A Core Risk Management Skill for Auditors and Facilitators: Effective Analysis

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    Speaker: Malcolm Schwartz


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    Duration: 90 Minutes
    Product Code: 50321
    Level: Intermediate

OVERVIEW

The approach to be presented for the core skill of analysis is based on what is termed the logic diagram, which has three building blocks: findings, conclusions, and recommendations. Each of these three building-blocks will be defined, and then tests for their effective use will be presented.

Then, the session will present the analysis process, for using and completing the logic diagram, the key steps being:

    • Step #1 -- Develop key hypotheses, which during the process will be converted to conclusions
    • Step #2 -- Specify the data packages, which will lead to findings
    • Step #3 -- Speculate on options, to arrive at recommendations. 

Two process controls will be presented. The first is to assure that only appropriate key hypotheses are identified and used, in order to be efficient and effective. The second is that the process is managed by developing and completing a relevant logic diagram. 

Some further concepts and aids to enhance effective analysis will be presented. 

In closing, there will be a review of the key concepts, along with a case study, and suggestions about how to apply these key concepts as a core risk management skill.

WHY SHOULD YOU ATTEND

Effective analysis is a core risk management skill for facilitators because the result of facilitation is to get agreement from the participants on what should be done, and getting agreement across disparate functions is usually tough to do. Similarly, it is a core risk management skill for both internal and external auditors because their analyses should lead to actionable recommendations related to risk management. Getting agreement and getting buy-in on recommendations is tough, and it has been shown that use of the tools presented in this course will increase effectiveness and efficiency because they enable greater understanding and acceptance of those who need to be convinced to agree and to do something.

AREAS COVERED

This session is about analytics as related to problem-solving, to recommending, and by getting buy-in to making things happen. It deals with why, what, how, where, when and who, for analysis as a core skill. 

  • Why we analyze is straightforward. It is what we have to do when problems – or opportunities – are expected and considered in risk management, and when we conduct routine work, such as measuring and monitoring associated with risk management. 
  • What we do to analyzeis to apply critical thinking skills that lead to effective recommendations that can be understood and accepted – and acted upon – by management. The approach also is efficient, so that no effort is wasted and no “do-overs” result.

We will delve into critical thinking skills, which sometimes are overlooked as an analyst focuses on big data and its use, which leads the analyst simply to accept the utility of bulk data and what trends or groupings emerge from it. Big data is useful but does not displace basic critical thinking skills. And, thinking involves logical analysis, of which there are two kinds: deductive reasoning, and inductive reasoning. Both will be defined and explained, how and when each is appropriate for use, and examples given. 

The product for the core skill of analysis is the logic diagram, which following its definition will be expanded to its three components of findings, conclusions, recommendations. Each of these three building-blocks will be defined, and then will be shaped in terms of tests for its effective use, and then will be shown in use.

Then, we will get into the process for building a logic diagram. The key steps include the following.

    • Step #1 is to develop key hypotheses, which through the work can become conclusions. But, to conclude something, after conjecturing about a hypothesis, the hypothesis has to be valid; so, the first step is to form an hypothesis. 
    • Step #2 is to specify the data packages. In order to conclude something – to convert a hypothesis to a conclusion -- things have to be found that enable and support that conversion of the hypothesis to a conclusion. 
    • Step #3 is to speculate on options. Conclusions lead to results, to recommendations. But, to get to recommendations, options have to be considered options so that the best fit recommendation can be made.

In order to make this process work, there are two types of controls. The first control is that appropriate -- and only appropriate -- key hypotheses are identified. The second control is that the going-forward process is organized into a relevant logic diagram. More specifics will be providedon each of these two types of controls.

Following a discussion and presentation of each of these – the process, the controls, and some concepts and aids – key concepts will be reviewed, and a case study will be presented.

LEARNING OBJECTIVES

The course objective is to present an approach to analysis, and the tools to support that approach, for effectiveness and efficiency. These tools are for thinking through the design, scope and conduct of an analytical project. This approach to analytics is not merely big-data number crunching and organizing, which can be used as a component of an analysis project but is not analysis leading to actionable recommendations as such.

WHO WILL BENEFIT

Facilitators and internal and external auditors will benefit from this course because they will have developed new tools that will make them more productive in undertaking projects dealing with risk management, internal control and compliance, and other projects dealing with complex outcomes.Also, their managers and related executives –C-level positions, board members, finance and operations and human resources managers and executives, as examples – will benefit because they will learn how analysis projects should be scoped, what skills are needed to do them, and what should be the outcomes from those who conduct such projects.

SPEAKER

Until his recent retirement from PwC, Mr. Schwartz had been the partner responsible for the consumer products industry management consulting practice in its Eastern Region.  He also had led the financial management practice. Previously, Mr. Schwartz was a senior vice president of Booz, Allen & Hamilton Inc., playing lead roles in the financial management, risk and controls, operations management, systems, and telecommunications practices; and had been responsible in the Eastern Region for the financial management services practice and for the administrative management services practice; and had been CFO. Typical consulting projects that he led include:

  • Revising the organization, processes and systems of a major consumer products manufacturer, resulting in share and service gains, and cost and asset reductions
  • Reengineering the supply chain -- including demand management and communication, planning and scheduling, operations improvement and supplier synchronization, and strategic sourcing -- for a household products company
  • Designing and installing a process-based controls approach for a global confectionery and foods company
  • Mr. Schwartz also has had extensive industry experience, including:
  • Manufacturing, industrial engineering, and cost control at Procter & Gamble.
  • Controller, treasurer, industrial engineering management, physical distribution management, and division management positions with International Silver Company, the housewares products subsidiary of Insilco Corporation.
  • With Westinghouse Electric Corporation, staff vice president for finance and operations of the Leisure Industries Group; and then executive vice president of Longines-Wittnauer Direct Marketing Company, the direct mail division.

Mr. Schwartz also served in the U.S. Navy Civil Engineer Corps, concentrating in public works administration, construction project management, housing construction and administration, and transportation management.

Mr. Schwartz has written and spoken on governance, risk management, internal control, financial management, and productivity; has been an expert witness on industry and organization structure, and on cost management; and has addressed international audiences on controlling investments and productivity, risk management and controls, activity-based costing, and organization design; and has been contributing financial editor to technical journals.  At PwC, he developed and led the activity-based costing practice; supported the development of business process reengineering; led the transition integration effort to create PwC from two separate firms, was one of the principal authors of Internal Control - Integrated Framework (ICIF); developed the risk assessment tools for the In-Control Practice; and developed related training for the for the  Audit and Attest Practices. He was on several COSO task forces developing guidelines for using ICIF.

He received a BSE degree with honors from Princeton University, majoring in civil and general engineering, and was elected to Phi Beta Kappa.  Also, he won the Class of 1883 English Prize for Freshmen in the School of Engineering.  His undergraduate thesis was on “The Competitive Bid Construction Contract.”

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