The antecedents of combined assurances implementation : a Global Survey

Details

Supervisors

Decaux, Loïc ; Sarens, Gerrit

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion

Abstract

The recent global economic crisis took the world by surprise, and showed more than ever that a lot of companies were not as effective at risk management as they thought they were (Baker, 2009). Indeed, not only did the crisis have a far reaching effect on the global economy, but it brought to the light the leading question as to why such an occurrence took place, especially at a time when financial regulations and risk management were assumed to be so advanced that the risk of a major economic crisis was supposed to be minor. One of the causes of the crisis was the inadequate management of the risk. Indeed, financial institutions relied too much on the recent historical data, in order to forecast future market performance. For the most part, the management tools remain effective, and if used correctly, they could have helped to avert the crisis, or reduce its effects. But, the sad truth is that risk professionals were rarely consulted. According to Dr. Simon Ashby “ there is a need for confidential research that targets those individuals that are involved with managing risk within financial institutions on a daily basis, which should provide credible evidence on the causes of the crisis straight from those individuals that were not only managing risk prior to the crisis, but often also during it” (Ashby, 2010). In order to restore the confidence of the different information-users, the assurance over risk management is now vital. Now, more than ever, in the wake of the crisis, in order to make their decisions, these information-users need assurance. The reports provided by independent specialists, whose quality assurance systems are monitored, enhance the credibility of the information reported by an organization. Combined assurance is a process that allows a continued monitoring of the risk management oversight (Landsittel & Rittenberg, 2010). King III, among other things, defines Combined assurance as “Integrating and aligning assurance processes in a company to maximize risk and governance oversight and control efficiencies, and optimize overall assurance to the audit and risk committee, considering the company’s risk appetite” (IoD, 2009). The main idea behind the combined assurances concept is to bring together assurance providers from different disciplines in order to guarantee to the Board the effectiveness of risk management and that risks are mitigated adequately (given the risk appetite). Nowadays, only a select portion of companies decided to give the coordinated approach a chance by implementing the combined assurance model. In spite of all the recommendations given to the concept (IIA 2009b; 2010; 2012a; 2012b; Sarens et al., 2012), combined assurance is a relatively new concept and its academic background is still fairly sparse. The purpose of this study is diminish this gap and to analyze the different antecedents that could bring an organization to implement the combined assurances model. For that, we will be using a survey that was aimed at the different internal assurance providers (mainly internal auditors), and following their answers, we will be studying the link between different variables and the decision to implement.