Internal Audit Banking & Financial Services - Risk …

1 Internal AuditBanking & Financial ServicesAs specialists in Bank Internal Audit we are seeing the global redevelopment of Internal Audit as it transitions tomeet the demands posed by the revised BIS expectations which include auditing efficiency. There is no question that changes in regulation have resulted in banks and insurance companies requiring a re-fresh and reconnect of Internal Audit to the Board, to serve as a risk mitigating function of importance. Whetherdriven by Basel /III or Solvency II, risk management and Internal Audit are working ever more closely is Risk Reward s most noted area of do we see as the current top five challenges facing Bank Internal Audit ? Corporate Governancehas become a major concern for regulators who are seeking additionalassurance regarding the operation of Boards, Committees and the effectiveness of executive and non-executive directors. Due to the sensitivity and profile of such an assignment the involvement of an externalresource is generally welcomed.

2 Internal Auditbecause The Basel Committee on Banking Supervision has for the first timeestablished the principle that the Internal Audit function within banks should be assessed for its independent assessment is to include the integrity, capability and professional competence of internalauditors, the scope of their work, their assessment of the Board and the Governance Framework, as well astheir oversight of other functions such a Risk Management, Compliance and Finance. Auditing of Enterprise Risk Management has also raised in importance due to concerns over dataquality. This is because each risk area is led by a subject matter expert, the requirements are complex andthere is significant use of judgement which rarely leads to consistent enterprise risk management. InternalAudit is forced to enhance its skills and be able to Audit what it should see as opposed to what is does Internal Audit of Models and model validation departments which requires a level of mathematicalskills often not available within Internal Audit .

3 Models exist in various parts of a firm including credit risk,market risk, treasury, strategy and pricing and all of these require Phased Implementation of Basel III because this is now being implemented in the US (under DoddFrank) as well as in the rest of the world. With Basel III comes a new determination of the calculation,allocation, management and adequacy of capital and liquidity within banks, all of which must be included inthe scope of the Internal auditor s work, with that work itself now made subject to regulatory assessment. Italso changes the way business will be conducted in the hope you and your Internal Audit management and teams will find something of interest within our serviceofferings, whether a short-term, small single Audit project, a major change programme or even a single trainingcourse. Please be assured that high-quality, service excellence and good value are what we are known for, andhave been for more than 10 not challenge us to add value to your Internal Audit department?

4 Dennis Cox, FCAC hief Executive OfficerCEO s Message1 Risk Reward Limited x About UsRisk Reward is a leading supplierof tailored advisory and training Services to thebanking, Financial and corporate sectors in developed and emerging markets. Ourconsulting and training Services are delivered directly to banks and Financial institutionsby our own consultants, or we will supply the same consultants via intermediaries withwhom we have developed close working business offers a wide range of Services delivered by a pool ofover 650 consultants. Each of our consultantsare experts in their fields with years of relevant industry experience, ensuring that our Services add value fromday one and eliminate the usual consultant learning curve delays. In every case our consultants are able to makesuggestions based on their own considerable experience of dealing successfully with similar challenges in theirown are some examples of recent bank Internal Audit solutions to the challenges Cairo our Internal Audit experts designed a programme to modernisethe Internal Audit function as part of a risk management culture changeinitiative.

5 The bank asked us to guarantee that they would see changewithin their auditors behaviour within 3 months. We worked closely withthe total C-Suite of the bank to ensure any potential reshuffle of personnelhelped in maintaining the bank s productivity, competitiveness and collaboration with the Chief Internal Auditor, the Audit Committee, theSenior Audit Managers and newly appointed Champions , our small in-country team were able to redefine the bank s Audit universe, preparethe Audit plan using a risk-based approach (treasury, risk management,credit, HR, IT, etc) and write new Audit policies, procedures and also run an on-going series of practical workshops includinghow to prepare new Audit programmes for the top 10 risk-based areas,how to review the Audit findings, develop techniques and solutions toimprove presentation of the Audit findings, improve negotiation skills withthe Audit Committee and implement effective Audit writing. A South African bank asked fortraining of their Internal auditors toaudit the Risk Department; within 15minutes (or as we figured, a run pastthe water cooler and enable them togo upstairs) we received a call fromthe Risk Department in the same bankasking for training as they were aboutto be audited.

6 Naturally, we suggestedto the Head of Human Resources Training Manager to throw everyoneinto the pool together and delivereda 3-week training programme for all150 of the combined teams. Later wereturned specifically to conduct ourview of the ICAAP and run a practicalworkshop to ensure the bank s auditteam could continue without the needfor consultants. A Saudi Arabian Islamic Bank required thebank s Internal Audit function to be redesignedand realigned to the changes implemented asit became compliant with traditional riskmanagement. Our qualified Islamic bankingand finance experts, working in collaborationwith the local Shariah board, successfullydesigned the Audit programmes for Islamiccredit, risk management and liquidity risk Kenya an Internal Audit team was seen as failing by its Audit Committee. OurConsultants reviewed the Audit function against the BIS sound practices paper andtrained the auditors on risk based auditing and writing Audit reports.

7 We alsodeveloped training for members of the Audit committee to enable them tounderstand their roles and recommended a restructuring of the Audit function. An accountancy firm with offices in a major off-shore marketasked our bank Internal Audit team to help them with audittraining for their own consultants who in turn were providinginternal Audit Services to their Banking and finance the costs to train their own team came underdiscussion we suggested that the firm host this internalaudit training and make it available to their clients locally ona discounted commercial basis (where such technicaltraining was quite rare). More than 20 client organisationsattended; the accountancy firm covered their costs, theyprovided a highly-valued service to their external clientsthrough training (which they could not offer otherwise dueto potential conflicts of interest) and even offered a fewpasses to the local regulator to attend, Markets & ClientsAfricaABSA Bank LtdABSA CapitalAccess Bank PlcAfrica Finance Corporation NigeriaAfrican Banking CorporationAhli United BankASO Savings and Loans plc (Nigeria)Audi BankBank of AlexandriaBank of Kigali LimitedBank Windhoek LtdBanque Africaine de D veloppementBanque Bemo Saudi FransiBanque Du CaireBanque Populaire du Rwanda Ltd - RWBarclays Bank (South Africa)Barclays Bank Mo ambiqueBDO (Mauritius)BNP ParibasBoE Private Clients (a Nedbank Ltd)Botswana Public Officer's Pension FundBRDC adiz Asset ManagementCavmont Capital Bank (Zambia)Central Bank of NigeriaChaseBank (Kenya)China Construction BankCITCO (Mauritius) LimitedCitizens SME Agency (Botswana)

8 Colgate PamloliveCommercial Bank (Zambia)Commercial Bank of EthiopiaCommercial International Bank (Egypt)Consolidated Bank of KenyaConstruction & Business Bank Bank PLCC redit Agricole Corporate &Investment BankD veloppement Bank PHB (Nigeria)Dashen Bank & ToucheDevelopment Bank (Rwanda)Development Bank of Mauritius LtdDevelopment Bank of Southern Africa(DBSA)EcobankEgyptian Banking Institute (Egypt)Equity Bank Rwanda LimitedExam Ready (South Africa)Export Development Bank of EgyptExport Development Bank SudanFinance Bank (Zambia)First Atlantic Merchant Bank (Ghana)First Bank of Nigeria PLCF irst Rand Bank (South Africa)FITC - Financial Institution TrainingCentre (Nigeria)FNB CommercialGCnet LimitedGT Bank (Nigeria)HFC Bank (Ghana)Housing Finance (Uganda)HSBC BankIndefund (Malawi)Industrial Development and WorkersBank of EgyptIndustrial Development Corporation (IDC)Intercontinental Bank Plc (Nigeria)Intermarket Banking (Nigeria)Investec (South Africa)Investec Asset ManagementInvestment Banking & TrustInvestrust Bank (Zambia)KCB Bank Rwanda LimitedKenya Commercial Bank LtdKPMG Professional ServicesLefisa Ventures (Lesotho)National Bank (Malawi)National Bank of Abou DhabiNational Bank of EgyptNational Investment Bank (Ghana)Nedbank (South Africa)Nedbank LtdNERFUNDN igeria Capital Market InstituteOmnifinance (Cote D'Ivoire)Press Trust (Malawi)Prudent Bank (Nigeria)Public Investment Corporation (PIC)Rand Merchant Bank (a Bank Ltd)Rawbank - DRCR okel Commercial (Sierra Leone)ScotiabankSierra Leone Commerce BankSkye Bank PlcSouth African Express AirwaysSouth African Reserve Bank (SARB)Standard Bank GroupStandard Corp.

9 & Merchant BankSterling Bank PlcSudanese Egyptian BankSuez Canal BankTrust Bank (Ghana)UBA (Nigeria)Union Bank (Cameroon)Unity Finance LimitedZanacoZenith Bank (Nigeria)AmericasAAA Northern CA, NV & UtahAIPSOA llianz Global Assistance USAA rvest Bank GroupAuto Club GroupBanco Industrial de VenezualaBank HapoalimBank Leumi USABank of AmericaBank of UtahBank PlusBank UnitedBoard of GovernorsBRD Groupe Societe GeneraleBrown Smith Wallace ConsultingCapital OneCentral Bank of BrazilCentral Bank of MexicoChapman ConsultingChicago Bridge & Iron CoCitizen's BankComerica IncDepository Trust & Clearing CorpDeutsche Bank AGDNB Bank ASAE*Trade Financial GroupEmblemHealthEnbridge IncEvans Bank NAFederal Audit Loan BankFederal Home Loan BankFederal Reserve Bank of DallasFederal Reserve Bank of New YorkFidelity Management ResearchFirst Citizen's BankFirst Niagara BankFirst Republic BankFRB of New YorkFreddie MacGEICO CorpGeneral MotorsGirobank NVGlens Falls National Bank & Trust CoHogan Taylor LLPI beria Banking GroupIntesa SanPaoloIntrepid Potash IncJohnson Financial GroupJSC Liberty BankL Thurston Accounting & Advisory SvcsLakeland BankLance IncLegg Mason

10 & CoMarlin LeasingMISM itsubishi UFJ Trust & BankingMizuho Corporate BankMorgan StanleyMutual of OmahaNew York Community BankNorthern TrustOppenheimer FundsPetroleos MexicanosProvident BankRabobankResource BankRidgewood Savings BankSignature BankState StreetSterling Savings BankSumitomo Mitsui Trust bank LtdSvenska Handelsbanken (New York)TD BankUniversal Property & Casualty InsuranceValley National BankWells FargoAsiaABN-AMRO (Hong Kong, Singapore)Affin Bank BhdAlliance Bank Malaysia BhdAsian Finance Bank BhdBanco Nacional Ultramarino (China)Bangkok Bank Public Co.,LtdBank Islam Malaysia BhdBank Negara (Malaysia)Bank Negara Indonesia (Persevo)Bank of BarodaBank of ChinaBank Of TaiwanBank Rakyat BhdBank SinopacBank TuranAlem (Kazakhstan)Barclays Private Banking (Hong Kong)Canara BankCathay United BankChang Hwa Commercial BankChina Development Industrial BankChinatrust Commerial BankCIMB Bank BhdCIMB Investment Bank BhdCitibank (Taiwan) LimitedDFCC (Sri Lanka)Dhaka Bank Ltd (Bangladesh)Dutch Bangla Bank (Bangladesh)E.