Audits of an organisation's culture are increasingly stepping beyond the consideration phase and into action. Sue Jex explains the hot topics in culture risk for 2021.
Consideration of culture audits has been a Chartered Institute of Internal Auditors (IIA) requirement for internal audit teams for several years, but recently actioning them has become much more common. The form of this action varies across organisations. For some, it is via bottom-up audits using existing teams, and for others, it is a top-down audit using external support, at least in some part of the mix. The audits themselves have also developed and become more sophisticated over the last few years; starting mainly as conduct audits, then moving into risk culture, and finally, into organisational culture.
The key is understanding your particular risks and which approach, or mix of approaches, adds the most value: both in terms of understanding the risks and issues, and adding to the strategic debate within your organisation. In our view, it is essential to start with a good risk assessment. If you are looking to use internal teams, we also recommend upskilling so that there is a common understanding and approach to auditing culture.
One of the simplest things you can do is keep the current hot topics in culture risk on your agenda in 2021.
Culture risk: hot topics for 2021
Examining your culture in a post COVID-19 world
COVID-19 has brought many challenges, mainly in terms of people risk. As we move forward, leading organisations are now examining their culture, particularly if the business strategy has changed or is changing. Is the culture still appropriate to support and address the new challenges ahead? In addition, organisations who now have more home-workers than before, or new employees who have joined remotely, are asking how can they maintain their culture in this environment. Internal audit can help you understand how embedded your culture is, or where there are risks of misalignment if you are creating a new one.
As organisations have undertaken their first culture audits, be it top-down or bottom-up, they are increasingly looking at continuous monitoring. This has lead to a debate on which aspects of culture change to measure and how to measure them so that organisations can develop wide dashboards of it. We will contribute to this debate as it progresses, but some of the answer lies in tailoring the approach to an organisation, so that its own dashboard is as unique and connected to strategy as its culture.
Ethical supply chains
As organisations are achieving more success in embedding their culture internally, the risks in the supply chain are becoming more visible. Internal audit teams are analysing ethical supply chains and cultural alignment with key suppliers. Risks in the supply chain can lead to both cultural and reputational risk, and avoiding both of these is critical to long-term success.
Analysing benchmarking data gathered from our culture risk app, one of the keys issues arising again and again is internal silos. Departments, functions or even individual leaders that work counter to the business culture cause internal friction and depress the scores even in the teams that are working hard on culture-building. Consistency is absolutely key when building or changing culture and internal audit can play a positive role in uncovering silos and then investigating the drivers which perpetuate them.
Building internal capability
As culture audit becomes a normalised part of internal audits, we see many teams looking to build internal capability in this area. Whether that is through sharing with other internal audit teams or more formal training, it is increasingly important to have a consistent approach, common language and shared understanding of culture risk in an organisation.
If you want to discuss any of these hot topics or have a more general conversation on culture auditing, contact Sue Jex.