Internal Audit´s stakeholder landscape was never broader, and complexity is increasing by the day. At the same time, professional expectations are shifting. Auditors must think relational, provide assurance, be sparring partners and advisors – all while staying objective and independent. Adding the role’s perception that doesn’t always fit with our own perception, and you may start wondering how to survive in the stakeholder jungle.

By acting strategically and staying true to themselves, internal auditors have a chance to develop business relationships built on trust – in other words, authentic sustainable stakeholder alliances.

It’s tough and it won’t get easier

Who are our stakeholders, and why can it be so complex to get along? ChatGPT did a nice job when asked to define a stakeholder in a maximum of eight words: “interested party in a project or an organization.” If you think about all potential “interested parties” and possible touchpoints, it’s evident that there is room for conflict.

Internal stakeholders

Start at the top! Your board, audit committee, or whatever your set-up is, is one of your most important stakeholders. Be it through reporting lines, one-to-ones, committee meetings, or a client role in a culture audit – there are lots of touchpoints with the governing body.

Next, think about your C-suite and management teams who typically could be your clients – and don’t forget the CAE´s frequent C-suite reporting line. Also, the entire second line – such as Legal, Compliance, or Risk – might be “interested party.” You need their data (and often their support), they could be your client, or you might work together on a project, to name but a few possibilities.

But then there’s everyone else in your organization! Client or no client, you see them day in, day out, have conversations around the water cooler, or go running during lunchtime… whatever the interaction might look like, anyone could get “interested party.”

And finally, there is the audit team. Be it through hierarchy or as an audit colleague, no stakeholders are closer than your team.

External stakeholders

From regulators to external auditors, from investors to analysts, from customers to suppliers – everyone at some point could be your stakeholder. Touchpoints are plentiful: reporting to a regulator, co-ordinating with external auditors, carrying out a supplier audit, or working with an external investigator: there’s a huge variety of interactions.

Stakeholder relationship challenges

Putting it simply, there are as many options for stakeholder conflicts as there are combinations of stakeholders and related touchpoints. Internal auditors walk a very fine line to keep interactions flowing.

Perception gap

The role of internal audit may have changed over the years, but perception has not always kept pace. “Policing” or “tick-the-box” remain common answers to the question “What does internal audit do?” Be it one stakeholder’s attitude, or the view of the organization: it’s too easy to pass the buck. Often it’s the auditor who isn’t adding value, lacks transparency, or simply doesn’t communicate well. Trapped in the perception gap, it´s hard to find common ground.

Communication mismatch

“We just don’t speak the same language” – language mishaps can take infinite forms:

• foreign language barriers;
• no adjustment to different professional backgrounds;
• jargon that remains “untranslated”;
• inadequate approach to formality;
• cultural misunderstandings; ineffective stakeholder reporting;
• or just no sensor for different personalities and communication styles.

Absence trap

Sadly, the “silo auditor” is no ghost from the past. Doors closed, phone silenced, meetings cut to a minimum, just “doing the job” – how can internal audit build trust and be perceived as value-added if the auditor is absent in the eyes of stakeholders? The absence trap tends to spiral downwards because the silo auditor doesn’t provide much opportunity to improve the situation.

Trust lost

How easy is it to lose someone’s trust? The sad answer that it’s extremely easy, with lasting conflicts to follow. Nastily surprising the CEO at the audit committee, being indiscreet, being unreliable, showing a blatant lack of objectivity, communicating inconsistently … the list of potential trust traps is endless.

Emerging issues don’t make it any better 

New risks, new touchpoints

Digital disruption, ESG, culture … such risks might have occurred on a company’s risk register, but only a few audit departments would have addressed them in the past. This has changed entirely. Emerging risks have risen dramatically in their expected relevance for internal auditors’ activities. New topics often come with new stakeholder touchpoints, hence more challenges.

New knowledge, new working methods

With a broadening scope, internal auditors must acquire new expertise. Change may be desirable per se, but often pushes the organization to the edge of its capacities and creates additional friction. Add expectations for everyone to work hybrid, agile, entirely digital, and with fewer resources, and one can easily see how working relationships are reshuffled.

New standards, new expectations

There’s no way around it: our profession is undergoing a shift in expectations. While ticking-off checklists might have been the way to go until the turn of the century, today, internal auditors are expected to give advice – on risks, controls, compliance, processes, projects, governance, culture … Along with the shift came a sense of competencies “upskilling” – less purely technical know-how, more focus on personal and relational skills. After all, why would anyone want to be advised by someone who isn’t able to build solid interpersonal relationships?

The new Global Internal Audit Standards (GIAS) explicitly embrace the shift: we are expected to “communicate effectively” (Principle 11), “build relationships and trust with key stakeholders … ” (Standard 11.1), document our “plan for managing stakeholder relationships” and be “respectful in all professional relationships and communications (Standard 1.1). In short: relationship-building is key.

With this mix of new and emerging challenges for internal auditors to navigate the stakeholder landscape, how can we succeed?

Master plan for sustainable stakeholder alliances

“All business is personal … make your friends before you need them” (Bob Johnson). While I don’t suggest that internal auditors’ objective should be to become best friends with their many business acquaintances, it’s still very much a people business. The quality of stakeholder relationships can make or break an internal auditor’s success story. The good news: it all starts with us.

Start with yourself

Successful business relationships are grounded in knowing oneself and acting accordingly and appropriately. Without self-awareness, we won’t understand how we influence and we won’t be able to act authentically. The concept of authentic leadership builds on authenticity in the meaning of being genuine and true to one’s own beliefs (Harvard Business Ideacast). Next to self-awareness, it builds on a clear purpose, on empathy, on strong relationships, and self-discipline to set high standards and stay accountable.

But first and foremost, authentic leadership is based on living one’s core values. The basis for this: integrity. Without a clear sense of doing the right thing and telling the truth even if it’s uncomfortable, it’s impossible to establish working relationships based on trust and transparency.

Having in mind our stakeholder challenges, how can authentic leadership be brought to use for internal auditors?

Codeword integrity

It helps to recall Principle 1 of the GIAS: “Demonstrate integrity.” Integrity is the core of our profession and the foundation for all other core principles, and it’s the connecting link to authentic leadership – the “True North” of the profession. Internal audit provides ample opportunity for grey zones – this is where our values are tested under pressure and where we must demonstrate integrity.  

Self-awareness

Why do we lead how we lead? As John Maxwell puts it: “Leadership is influence – nothing more, nothing less” (Business News Daily). Why do we have a hard time accepting critical feedback on our audit report? Why do we shy away from conflicts with some colleagues? Why do we get impatient with certain behaviors? Self-awareness means understanding one’s weak spots and working on them. It makes us vulnerable – and it helps us behave authentically.

Empathy

Genuine interest in others is essential to building trust. “Tough empathy” is typically required in challenging situations, where it is sought to foster understanding when striking a balance between the issue at hand and the individual´s concern. It demonstrates honesty and the courage to make tough decisions by staying true to oneself.

Other characteristics of authentic business relationships

Having a long-term, non-transactional focus that puts mutual benefits first helps create better acceptance for inherently conflicting stakeholder touchpoints. Being approachable and consistently reliable, and not hiding behind a façade, supports an environment of safety and trust. Authentic leadership requires investment – first and foremost in one’s personal development.

Get strategic

Map out your stakeholder landscape

We shouldn’t leave how our business relationships evolve to chance. Who are we primarily and secondarily working with? Were there issues in the past? If yes, why? How were they handled? What’s the strategy to mend the loose ends? Such questions require honesty. It doesn’t help to pass the buck when assessing how a relationship derailed. Next to known touchpoints, think about emerging topics – who has recently appeared on our stakeholder radar, what’s on the horizon? How can we start connecting, and where could it get challenging?

Don’t play stakeholder roulette

One-and-done stakeholder interactions were yesterday. Think long-term: where is common ground in your interaction? Discuss common expectations – such as with a new client, or a department you haven’t worked with yet. Openly communicating on potential challenges and candidly searching for common ground feels disarming and proves your good intentions.

Network with a common purpose

Do you have your personal advantage in mind when you network? Or does networking mean connections for mutual benefits? Showing genuine interest in others is a good start and is always better received than “fakeworking” – nobody can be fooled by fakes in the long term. Remember: leading is all about influencing – but influencing shouldn’t be confounded with manipulation.

Ask for feedback

Next to self-awareness it’s equally important to get honest feedback on how others perceive you – there´s always the other side of the coin. Be it 360° feedback loops, an external quality assessment, a candid conversation with a colleague, or simply an open discussion with your partner: it helps put things in perspective.

Get relevant training

If you realize that there is room for improvement at your end, go for it. Be it professional or personal skills – maybe you find it hard to communicate at ease with your board, or you wonder how you can build better rapport with your clients without getting defensive, or be a more inspiring, empathetic leader for your team – training options are endless, and better self-awareness through honest feedback is a great starting point.

Remember: “The hardest person you will ever have to lead is yourself.” (Source: Bill George (2022): True North – Emerging Leader Edition)