Risk 101: It's All About People

In 1913, James Cash Penney, the Founder of JC Penney, raises this point best within The Penney Idea which states, "To improve constantly the human factor in our business."  This philosophy has helped JCPenney prosper over a century.  More recently, Warren Buffett,has been quoted saying "We can afford to lose money - even a lot of money.  But we can't afford to lose reputation - even a shred of reputation."  Whether you love or loath Mr. Buffett, his philosophy has withstood the test of time and proven successful for Berkshire Hathaway.  In fact, all business problems, particularly reputational ones, share a common denominator - people.  Assuming the human factors always work or you can always trust people is probably the most significant and overlooked risk by Boards and Management.  Trust is not a control and you can't control behavior, but you can govern it - by accepting or rejecting an individual or groups conduct and methods of dealing.  After all, your reputation might just be at stake.  This is why I often recommend routinely engaging all employees to solicit feedback, ethics complaints, and suggestions to gain visibility into culture to help discover where reputational risk might be hiding or starting to fester.

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Ethics & Governance Leadership - Speaker Demo

New Era Internal Auditor - Speaker Demo

Corporate Culture Index Overview

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Corporate Culture Index Overview

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MoneyMattersTV talks about Internal Auditing (1 of 2)

Ethics and Internal Auditing

The internal auditor have a duty to gather, analyze, and document relevant, reliable, and sufficient information to support their assertions, opinions, and recommendations to the Board and Management. It is critical the internal auditor has full and unrestricted access to all company records, property, and personnel to prevent the opportunity for a company employee to falsify, manipulate, or distort information. This level of unrestricted authority should be granted by a formal internal audit charter, approved and communicated by the Board and Management of the company at least annually. As trusted custodians of company information internal auditors must hold themselves accountable to a strict Code of Ethics. If the internal auditor is a Certified Internal Auditor, then they must apply and uphold the 4 following principles as defined by the Institute of Internal Auditors:


1. Integrity - The integrity of internal auditors establishes trust and thus provides the basis for reliance on their judgment.

2. Objectivity - Internal auditors exhibit the highest level of professional objectivity in gathering, evaluating, and communicating information about the activity or process being examined. Internal auditors make a balanced assessment of all the relevant circumstances and are not unduly influenced by their own interests or by others in forming judgments.

3. Confidentiality - Internal auditors respect the value and ownership of information they receive and do not disclose information without appropriate authority unless there is a legal or professional obligation to do so.

4. Competency - Internal auditors apply the knowledge, skills, and experience needed in the performance of internal audit services.