuss how internal audit should be leveraged for reputation management.

Speakers included experts on the topics of crisis management and leadership excellence as well as a stellar panel of senior officials from the public and private sector, all of whom had successfully navigated complex challenges of reputation management. Executives and audit committee members from Public Safety Canada and the Public Security Integrity Commissioner joined private sector leaders from Loblaw Canada, Toronto Hydro and the University of Toronto to debate some key issues:

• What are the key imperatives facing executives in the area of reputation management?
• Is Internal Audit strategically positioned to add value in this area?
• Do our audit leaders and executives have what it takes – in terms of professional practice and personal courage – to get ahead of the issues that threaten reputations?

The symposium began and ended with superb keynote speakers: Jaime Watt, executive chairman of Navigator, and Vince Molinaro, global managing director of the Leadership Practice for Knightsbridge Human Capital Solutions.

All the experts agreed that public trust in leadership is eroding. Governments everywhere struggle to proactively manage their reputations. Yet inherent challenges exist: risk aversion works against efforts to proactively get ahead of threats that can damage reputations. At the same time, the ever-present media, an increasingly engaged and cynical public, and the rise of social media has put pressure on organizations to be more transparent. In this context, leaders and audit committees need trusted advisors who will give them the “straight goods” and help them to navigate the complex world of reputation management.

Worried? Look no further than your internal auditors. The senior panel of public and private sector leaders and audit committee members outlined the multi-faceted value proposition of internal audit from a reputation management perspective:

• Oversight: Independent and unbiased, internal audit provides senior leaders with comfort that their management practices are well designed and effective. In this way, internal audit forms part of the organization’s “conscience” and is a powerful resource that can be drawn upon to contribute to public trust and to safeguard reputations. Through their work, internal audit can demonstrate that the systems of oversight, accountability and control are working as intended to achieve objectives.

• Insight: Internal audit’s ability to access information and people, and to “connect the dots” on important questions of risk gives deputy heads unique insights into the areas of governance, risk management and control. As critical enablers of management excellence and accountability, these practices ultimately help to protect the organization’s reputation.

• Foresight: Through the provision of objective, reliable and relevant advice and guidance on complex management issues, internal audit provides senior leaders with early warning signs of risk and control weaknesses, allowing them to proactively address them before they threaten their organization’s reputation.

Notwithstanding the many benefits resulting from internal audit, the panel also noted that it can equally pose a risk to reputations. This is particularly the case given federal and some provincial legislative obligations to post internal audit reports on the internet. So while the audits can be valuable to senior management, if the reports don’t provide sufficient context for the findings or are not written in a balanced manner, noting both strengths and weaknesses, when scrutinized by the public, they can be easily misconstrued. Similarly, if the reports and analysis are not focused on the key risks to the organization, important potential reputational risks may be missed, limiting the “early warning” signs that leaders so critically need.

For their part, public sector executives need to be open-minded to the value internal audit can bring and be courageous enough to have frank and meaningful discussions on issues of risk and control. Working together, chief audit executives and deputy heads must put strategies in place to strategically and constructively position internal audit in a way that helps to manage the “downside” risks and seize the “upside” opportunities. This will help to ensure that internal audit is helping to safeguard the organization’s reputation and contributing to increasing public trust and confidence in the public sector.