Corporate Governance in Banca d’Italia and the role

of Internal Audit

L. Micio Director de la Auditoria Interna

Banca d’Italia

Agenda

Corporate Governance (CG)

Definition

Role of Internal Audit

CG in Central Banks

CG in Banca d’Italia

Players, objectives, …

Internal Audit in Banca d’Italia

A Definition of Corporate Governance

The combination of processes and structures

implemented by the Board to inform, direct, manage, and

monitor the activities of the organization towards the

achievement of its objectives (IIA standards - Glossary)

The internal audit is a key player in the corporate governance:

– independent evaluator of the adequacy of governance structure, in terms of design and effectiveness

– assurance & consultancy services (double role)

Role of Internal Audit

• The main asset of a Central Bank: reputation

• Credibility of Central Banks with supervisory task: do what you preach

• Transparency in Central Banks’ action (e.g., IMF Good Practices for monetary policy decisions)

CG in Central Banks: distinguishing features

Corporate governance in Banca d’Italia

The Key Players

• Directorate

• Board of Directors

• Board of Statutory Auditors

• External Auditors

• Shareholders

• Audit Committee

•Internal Auditors

Banca d’Italia operates in a cooperative / competitive

environment* posing constant challenges requiring

• promptness

• flexibility

• high quality

*e.g., the financial crisis, the Eurosystem …

Objectives and Challenges for Banca d’Italia

Banca d’Italia: lines of development

• Strategic planning: from the Board vision to result measurement

• Organizational design inspired to flexibilty and differentiation

• Structural streamlining

• Process optimization

• Availability of information (“what needed, when needed”)

• Social responsibility

• Effective internal and external communication

Being a trustworthy “dashboard” for the Board and a

point of reference for the Audit Committee

The Internal Audit in the Banca d’Italia: CHALLENGES

- consultancy role of IA, as risk and control expert - added value: from risk identification to process

improvement

Internal Audit in Banca d’Italia:

Internal Audit as information hub on risk and controls

– Audit Committee – Secretary functions

– The Statutory Board of Auditors

– Bank’s Committees (strategic, risk, procurement, IT, HR, real estate …)

The way IA plays its role

• Attribute:

• combine specialization and holistic vision

• team working, certification

• Performance (thanks to its methods)

• internal auditors are professional and influential counsellors

• a rigorous common organizational language

Disclosure and

Accountability

Internal Audit

Off-site

Audit Resources

What levers IA uses

Transparent information flow

within the Bank

Entailing?

• Sharing IA’s horizontal vision • Building awareness

DISCLOSURE

Meaning?

• Transparent planning process

• Full and open communication of audit results

Added value: process information provide assurance

Being accountable for your own activity means that facts are

your starting points, and your analyses are logical and rigorous.

“ACCOUNTABILITY is the acknowledgment and assumption of responsibility for

actions, products, decisions, and policies including the administration, governance,

and implementation within the scope of the role or employment position and

encompassing the obligation to report, explain and be answerable for resulting

consequences” [Wikipedia]

ACCOUNTABILITY

Facts, proofs and rigorous analyses are our shields

OFF SITE AUDIT, WHY?

Available resources

Wideness and complexity of the Audit Universe

Audits focused on selected risk areas

Off-site activities to concentrate resources where needed

Being always up-to-date means being capable of changing

your own instruments often to make them more effective and advanced

OFF SITE AUDIT TOOLS

• Control Risk Self-Assessment: spreads awareness

of the relevance of risk management and promotes

the sharing of best practices

• FOLLOW-UP: continuous monitoring of management

action plans to ensure prompt and effective risk

responses

• BUSINESS INTELLIGENCE: processing of data

from multiple sources to extract useful information

• OFF-SITE ANALYSIS: further developments of desk-

review tools

OFF SITE AUDIT, WHY?

Off-site audit implies full synergy between off-site and

on-site analysts

+ Cross fertilization

- Silos approach

+ Synergy

- Static roles

HR DEVELOPMENT

Added value

Great commitment

Rigour and professionalism

Common Values

Think-tank laboratory

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