Expanding Role of Audit Stretches Resources and Capabilities
Over the past two decades audit has changed. The role of the audit is taking on greater significance to guide the enterprise beyond traditional attitudes about financial controls; toward assuring that the organization is managing risk appropriately and meeting obligations across a range of high-risk business processes, operations, and regulatory requirements.
Audit is being challenged to cover enterprise risk management, a broad array of operational audits, increasing regulatory compliance audits, and expanding demand for 3rd party (e.g., vendor, supplier, agent) audits across a dynamic and distributed business. Therefore audit itself needs to have a strategy that encompasses both the dynamic need for audits as well as the planned and cyclical. There is growing interest in dynamic audits – but the best approach is a hybrid in which there are regularly scheduled and planned audits yet there are resources available for the dynamic needs of business for audits when risk and situations require them. This grows particularly challenging as business is constantly changing and distributed across a mesh of business relationships. Providing assurance to stakeholders in the modern organizations has become a real challenge to audit and has increased audits role and visibility while stretching its resources. To effectively manage audit requires new paradigms in managing audit, audit processes, analytics, and the role of technology to make audit successful.
The issues facing audit are more challenging than ever before. The audit department is being asked to do more audits across more areas of business operations with limited resources. It has become an ongoing challenge to document and maintain auditor skill sets, develop and deliver audit work papers, and provide assurance across business operations and relationships. The business has grown in diversity, complexity, and processes that challenge audit to build an audit program that is sustainable, efficient, effective, and agile to the needs of a distributed and complex business environment. The need for resources and tools to drive efficient and effective audits through audit analytics of vast sets of data further adds to the challenges facing audit.
The bottom line: This is not your father’s audit program. Audit today is different than it was twenty to thirty years ago. Today’s audit department has growing demands to do more audits across operations and relationships while still being constrained by limited resources to fulfill these demands. To effectively conduct audits, efficiently manage limited audit resources, and meet the agility required of a dynamic business environment requires a top-down approach to audit that is driven by risk-based priorities and technology is utilized to manage resources, analyze data, and streamline audit operations.
How TC Energy Achieved Value in Audit Management
TC Energy Corporation (formerly TransCanada Corporation) is a major energy organization that develops and operates energy infrastructure in North America. This includes extensive oil and natural gas pipelines, storage, as well as power generation. As a critical infrastructure organization the demands on audit for assurance of their operations and controls is significant. Their total oil, gas, and energy assets is approximately $54 billion, with nearly 5,500 employees across 7 Canadian provinces, 31 US States, and 6 Mexico States. TC Energy is developing $38 billion of capital projects in next 5 years in oil and gas pipelines as well as power plants. This presence and expansion is impressive while operating within complex social, corporate and regulatory environments.
The challenge was that audits and the overall audit program were managed as individual projects that were responsible for producing their own metrics and measures of project audit quality and performance. Consequently, results were difficult to baseline and measure throughout the corporate portfolio.
TC Energy needed an overhaul of their audit program and this included a technology foundation to make it sustainable with the organizations growth and complex operational control requirements.
To address a sustainable audit program for the organization, TC Energy created an ISO 9001 based Quality Management System (QMS) that facilitates an audit program to identify and correct underperforming areas within processes and procedures required to deliver capital projects within TC Energy. In addition to the traditional benefits of an audit program this CPMS (Capital Project Management System) has one critical and very public objective: acquiring and maintaining a social license to operate. As a major player in the oil & gas pipeline industry TC Energy is under constant scrutiny to prove to regulators, partners, local communities and the world that these major infrastructure projects are not only safe, but are executed with an unparalleled level of quality and a serious respect for the environment and social impacts. A successful implementation and adoption of this program will resonate across the industrial and social communities that TC Energy is committed to delivering the highest quality standards for all projects delivered throughout North America.
TC Energy’s tactical Objectives of their audit program were:
- Uncover specific process or procedure steps that are underperforming, correct them, and input results back into the Process Continuous Improvement Cycle.
- Understand the project life cycle (i.e., prospecting, proposal, definition, implementation, operation) to improve the quality, delivery timelines, lower additional project cost and minimize project issues.
- Enable the business to track and manage control points as part of their operations with audit review and assistance instead of audit as the primary documenter and assessor.
TC Energy needed a solution to manage CPMS and their overall audit program. They evaluated solutions in the market and chose Resolver’s GRC solution. Resolver’s audit management solution provides TC Energy an integrated audit management solution to collaborate, understand risk, align audit with strategic planning, and drive business value.
Resolver enables TC Energy to have an audit program focused on continuous improvement to maintain its status as a leading Energy Infrastructure provider in North America.
The Value of Resolver at TC Energy
GRC is a capability to reliably achieve objectives [GOVERNANCE] while addressing uncertainty [RISK MANAGEMENT] and acting with integrity [COMPLIANCE].1 Successful GRC strategies deliver the ability to effectively mitigate risk, meet requirements, satisfy auditors, achieve human and financial efficiency, and meet the demands of a changing business environment. GRC solutions should achieve stronger processes that utilize accurate and reliable information. This enables a better performing, less costly, and more flexible business environment.
GRC 20/20 measures the value of GRC initiatives around the elements of efficiency, effectiveness and agility. Organizations looking to achieve GRC value will find that the results are:
- GRC Efficiency. GRC provides efficiency and savings in human and financial capital resources by reduction in operational costs through automating 1 This is the official definition of GRC found in the GRC Capability Model and other work by OCEG at www.OCEG.org. ©2014 GRC 20/20 Research, LLC; Licensed to Resolver, Inc. for Redistribution 7 processes, particularly those that take a lot of time consolidating and reconciling information in order to manage and mitigate risk and meet compliance requirements. GRC efficiency is achieved when there is a measurable reduction in human and financial capital resources needed to address GRC in the context of business operations.
- GRC Effectiveness. GRC achieves effectiveness in risk, control, compliance, IT, audit, and other GRC processes. This is delivered through greater assurance of the design and operational effectiveness of GRC processes to mitigate risk, protect integrity of the organization, and meet regulatory requirements. GRC effectiveness is validated when business processes are operating within the controls and policies set by the organization and provide greater reliability of information to auditors and regulators.
- GRC Agility. GRC delivers business agility when organizations are able to rapidly respond to changes in the internal business environment (e.g. employees, business relationships, operational risks, mergers, and acquisitions) as well as the external environment (e.g. external risks, industry developments, market and economic factors, and changing laws and regulations). GRC agility is also achieved when organizations can identify and react quickly to issues, failures, non-compliance, and adverse events in a timely manner so that action can be taken to contain these and keep them from growing.
GRC 20/20 has evaluated and verified the implementation of Resolver at TC Energy and confirms that this implementation has achieved measurable value across the elements of GRC efficiency, effectiveness, and agility. In this context, GRC 20/20 has recognized Resolver and TC Energy with a 2014 GRC Value Award in the domain of Audit Management.
Audit Management Efficiency Value
TC Energy using Resolver has been able to identify both quantitative (hard objective facts and figures) and qualitative (soft subjective opinions and experience) measure of audit management value as they pertain to the human and financial efficiencies they have benefited from.
GRC 20/20 has evaluated and verified the following quantitative measures of audit management efficiency value:
- TC Energy has seen a direct impact in a reduction in staff required per project based on greater visibility into CPMS and audit with Resolver. This is reflective in that projects have increased by 110% while staff has only increased by 60%.
- The bandwidth of TC Energy’s project portfolio has increased because of greater visibility of control and issues. Portfolio growth over the next 5 years is ©2014 GRC 20/20 Research, LLC; Licensed to Resolver, Inc. for Redistribution 8 significant; this project established the foundation and the capacity to support quality though this growth period. Project portfolio growth is targeted to reach $38 Billion over the next 5 years.
- TC Energy has reduced project costs while simultaneously increasing average project system conformance by 31% between August 2013 and May 2014.\
GRC 20/20 has evaluated and verified the following qualitative measures of audit management efficiency value:
- TC Energy, utilizing Resolver, has created a lean approach to better allocate resources within project teams. The audit program allows specific underperforming processes to be identified both within specific projects and the system as a whole. Consequently, customized training plans can be created on a project specific basis and holistic process improvements can be made on a process specific basis.
- The Resolver workflow engine allows Trans Canada to customize and replicate new processes in a fully automated structure.
Audit Management Effectiveness Value
TC Energy using Resolver’s software has been able to identify both quantitative (hard objective facts and figures) and qualitative (soft subjective opinions and experience) measures of value as they pertain to the effectiveness of audit management that the organization has benefited from.
GRC 20/20 has evaluated and verified the following quantitative measures of audit management effectiveness value:
- With greater visibility into audit issues, TC Energy reports that Resolver has enabled them to see a decrease in the number of issues identified with a 33% reduction from August 2013 to May 2014
- TC Energy has successfully implemented a tiered auditing program on 30 major projects and 2 capital programs. From inception through May 2014, TC Energy has performed over 262 audits utilizing Resolver. The results of these audits are presented at monthly meetings that include senior vice presidents, directors, and project teams throughout the company.
- Measurable improvements in project execution and tracking through cumulative conforming deliverables that are tracked and compared proportionately to the total population of controls assigned in a given project phase. Projects target 95% of Phase conformance prior to moving through a stage gate. Initial scores in August of 2013 gave an average phase score of 48% (15 projects), and scores in May of 2014 gave an average phase score of 79% (31 projects).
GRC 20/20 has evaluated and verified the following qualitative measures of audit management effectiveness value:
- TC Energy projects have increased quality, accuracy, timeliness, and with fewer issues.
- TC Energy has seen increased ability to consistently provide product that meets applicable statutory and regulatory requirements.
- There is increased customer satisfaction through the effective application of the system, particularly the process for continual improvement and the assurance of conformity to customer and applicable statutory and regulatory requirements.
- Improved visibility into control referrals by month allows TC Energy to gauge how projects are trending.
- Resolver flags inconsistencies providing TC Energy with visibility into control deferral trends tracking when the project goes off course.
- TC Energy is able to track incremental criteria to ensure that deliverables are progressed with maximum conformance towards a delivery date.
- Findings are clearly articulated and tracked in the Resolver system providing visibility to vulnerable areas.
- With the offline capabilities of Resolver, TC Energy is able to ensure that work can continue at remote sites that do not have connectivity.
- Audit data indicates the key system areas where work is being deferred. Repetitive deferrals often indicate project specific areas that require increased oversight by the project team or require additional training or resources to deliver conforming results.
Audit Management Agility Value
TC Energy using Resolver has been able to identify both quantitative (hard objective facts and figures) and qualitative (soft subjective opinions and experience) measures of value as they pertain to the agility and responsiveness of Audit Management that the organization has benefited from.
GRC 20/20 has evaluated and verified the following quantitative measures of audit management agility and responsiveness value:
- The Resolver solution has proven to be agile in a dynamic and distributed business environment at TC Energy with over 80 users utilizing the solution and process across projects on a regular basis.
- The size and number of projects contributing to economic development of Canada continues to grow into increased job creation
GRC 20/20 has evaluated and verified the following qualitative measures of audit management agility and responsiveness value:
- Resolver allows TC Energy to integrate a strategy and provide visibility across all projects in North America with better resource allocation.
- TC Energy’s CPMS program has received recognition from management and the board as an excellent process and has seen adoption of audit practices across business operations. The business is asking to be included in the audit program because of the maturity of the control framework.
- TC Energy’s culture has shifted to operations fully adopting management of projects in Resolver.
- Implementation of CPMS and the audit program has enabled TC Energy to build a reputation of delivering some of the highest quality projects across the industry.
GRC 20/20’s Final Perspective
What is particularly impressive at TC Energy is their increased social license to operate in which the CPMS and the audit program in Resolver is giving TC Energy an unbiased, transparent and measurable approach to show that the organization is an industry leader in ensuring that all assets are delivered to the highest quality standards defined by governmental agencies where it operates. This, in turn, is information that the government agencies can utilize to demonstrate the high integrity and safety of these assets as demanded by the general public.