1. Sped up change Implications for the audit profession March 2015
Michele J. Embling
National Assurance Leader
PwC
March 2015

2. Assessing current governance, risk management and control
Sped up change
Change is inevitable…
…and getting faster
You change, or…
Assessing current governance, risk management and control
The future is more variable and more uncertain than we’ve seen before.

3. Assessing current governance, risk management and control
“He who rejects change is the architect of decay. The only human institution which rejects change is the cemetery!”
Harold Wilson
Assessing current governance, risk management and control

4. Collisions of Megatrends will present opportunities and disruptions
Demographic & Social Change
Shift in Global Economic Power
Rapid Urbanisation
Collisions of Megatrends will present opportunities and disruptions
Climate Change & Resource Scarcity
Technological Breakthroughs
Assessing current governance, risk management and control
The 5 megatrends or forces will result in business, societal and political change.
Why would we think that these forces wouldn’t impact the audit profession?
CEO’s around the world are placing increasing strategic importance on a range of digital tools → turning threats into opportunities to remain relevant and successful in a changing world. Is the audit profession keeping up?

5. Increase in climate related disasters and resulting economic impact
Assessing current governance, risk management and control
Where is the audit profession?
Do we have the skills to respond to, know if our clients have assessed and managed the risk.

6. Terrorism – we are not as isolated as we might think
Assessing current governance, risk management and control
The new digital age will bring rise to a whole new range of risks surrounding data privacy and security.
As demonstrated by the recent Sony cyber-attack these are new areas of vulnerability for both individuals and businesses.

7. Technology will be a key enabler and disruptor for everything…
… and its moving fast
Assessing current governance, risk management and control

8. Three major reasons Cost and availability of computing and storage
Openness of people to share their information
Availability of capital to scale disruptive propositions
Assessing current governance, risk management and control
The days of maintaining in-house IT infrastructure are all but over.
Within a few years the majority of private businesses data will be almost exclusively collected, stored, managed and maintained and shared via the Cloud in real-time.
Maintaining data in the Cloud frees up entities from the cost, risk and inflexibility of in-house infrastructure that rapidly gets out of date. Allows them to be agile, cost effective and respond to client needs. Digital natives are more comfortable with sharing their private information. Wearable technologies such as smart phones, fitbit, apple watch provide an ability to collect all manner of personal info such as how we drive, what we eat and how much we exercise. The data being collected by providers such a Google across devices is truly mind boggling. In the future this data will be used by insurers to more accurately determine our insurance risk profile. Sharing info in this way is becoming part of everyday life, particularly for the millenials who are digital natives. The desire for lower insurance premiums and improved service levels are likely to outweigh privacy and security concerns.
Does it matter if the insurer is Google or Apple?
Not every entity will have the in-house skills (or can afford them). There will be a move to greater collaboration/out-sourcing with others through JVs, alliances to gain access to new or emerging technologies, for innovation and to share risks.

9. The statistics are mind blowing
Internet Users
Connected Devices
Morgan Stanley thinks 75 billion by 2020 (9.7pp)
3b people, 40% of the world
Social obsession (1 sec)
Importance of Mobile
347,222 Whatsapp msgs
1,792 Instagram photos
8x increase by 2020
96,553 Youtube videos
8,654 tweets
8,101 disappearing msgs
52,083 likes
Assessing current governance, risk management and control
1.8 billion interactions in this 60mins
By 2025 the millenials (digital natives) will be 75% of the workforce.
Tech savy, educated, unique set of needs and expectations from their employers, society, governments.
Their choices will drive business/services models to adapt or die.
They will use the power of social media to drive change, demand answers.
Some refer to this technological age as the 2nd industrial revolution.
These changes will impact not only those entities we audit but US.

10. Our choice is binary Hope it just goes away
Assessing current governance, risk management and control
Embrace the change as an opportunity
There will:
Be changes in the entities we audit
Need to be changes in what/how we audit if we are to remain relevant
Need to be changes in the skill sets of auditors to cope in this new world
We can either hope or embrace:
Entities we audit
where is their data (controls might be embedded)
new risks (cyber, data privacy, JVs, outsourced)
Audit relevance
value of historical audit…FS?
real time auditing?
over more than just financials
predictive analytics → imagine downloading the entire data set of every client. Whole assurance as opposed to sampling
providing real insights to your clients?
Our people and their skillsets
we will need to invest in new skills and will need to look broader for graduates and others.
will they want to audit anyway? How do we make it desirable?
millenials will not be prepared to leave their cool stuff at home to come to work!
we are fast returning to the pre GFC concern of a war on talent.

11. Assessing current governance, risk management and control
Final comments…
As leaders in the audit profession we have choice:
courage to take risks, innovate and do something different, or
sit back and enjoy the “ride” to the bottom
If you dislike change you’re going to hat extinction!