Internal Audit is a Competitive Advantage for Innovative Banks

Internal audit is an objective source of confidence for stakeholders, and proof that your bank is compliant and prepared for the future. Typically, an internal auditor will focus on things like reputation, growth, and corporate governance by keeping sight of controls and management, risk, and operations. The most valuable and effective internal auditors, however, go beyond those functions. They help the bank to stay aware of business trends and remain anticipatory so you are equipped and prepared for upcoming challenges, risks, and opportunities.

In the complex regulatory and economic environment, most bank management and Board members are working on business strategies that will help them remain well positioned and financially healthy. Most of the strategies relate to rolling out new products or services, improving customer satisfaction, increasing market share and digital presence, and expanding technology utilization.  Every one of these initiatives is necessary for growth and all have associated risk.

By working with a good internal auditor, bank leadership can gain objective guidance, timely information and assurance to help minimize the potential impact of strategic, operational, financial, and compliance risks. Building a robust internal audit function is – and will remain – crucial to the ongoing success of the organization.

The HORNE Banking team recommends three primary ways your bank can take advantage of the internal audit function.

1. Early Warning Detection System An internal auditor can assess and confirm that the internal control infrastructure is mitigating risk. This assurance frees executive management, Board, and other stakeholders to focus on strategic business objectives.
2. Nurture Culture The rate of new M&A deals, expansion, and product diversifications isn’t subsiding. Internal audit is one of the best tools your bank has to direct the outcome of these changes on the culture of the bank. That may include working to integrate a newly purchased entity or auditing new locations to ensure your bank culture can translate smoothly to the new geography. For many community and regional banks, culture is a competitive advantage. Internal audit can help to keep legacy and new employees accountable to living out your values.
3. Improve Efficiency and Effectiveness Internal audit is a great system for reviewing key processes for redundancies or operational ineffectiveness. Has your institution ever implemented a great technology solution, only to realize that most of your employees are resisting the change? Not only does a lack of adoption increase your operations costs, it creates significant inefficiencies. Internal audit can smooth the implementation process by making sure that training and adoption are happening on the identified schedule.

For banks looking for competitive advantage, internal audit may be the secret. Rather than viewing this function as a compliance exercise, it’s time for bank leadership to recognize its potential as a very real value-add that can help to minimize risk and grow the bank. 

Each month, we will take a more in-depth look at what an effective internal audit function can do to help your bank innovate and prepare for the future. Don’t miss out on this actionable information.

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