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How data analytics can help with integrated audit
 

How data analytics can help with integrated audit

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    How data analytics can help with integrated audit How data analytics can help with integrated audit Presentation Transcript

    • How data analytics can help with integrated audit?The Institute of Internal Auditors of ThailandIIA Thailand - Annual Conference 20117 September 2011
    • Agenda• What is data analytics?• Data analytics in the context of risk management• Applying data analytics to risk management1 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Market Trends & Facts
    • Data Analytics: It’s not something new 1960s-1970s: First attempts at 1990s: Analytics evolves with the development automating the data analysis using of enterprise resource planning (ERP) systems mainframe computing and data warehousing Mainframe computer- based tools Timesharing and Risk management supporting Audit minicomputer and actuarial sampling based tools built Analytics (Auditape/STRATA) and regression modeling toolsStatistical introducedsampling tools and model libraries Fraud, anti-moneyintroduced in laundering and FCPaudits introduced support tools 1960 1970 1980 1990 2000 2010 2015 Financial PC-based tools Predictive modeling Major investments in modeling tools built work begun in data center built insurance industry infrastructure in U.S., Canada, and Operations Predictive modeling Australia research practice introduced in pricing started and supply chain work 1980s: Desktop analytics accelerates through the PC revolution 3 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Data is growing exponentially and there is pressure now for companies tomake faster and better decisions Data Trends External and Internal Drivers A recent report by the Economist highlights A recent Kennedy Report indicates that a variety of internal that data-assets continue to grow and external industry drivers are pushing our clients to exponentially embrace analytics Top internal and external industry factors contributing to adoption: External Internal 1. External competitive 1. Data proliferation and pressure growth 2. Increased regulatory 2. Increasing sophistication The Economist. Data, data everywhere. Feb 25th pressure of users 2010 3. Technology advancement 3. Maturation of ERP systems 4 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • The data already shows that analytics differentiates the top performers fromaverage and lower performers A recent study from MIT shows that on average the top performing companies use analytics almost three times as much as lower performing companies in everyday operations and decisioning MIT Sloan Management Review and the IBM Institute for Business Value. Analytics: The New Path to Value How the Smartest Organizations Are Embedding Analytics to Transform Insights Into Action. 2010 5 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Kennedy predicts growing competitor investments in Analytics Industry Sector Trends Kennedy predicts that demand for Analytics particularly will be led by: 1. Financial services 2. Healthcare 3. Retail Information Management & Analytics Consulting Marketplace 2010-2013: Kennedy Consulting Research & Advisory. 2011 6 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • What is Data Analytics?
    • What is data analytics“A practical definition, however, would be that analytics is the process ofobtaining an optimal or realistic decision based on existing data.” (Wikipedia)“Data analytics is the science of examining raw data with the purpose ofdrawing conclusion about that information.” (Whatis.com)“Analytics leverage data in a particular functional process (or application)to enable context-specific insight that is actionable.” (Gartner)8 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Analytics DefinedAnalytics is using data to generate predictive insights to make smarter decisions that drive strategy and improve performance Deloitte Analytics refers to the skills, technologies, applications, and practices for continuous iterative exploration and investigation of past business performance to gain insight and drive business strategy Business analytics is the practice of using data to manage information and performance—and make more effective decisions. It can apply to almost any “sticky” business issue.9 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Data analytics in thecontext of riskmanagement
    • Opportunity for using data analytics in managing risks• Explosive data growth means more raw materials• Innovation in data generation and capture• Data supports fact-based decision making• Already used extensively in many areas of business• Data analytics focusing on risks are primarily used in the areas of credit risk, anti-money laundering and fraud Data analytics has significant potential to be exploited in the internal audit and risk management space11 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • What will the future hold• Will Board and Management be asking us to back up our gut feel on risk with hard data?• Will the C-Suite want to understand the key risk factors and their relative importance in real numbers?• Will Management have even greater responsibility to foresee future risks long before they manifest themselves?• Will data analytics be a core competency for all risk professionals? Data analytics is a business tool that will be pervasive in our organizations12 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • What types of questions can analytics answer Historical Current Future Perspective Perspective Perspective What if these Where is the trends What problem? continue? Happened? What will Why is this happen next? happening? How many, What’s the how often, What actions best that can where? are needed? happen?13 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • How can data analytics be applied to risk management Error detection and quantification – Targeted Historical perspective analytic applications to detect errors (e.g. business unit reviews or internal audits) Risk Dashboard/ Monitoring – How are we Current perspective currently doing? What if our current risk profile? Key Risk Indicators (KRIs) Future perspective “What-if” – How will this decision affect our risk?14 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Applying data analytics torisk management
    • Deloitte Analytics: Domain OverviewAnalytics create value across the enterprise throughimprovement of applicable business value drivers. Value Drivers = Business DomainsFive Deloitte Analytics Business Domains span theareas identified in the Enterprise Value Map andlend themselves to improvements generated byDeloitte Analytics: Deloitte Analytics Business Domains Customer Supply Chain Workforce Customer Analytics is the Supply Chain Analytics is Workforce Analytics is the use of analytics to enhance the use of analytics to use of analytics to enhance the customer lifecycle, sales provide insights across the and optimize workforce and pricing processes, and organizational value chain processes and intelligence overall customer experience Finance Risk Finance Analytics is the use Risk Analytics is the use of of analytics to measure, analytics to measure, monitor control, and optimize and mitigate enterprise risk financial management processes 16 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Deloitte Analytics: Risk Management Domain1. Continuous Monitoring (CM)2. Continuous Auditing (CA)17 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Deloitte Analytics: Risk Management DomainContinuous Monitoring (CM) is an automated, ongoing process thatenables management to: • Assess the effectiveness of controls and detect associated risk issues • Improve business processes and activities while adhering to ethic & compliance standards • Execute more timely quantitative and qualitative risk-related decisions • Increase the cost-effectiveness of controls and monitoring through IT solutions. The value of CM is that it gives management greater visibility into, and more timely information on, business processes designed to achieve strategic and operational goals.18 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Deloitte Analytics: Risk Management DomainContinuous Auditing (CA) is an automated, ongoing process thatenables internal audit to: • Collect from processes, transactions and accounts data that supports internal and external auditing activities • Achieve more timely, less costly compliance with policies, procedures and regulations • Shift from cyclical or episodic reviews with limited focus to continuous, broader, more proactive reviews • Evolve from a traditional, static annual audit plan to a more dynamic plan based on CA results • Reduce audit costs while increasing effectiveness through IT Solutions The value of CA is that it enables internal audit to move from sampling accounts and transactions to coverage of 100 percent of accounts and transactions.19 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Barriers to CM & CA Adoption• Perceived impact on the enterprise – impacts on costs, headcount, audit plans, workload, quality of audits & stakeholder satisfaction• Priority of implementation – factors to be considered, such as risk rankings, importance of audit evidence, return on investment and ease of implementation• Internal audit’s readiness to develop and adopt CA – depend on business cycle, audit focus & use of automation• IT & software considerations• Realistic expectations – benefits are not achieved overnight20 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • CM/CA Roadmap 5. Monitor performance & 4. Build & progress implement the CM or CA 3. Plan the system design & implementation 2. Develop a strategy for adoption 1. Develop the business case21 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • CM/CA Roadmap1. Develop the Business Case• Connect the initiative to the drivers of value, and the risks, in the business• Identify benefits and costs, and quantifying them when possible• Place CM or CA in the context of the overall GRC effort and clarifying their roles22 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • CM/CA Roadmap2. Develop the Business Case• Target efforts based upon risk exposure, appetite, and tolerances, enterprise-wide and locally• Identify which areas are appropriate to pursue based on projected benefits, costs and ROI• Identify how to set thresholds and monitor risks, as well as useful intervals and notification mechanisms• Consider required resources and how current resources and priorities may help or hinder adoption23 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • CM/CA Roadmap3. Plan the Design & Implementation• Determine the scope of the objectives• Establish roles and responsibilities• Design the CM or CA process & mechanisms• Allocate resources and creating a timeline and project plan• Set reasonable expectations for performance• Align people, processes and IT resources24 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • CM/CA Roadmap4. Build & Implement the CM or CA System• Begin with relatively straightforward, low-cost, high-return projects• Involve IT, business units, and other key stake-holders early on• Create a sense of shared ownership of the project and results• Test the CM or CA system, particularly for its impacts on the IT system, before actual launch and adoption• Follow the plan, but make course corrections as needed• Establish workable practical CM or CA Procedures25 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • CM/CA Roadmap5. Monitor Performance & Process, and refined as needed• Report the results of the effort to management and all other stakeholders• Demonstrate the valued added – in momentary terms when possible• Verify by manual means that the early reading and results are accurate• Adjust monitoring or notification mechanisms as needed, given their performance and the quality of the human interface26 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Closing thoughts• Data analytics requires innovative thinking about sourcing data and identify sensors• Data analytics is as much about asking the right questions as it is about the mathematical contortions going on behind the scenes• Data analytics can be applied to more aspects of risk management than just credit risk, AML and Fraud27 IIA Thailand - Annual Conference 2011 © 2011 Deloitte Touche Tohmatsu Jaiyos
    • Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of memberfirms, each of which is a legally separate and independent entity. Please see www.deloitte.com/th/about for a detailed description of the legalstructure of Deloitte Touche Tohmatsu Limited and its member firms.Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globallyconnected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and deep local expertise to help clientssucceed wherever they operate. Deloittes approximately 170,000 professionals are committed to becoming the standard of excellence.This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities(collectively, the “Deloitte Network”) is, by means of this publication, rendering professional advice or services. Before making any decision ortaking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the DeloitteNetwork shall be responsible for any loss whatsoever sustained by any person who relies on this publication© 2011 Deloitte Touche Tohmatsu Jaiyos