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#Business response to disaster and role of #internalauditor - Aryan Consulting Remote Services

Updated: Jul 8, 2023


In continuation to my last post about changing role of internal auditor in response to the current pandemic, my current article deals with probable response of businesses, particularly in the SME segment. Discussion is split into 2 parts, when pandemic occurs and what after it is over.


When a pandemic occurs


The COVID–19 pandemic has all the ingredients to send many organisations to the wall and the resulting fallout may mean many employees lose their jobs, with the community experiencing diminished services and rationing of goods. Many organisations, in particular small businesses, may never recover. For many organisations the situation can quickly become dire.


When a crisis unfolds, organisations need to have access to sufficient cash to survive. How long can the organisation pay its employees, rent, leases and other regular payments? What action needs to be taken to ‘sure-up’ its liquidity? At what stage would the regulator, financial institution, suppliers and other stakeholders need to be informed if the ‘going concern’ test is coming close to the wire?


Ways to Ready Your Organization for Future Disruption


Businesses around the world are dealing with the spread of the COVID-19 as ripple effects from the disease outbreak are expected to continue to impact financial markets, global supply chains and workforce mobility. COVID-19 is not only a worldwide health concern, but also a large concern for the global economy.


Pandemics aren’t a typical type of business disruption. The benefits of proper organizational and disaster preparedness planning include:

  • Minimizing staff impact

  • Minimizing supply chain impact

  • Minimizing service delivery impact

  • Minimizing IT infrastructure impact

  • Protecting corporate reputation

  • Reducing financial impact

  • Enabling the organization to return to normal sooner


The internal audit function can respond to pandemic risk through a number of avenues:

  • Suspend work on the internal audit plan

  • Identify high risk–high priority issues

  • Tell management you’re there to help

  • Take an active business continuity role

  • Become a real-time control adviser

  • Become a control monitor

  • Take off your internal audit hat

  • Provide alternative services With the internal audit plan off the table, the internal auditor needs to provide services that directly support the recovery effort. This might be advisory services such as providing advice, or facilitating brain-storming sessions to seek options and solutions to the myriad of crisis-related problems facing the organisation.


Post-pandemic – when the pandemic is controlled


There are likely to be many tasks internal audit could perform after the crisis has passed. Examples may include return to work planning, post-crisis reviews and reports, integrity (probity) activities for pre- and post-crisis procurement activities, work health and safety assessments for a potentially traumatised workforce, performing reconciliations and assessing process control strength.

Let me offer a few additional thoughts.

  • To be an effective and trusted partner, internal auditors must understand their organizations' business well enough to know, understand, and anticipate risks. A firm grounding in the organization's strategy and operations is essential to see the risk landscape fully.

  • An epidemic such as COVID-19 is what risk management is all about. There should be no question or hesitation by internal auditor about taking on active and high-profile roles in their organizations' plans and actions.

  • Boards worry about their organizations' ability to successfully identify emerging and atypical risks. Boards also want assurance that their corporate culture encourages collaboration across the organization to develop business plans that adapt to market disruptions, such as the COVID-19 epidemic. Internal audit should be providing that assurance.


Some might see the plunge in markets, incessant news coverage, and social media obsession with COVID-19 as an overreaction. But even if the epidemic is contained and the economic impacts are temporary and mild, the outbreak offers an opportunity to examine our capabilities, strengthen our plans to manage any significant crisis, and position internal audit as a trusted partner and advisor.


Looking forward to your comments, likes and shares...


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