Copyright. Unpublished Work. Raytheon Company.Customer Success Is Our Mission is a registered trademark of Raytheon Company.

Leadership and Rising Stakeholder

Expectations

Tom SanglierDirector, Internal Audit

February 13, 2015

Page 22/17/2015

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A World of ChangeWhy Internal AuditDemands and Expectations on Internal Audit – and on youInternal Audit Skills and RelationshipsLeadership

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Consider the operating

environment of our key

stakeholders

A World of Turmoil

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Why Internal Audit, Why Now?

2/17/2015

Business has never been more global Risk complexity and velocity

continue to increase Technological innovation and

disruption Impacted by man-made and

natural events around the world

Business Challenges (1)

Uncertainty Globalization Innovation Regulation Technology (including Cyber) Diversity Complexity Information Overload Supply Chains Problem Solving

(1) BMGI “Top Ten Problems Faced by Business”

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The Demand Exists

2/17/2015

• Stakeholders more demanding• There is less margin for error• There is less time to react and recover

As IA matures and internal controls become wellestablished, there is an opportunity to move beyondan assurance function to combined assurance andadvisory services.

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The Future is Bright

2/17/2015

Most surveyed CAEs forecast sustained or increased resource levels for IA, indicating stakeholders maintain that IA is a justified use of resources.

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Rising Expectations

“As we continue to meet the challenges thrown at us daily,the expectations bar ratchets higher and higher.”

Carolyn SaintVice-President, Internal Audit 7-ElevenFormer IIA North America Board Chair

“Audit committees and management expect more frominternal audit, providing a huge opportunity for us to berelevant contributors to protecting stakeholder value andthe business from the most critical risks.”

Jason PettUS Internal Audit Services LeaderPricewaterhouseCoopers

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Rising Expectations

We must increase our value and be a critical success factor for our customers

2/17/2015

Questioning the effectiveness and cost of risk management

Reducing cost and simplifying business, but remaining compliant

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The Future of Internal Audit

Your leadership’s expectations of you and your costs are increasing…..

.....therefore, your value must rise faster…..

.....or you risk your job disappearing.

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PwC 2014 State of the Profession

2/17/2015

Summary: Opportunities exist for IA to increase

its value and its contribution to the business.‒ 55% of senior management stated they do

not believe IA adds significant value.‒ 30% of board members believe IA adds less

than significant value.‒ Only 49% of senior management and 64% of

board members believe IA is performing well at delivering on expectations.

IA must be aligned with stakeholder expectations

The Challenge Is Waiting – Will You Accept?

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Adding Value: A Look Into the Future

2/17/2015

Our value will be based on what we do today and the vision we set for tomorrow.

CBOK Surveys as our guide: 5-report series 13,500 responses; 107

countries Comprehensive snapshot of

the profession globally Insights and actionable

intelligence Points the way forward to

maintaining the profession’s continued relevance and value-added contributions

Page 132/17/2015

Emphasize Risk Management and Governance Sharpen Your Focus on Risk Management and

Governance٠ Top concern of directors, senior management, and

regulators – our customers٠ Projected to become the cornerstones of our profession

Conduct a More Responsive and Flexible Risk-based Audit Plan٠ Move beyond our traditional internal control and

assurance focus and adapt more readily to a fast-changing economic environment

Are you an expert in risk? You need to be.

CBOK V: The 10 Imperatives

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Address Key Stakeholder Priorities Develop a Strategic Vision for Internal Auditing Focus, Monitor, and Report on Internal Auditing’s Value

٠ Building a brand Strengthen Audit Committee Communications and

Relationships View Compliance with the IIA’s International Standards for

the Professional Practice of Internal Auditing as Mandatory, Not Optional

Our Failure to Identify, Align To, and Support Our Organization’s Key Initiatives Will Lead to

Diminished Value and Respect.

CBOK V: The 10 Imperatives (cont’d)

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Optimize Internal Audit Resources Acquire and Develop Top Talent Enhance Training for Internal Audit

Activities Broader skills beyond Accounting & Finance

Take Advantage of Expanding Service Provider Membership

One quarter of survey respondents

IA Must Equip Itself To Address Emerging Issues And Changing Stakeholder

Expectations More Effectively

CBOK V: The 10 Imperatives (cont’d)

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Leverage Technology Effectively

Step up our use of audit technology and tools٠ Need to audit more efficiently and effectively٠ Increasingly complex world of technology٠ Can also be used for risk assessment and

continuous monitoring

This Is Not A New Message – Are We Listening?

CBOK V: The 10 Imperatives (cont’d)

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5 Imperatives for This Decade

Enhancing and

leveraging a continuous focus on

risks

Providing assurance on

risk management effectiveness

Enhancing our

proficiency with data

mining and analytics

Securing a “seat at the table” for

operational and strategic discussions

Solidifying our expertise

to address key risks

These relate directly to top business challenges.

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Requisite Skills to Add Value

The Future Will Be Demanding

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Focus on both key and emerging risks People with necessary skills Leverage technology and integrate analytics Address strategic risks Adapt to rapidly changing control environment Align with risk partners Satisfy the Audit Committee Do the right thing Be relevant/indispensable Keep up with change Be a talent source Manage your costs Anti-Fraud partner

A Demanding Future

All valid points, but…..

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Our customers will need a great team to meet these demands.

A great team will require a worthy leader.

A Demanding Future (cont’d)It is not just governance, risk, controls and technical skills. It is about: Investing in yourselves and your team Building relationships Inclusiveness and diversity of thought An international mindset Creating a culture where people want

to work and grow Being recognized as a thought-leader

and business expert

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Someone who transforms:– Their team– Their organization– Our profession– Who drives change/influences others

There is a waiting list to join your team:– Not just internal audit professionals

Customers embrace IA as value added partner– They seek you out for their business problems

Others in the profession seek out your guidance

The Successful IA Leader of the Future

Hopefully that person is here todayHopefully, it is you!

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The 3 C’sThe Successful CAE of the Future Must Master the 3 C’s

Connect

Collaborate Communicate

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Set the bar high Attain 100% CIAs (team) Require personally funded training in addition to organization funded

training (team) Achieve the highest employee satisfaction scores in your organization

(team, organization)Innovate Contribute to a process reengineering project using Lean, Six Sigma

and data analytics (team, organization) Partner to co-develop a control self-assessment process for your

organization (team, organization, profession) Be ethical at all times Publically display your values and discuss at meetings (team) Have courageous conversations with peers (organization) Practice respect (team, organization, profession)

Connect: Inspiration

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Be proud to be anInternal Auditor Tell people what you do (profession) Have your staff explain why “their”

audit is critical (team, organization) Publically display team awards

(team, organization) Publically speak at non-IA events

(profession) Chair and/or support employee

resource groups through deeds, not just words (organization)

Connect: Passion

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Share Give knowledge freely Write and contribute articles (profession) Volunteer for organizational initiatives (organization) Mentor those not in your department; mentor upwards

(organization) Provide data analytic tools to customers (organization) Benchmark with others (team, profession) Benchmark processes between divisions (organization) Share your risk assessment, tools, and programs with other risk

functions (organization)٠ Act like you are trying to put yourself out of business

Collaborate: Giving

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Be inclusive to increase business knowledge Create a GRC council with other functions (organization) Recruit non-auditors (team) Have customers provide functional overviews (team) Utilize guest auditors (team, organization) Loan your staff to others (team, organization, profession) Invite customers to co-present with you (organization) Publically praise your peers for their successes (organization) Individual incentives aligned to collaboration goals (team)

٠ Performance measurement based on overall audit satisfaction٠ Creating team value-add deliverable

Collaborate: Teaming

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Feedback (give and get) Skip-level meetings (team) Give a handwritten thank you note (team, organization) Surveys (team, organization, profession) Broad audit report distribution (organization)

Participation Participate in business/function reviews (team, organization)٠ Invite your staff if possible, otherwise…٠ Disseminate knowledge

Communicate: Feedback & Participation

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The IA Leader of the Future

Leaders are not just titlesYou do not have to be a CAE to leadThe 360 Degree Leader

(1)

– Leading up– Leading across– Leading down

(1) John C. Maxwell

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Leading Up

Influence leaders by supporting them Lighten Your Leader’s Load

– Take on extra responsibilities that will allow your leader to focus on more pressing issues

– Be a team player, not a praise seeker

Be Prepared Every Time You Take a Leader’s Time– Understand your leader’s priorities– Add value

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Leading Across

Excel at building relationships Put other’s success ahead of competition Be a friend (i.e., Listen) Avoid office politics Expand circle of acquaintances (i.e. network) Let the best idea win Don’t pretend you’re perfect

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Leading Down

Lead through influence Walk slowly through the halls Develop each team member as a person Model the behavior you desire Transfer your knowledge Place people in their strength zones

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360 Degree Leaders = Valued

Good leaders in the middle can become great leaders at the topA leadership team is more effective than one leader Leaders are needed at every level of an organization Leading successfully at one level is a qualifier for leading the next levelNo need to wait

–Why develop leadership skills solely for some future role when you can lead now?

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The Self-Fulfilling Prophecy

Great Leadership

Through CCC & 360

Become & Attract Top

Talent

Deliver Added Value

Create Demand

For Internal Audit & Yourself

Increased Recognition & Responsibility

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The final test of a leader is that he leaves behind him in other men, the conviction and the will to carry on.

Walter Lippman

The function of leadership is to produce more leaders, not more followers.

Ralph Nader

If your actions inspire others to dream more, learn more, do more and become more, you are a leader.

John Quincy Adams

Creating Your Legacy

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Final ThoughtsPlease think about: The demands and expectations on our profession –

and on you personally as an internal audit leader The Change Imperative Continuous focus on requisite internal audit skills

and relationships Practicing your connecting, collaborating, and

communicating skills Be a 360 degree leader Creating your leadership legacy

And remember…Be Proud To Be An Internal Auditor

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Contact Information

For questions, please contact me at:Thomas.C.Sanglier@raytheon.comT: (781) 895-8316

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