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Audit_Consulting
09 Dec

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Expert Audit Consulting for Uncertain Times No Comments

Expert Audit Consulting for Uncertain Times

NCS a ‘Technology Product Company’ with eTHIC as the market leader in Internal Audit automation, in India. Currently, eTHIC is running successfully in 30+ Banks in India. At NCS, we have always had in-house Banking experts, for guidance in development of eTHIC, as well as in its implementation in various banks. Having implemented eTHIC in many Banks, we had a felt a strong need for building in-house ‘Consulting Capability’, to prepare ourselves to the emerging needs of Banks in Internal Audit. It was felt necessary to know of the latest trends in Internal Audit in India as well as Overseas. The latest trends show that the traditional role of Internal Audit is sought to be enhanced, so that it contributes towards improving the controls as well as move towards auditing key controls real time.

To build Consulting capabilities, we have with us two retired Bankers who have been Audit heads in their respective banks. They have both strategised and overseen transformational change in Internal Audit, in their respective Banks. We have also inducted a retired Senior Banker, with experience both in Internal Audit and Technology. One of our Senior Banking Experts shared with us an experience of his, on how a control which was prone to high level of breaches could be addressed and compliance improved dramatically:

“We had built up Analytics to let us know the instances as well as level of breaches of individual controls in the Audit universe. One of the Controls which showed breaches across nearly all branches, was ‘Insurance of Stocks’. The level of breaches had continued unchanged for years. At the intervention of Audit, the Credit Operations Deptt of the Bank was able to take up the issue with the Insurance subsidiary of the Bank. This eventually led to development of a Group Insurance Product for SMEs (with a cap on the limits up to Rs 50lacs). Being a group insurance product, the premium was much cheaper and for bank’s customers Insurance could be bought online. The compliance of the control improved dramatically as the ‘Control’ was more or less automated, with very few dependencies. IA was consulted right through the development of the product”.

We felt that having implemented Audit automation through eTHIC, our clients can move towards a quantum jump in the efficacy of Internal Audit. Besides, there could soon be some pressure on Banks from Regulators on this subject. RBI has recently circulated a ‘Discussion paper on Governance in Commercial Banks’ in India. The paper takes about a much enhanced role and profile for Internal Audit than at present. The importance of RBI’s move can be known from the fact that RBI’s paper is modeled on a BIS document on Governance in Banks. As the Discussion paper will lead to issue of regular instructions by RBI, banks will soon have to work on enhancing the capabilities of their Internal Audit function in a big way.

Our experts have been guiding us for over two years now and we have been in the process of developing various innovative products like:

  • Usage of Analytics to study the trend of Control breaches at the enterprise level, do a root cause analysis when beaches are high and suggest possible remedies. We already have a working model of this named as ‘Previse’.
  • Audit bots for Automating Audit.
  • “Remote Audit” so that Internal Audit is done offsite and on a continuous basis. This has many advantages like knowing control breaches real time and fixing the same. Over time this can lead to a significant improvement in the Compliance culture in the Bank. It will also substantially reduce the role of on- site Auditors. We already have an order for ‘Remote Audit Solution’ from a mid-sized bank and are in the process of implementing our solution.

The innovations described above can be of great use to Banks to handle the emerging risks due to impact of Covid. Clearly, with RBI guidelines on Moratorium and guidelines on handling post moratorium scenario places a lot of ‘Regulatory Compliance’ responsibilities on Banks. Expectedly, Covid has brought in its wake business distress impacting credit quality in Banks. Suggestions on how our innovations discussed above can be tailored to suit the needs of the Banks, to handle the emerging scenario are given below:

  • In the post Covid scenario with pressure on credit quality, it is important to scrupulously adhere to the credit controls. In actual practice, this may prove difficult due to distress faced by credit customers and the work pressure on the staff. In such a scenario, ‘Previse’ our analytics based predictive tool, can identify the credit controls prone to higher level of breaches. A Root cause analysis of the breaches will reveal the underlying causes as also help frame responses to not only address the risks but also evolve appropriate response in terms of improving internal control. Our experts can work with the Bank’s Internal Audit team in the initial stages in streamlining identifying critical control breaches and framing responses. Previse can also automate reporting to Senior Management/ ACB.
  • Previse plays another important role in making Audit Plans dynamic. Based on emerging risks Thematic Audits can be planned. If the risks pertain to specific geographies cluster audits can be planned too.
  • The best Industry practice is Offsite (Remote) and continuous Audit. We know of Banks who have totally moved to offsite audit (barring checking documents) for Credit. Many operational Risk Controls are being audited off-site too. We have already built a working model for Remote Audit of Credit and are now working with a Bank to actually implement a Remote Audit solution covering both Credit and Operational Controls. Moving to Remote Audit would be an ideal response to Covid. Firstly. Audit will be real-time in a situation when risk profile is increasing and secondly movements of Auditors can be restricted enhancing their personal safety.

The technology products discussed above are generic will suit most banks. We can customize these products as per the requirements of individual Banks. Also, new solutions can be developed in a short time frame if any Bank expresses a need for the same

Reach out to us for a demo on the products. We are ready to offer our expert guidance on Internal Audit, Governance and your Risk Management needs.

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