Andy Kovacs of ELC Consultants Forecasts Internal Auditors as Value Drivers

Join Richard Chambers for a new episode of his Agents of Change video series, featuring conversations with internal audit leaders from some of the world’s most prominent companies about innovation in the profession.

In this episode, Richard sits down with Andy Kovacs, Corporate Learning Director and Co-Founder of ELC Consultants, to discuss the evolving mission of internal auditors and the ways they can help the business meet tomorrow’s challenges, including:

• Why internal auditors should be proactive forces to drive and create value, not just protect it.
• How internal auditors should pragmatically approach AI and technology advancements to ensure productive outcomes. 
• How relationship-building and strategic talent management, especially leaning into developing your younger talent in creative ways, will prepare a team for the road ahead. 

Watch the full conversation, and read the can’t-miss highlights below.

Agents of Change Must Drive Value, Not Just Protect It

Richard Chambers: In Agents of Change, I make the case that internal auditors have to embrace change and seek to drive value in their organizations. What’s your view on internal auditors as agents of change in organizations? Andy Kovacs: It’s not just about adequacy. The decision now is to evolve or become extinct. As an internal auditor, this whole concept of creating value shocks some people; it disturbs some people. But ultimately, that’s where we all have to be in our organizations. So why do I believe this? In the past, when you look at older corporations, the big fear was that if we were not protecting value, we could lose the corporation.

But now, the C-suite fear, the investor fear, and the shareholder fear are different. If we’re not creating the right value, we’re going to lose the company. There are no passengers on this journey. You are either a part of that, or you’re not. We’re not sitting there on the tightrope looking up at the C-suite thinking, “Oh, the prevailing winds might knock them off here.” The whole organization is on the tightrope now. 

Richard Chambers: It’s important to consider what skills and attributes are required to be an agent of change. You have to have business acumen, and be a relationship builder. You have to be strategic in your thinking, and you have to be innovative. Are there other things that come to mind for you about transformational internal auditors?

Andy Kovacs: They’re good with emotion, and I think you are one of the leading exponents of that. I remember we met in Bristol at a Chartered Institute of Internal Auditors event. There was a group of people around, and you entered. And some of the younger guys were a little bit nervous to meet you. You came and joined us, and you could sense this. So what did you do right away? You cracked a joke, and everybody laughed. The emotional pressure dropped down and suddenly, everything started to flow. 

AI and Changing Technology in Internal Audit

Richard Chambers: We have entered what many think is an absolutely transformational era of artificial intelligence. AI has so much potential, and there are those who openly question whether AI is capable of doing what we do. My theory is that AI is going to be very capable of providing assurance. But are we willing to move beyond assurance? That’s the key question.

Andy Kovacs: If you’re stuck in a past with a rear-view mirror hindsight of audit and protecting value, you’re going to be in trouble with AI. So you need to evolve beyond this. It’s so exciting. It’s so fascinating. The capability it gives us. 

The one thing I’d say about AI and the adoption of any technology is that you see two things in the audit space. Some people are skeptical about it, and some people are overly enthusiastic. So when you’re talking about adding technology, I would say don’t put the cart before the horse. Sometimes I talk to people about AI, and they say, “We need to use AI.” And I say, “Okay, why?” And they say, “Because everybody is.” 

Here’s the thing to ask yourself: What is the biggest pain point and problem that is stopping you from achieving your objective? And how can AI or any technology facilitate that? 

One example: I talk a lot about the zero-page audit report. 85-100% of reading is from the screen. So what does that mean? If you write your audit report in the same way that you’ve always done, the research shows us a 20% recall gap. You have to change the way you write. I think AI is so exciting, but we need to use it to complement our journey as agents of change.

Talent Management and Relationship-Building for the Future

Richard Chambers: Considering all the dynamic change that we’ve seen over the last four years, what should internal auditors be doing to help their organizations better position for the future?

Andy Kovacs: It’s really about building relationships with stakeholders. Nobody’s ever said, “You know, what changed my life was this fantastic risk assessment.” But we can all talk about the inspirational teacher, community leader, friend, relative, or neighbor. 

We need to increase our relationship quotient, and we need to increase our ability to build relationships with stakeholders. It’s those skills that we need to harvest as internal auditors. In Agents of Change, you make a fantastic point –– independence and objectivity become a cloak in which we wrap ourselves. But independence doesn’t mean isolation. 

If I were a CEO, I’d want my auditors to be absolutely focused on being indispensable to risk management, control governance, and acting as the go-to experts for helping the business to protect and create value. 

But then I want to see what they’re doing. When they’re in the lunch queue, are they talking to people? Do the key stakeholders know who they are? Do they know who the key stakeholders are? When they come and present a finding to me, I check their emotional quality. Because I’d think, “Do you really perceive what’s going on?”

Richard Chambers: How do you manage talent these days? The one thing that I hear chief audit executives saying is keeping them awake at night is talent. They wonder how to recruit and retain the talent that’s going to help meet tomorrow’s challenges. What advice would you give to chief audit executives about their talent recruitment strategy?

Andy Kovacs: Think back to yourself when you were younger: What did you want at the start of your career? When I was younger, I used to think about the future. What can it be? Where can the journey go? Does it excite me or not? 

I think, what does a young person want? They want a platform from which they can showcase their skills and ability. They want to learn, they want to grow, they want to network, they want to succeed. So, offer them those things!

For example, video audit reporting. You are the guy that did the audit. So you should be the person to star in the video. That video will then be shown to the board, to the AC, and to the senior stakeholders. It’s a platform for you. I would also really encourage any younger auditors and audit teams to get involved with physical events. IIA events, AuditBoard events, and social media: There’s a fantastic internal audit community on LinkedIn. It’s a really warm and welcoming community. It’s a lot of fun. 

I would encourage you to get your younger talents involved in activities like this. They can tell their story and make some videos that share expertise, experiences, and their learning journey. When others see that, they say, “I want to work in that place.” That becomes a magnet for talent.

The final thing I’d say is that internal audit teams always look at how we can buy training and consultancy. But the most under-exploited resource is the support, talent, and experience of your own team. Sometimes experienced auditors complain and say, “Oh, when we get a new guy, it takes a long time for them to learn. I have to explain and show them what to do.”

So, record it! Go onto Zoom and chat with another experienced colleague of yours. That webinar is a learning resource. Rip out the audio, and make a podcast. You have so many opportunities like this. To me, it’s really about platforms and learning.

Check out more audit leader interviews with Richard Chambers on our Agents of Change video series channel.