Following the release of the Chartered Institute of Internal Auditors’ (IA) latest report Cultivating a healthy culture: Why internal audit and boards must take corporate culture more seriously in a post-Covid world, we wanted to provide you with a short overview of this report and how some of the work we are doing at A&O Consulting is designed to address many of the culture issues highlighted.
The Chartered Institute of IA’s report is based on a survey of over one hundred senior internal audit executives across all sectors in the UK and Ireland. The aim of the survey was to gain insights on what IA is doing to support boards and audit committees in monitoring and assessing corporate culture.
The report highlights the significant pressures that operational disruptions due to Covid and increased wider societal expectations on equality, diversity and inclusion (EDI) are having on organisational culture. The survey suggests that there is not enough focus on the risks posed by weak corporate culture, with over half (52.4%) of senior internal audit executives stating that they have not been asked by the board or audit committee to provide reports on corporate culture or EDI initiatives.
Other key highlights from the research include:
- Around a quarter (23.2%) said their board has not established and articulated what culture it wants, despite this being fundamental to the effective leadership, resilience, and governance of an organisation.
- 65.7% believe the Financial Reporting Council should act by further strengthening the UK Corporate Governance Code in regard to corporate culture, putting greater emphasis on the responsibility of company directors to promote, monitor, and assess the culture, and, if required, seek assurance that management has taken corrective action.
With many organisations moving to a hybrid working model as a longer-term solution there is a real risk of cultural erosion over time and organisations must look for new ways to develop, embed and maintain a healthy culture and manage the risks associated with weak culture. With ever changing societal expectations this includes a wide range of EDI measures to build psychologically safe and productive workplaces. The top three risks that were identified as having the most impact on corporate culture within an organisation were: human resources, talent management, and recruitment and retention risk (64.5%); inclusion, equality, and diversity risk (34.1%); health, safety and staff wellbeing (31.6%).
The report urges boards and audit committees to be proactive in gaining independent assurance and harnessing the skills of their IA function to test and improve a healthy corporate culture that is connected to its purpose, values and strategy.
Our expertise and how we can help you address these challenges
Within our consulting practice we have a team of culture experts who bring first-hand experience having delivered and overseen cultural change programmes for clients across different sectors and at differing stages of maturity from start-ups to listed companies to large multi-national corporates.
We recently published a research report into cultural failings and their causes in which we analysed 11 high-profile breaches from around the globe for study, covering a range of organisations that encompass elite sport, aviation, manufacturing, payments and banking. Building on similar analysis from 2019, we identified new learnings including signs of more escalation and public scrutiny, the importance of the tone from the middle, and a greater focus on inclusion and equality, beyond diversity. Culture remains key to the success of a business and in times of uncertainty and rapid change, businesses must not lose sight of the importance of building and maintaining the right culture.
We provide wide ranging culture support to clients including bespoke training, designing and implementing culture dashboards and have considerable experience running full culture health assessments. In addition to supplement the offering we have developed the Culture Benchmark app, which helps an organisation to run a real time check on their culture and the success of their culture initiatives. Our pragmatic approach addresses every element of culture change, from initial assessment through to implementation, continuous monitoring and improvement.
Please do get in touch with us to find out how we can help.