As businesses battle against economic turbulence, driven by stubbornly high inflation and an interest rate rise shock, the Chartered Institute of Internal Auditors is urging boards to work alongside their internal audit functions to build resilience against a possible recession. That is the key message of Adapting to Economic Uncertainty: Internal Audit’s Journey, which provides guidance to internal audit and boards on navigating the multitude of risks associated with the economic downturn. Some of the key findings from the report include:

• 56% of respondents perceive the risk level posed by economic uncertainty to their organizations as high to very high.
• The top risks most impacted by economic volatility were financial capital, cash flow, and liquidity risk (26%), along with changes in consumer demand and behaviors (22%). 
• Internal auditors are most engaged in supporting risk management and framework assessment (73%), auditing cost savings measures (58%), and supply chain risk assessment (49%). Other key measures internal auditors are engaged in include auditing pricing strategies, budgeting and forecasting reviews, contingency planning evaluation, financial stress testing, and economic scenario planning.

Despite the many economic resiliency measures internal audit functions are engaged in, they are often an overlooked key asset in supporting organizations to navigate economic uncertainty. The report calls on boards to better harness this asset by working with their internal auditors to implement robust assurance measures and foster a culture of resilience during times of economic uncertainty. Implementing economic scenario planning, financial stress testing, and financial and economic simulations can ensure the response to the ongoing economic challenges is proportionate, relevant, and impactful. 

Download your copy of the full report to examine lessons learned from previous economic shocks, the current response to economic uncertainty, and how internal audit can proactively support the path to recovery and adaptation.