Learn how a leader in the food and beverage industry is harnessing the power of information to prepare for what comes next
THE BETTER THE QUESTION
How do you turn real-time insights into long-term value?
Helping internal audit teams drive better results from Key Performance Indicators
The Kraft Heinz Company is a global leader in the food and beverage industry, with sales of $25B in 2019. In the past, the organization’s internal audit focused on executing audits spanning operational, financial, and compliance risks. However, with the organization experiencing rapid change and a mandate for the internal audit team to act as trusted risk advisors, there was an opportunity to use data in a more in-depth and forward-thinking way – not only to continue providing assurances over key business processes but to enhance insights and risk coverage.
It’s standard practice for management teams to use key performance indicators (KPIs) to address business objectives. However, it can be difficult to analyze just how effective business processes are being executed in relation to company objectives. A new leading practice is to understand key risk indicators (KRIs) to ensure risks are adequately mitigated in order to achieve results for the business.
Kraft Heinz Global Internal Audit (GIA) engaged EY to transform their internal audit data risk analytics program in order to mine better risk insights from more real-time data. EY Risk Navigator is an SAP-powered platform built by EY. It combines SAP solutions and technology with EY intellectual property to help companies continuously monitor and manage risk.
Together we leveraged EY Risk Navigator as the basis for building risk analytics capabilities within Kraft Heinz. Now, the Kraft Heinz internal audit function can leverage real-time analytics to create a more efficient audit process, as well as delivering enhanced risk coverage and value.
“Our first goal was to create a more efficient and risk-based internal audit process by enabling the KH GIA team to have access to real-time risk analytics. But we also wanted to find ways for the organization to leverage these risk analytics to better mitigate risk and enhance standardization of business processes,” explains Mike Rambasek, Partner, Business Consulting, Ernst & Young LLP.
THE BETTER THE ANSWER
Data analytics determine where process breakdowns occur
Using automation to analyze the whole business in real-time.
Rather than continue with manual data analytic procedures, Kraft Heinz internal audit engaged EY to implement a new tool to not only digitalize the existing data analytics onto a global platform but to lay the foundation for more advanced risk analytics, such as predictive abilities to be built in future phases.
Real-time risk analytics powered by transactional data
Previously, the efforts to produce the data risk analytics involved manual efforts (executed by a separate team for data extraction, data analysis, and data visualization) that needed to be performed during each internal audit review. In addition, risk analytics had to be re-run on an ad-hoc basis. This made for an inconsistent process. For example, one audit team might use certain risk indicators, but a different team would use other indicators for the same audit. The results would then be handed off to the auditors who leveraged them to identify outliers and samples to select.
By building Risk Navigator, powered by SAP, directly onto Kraft’s two major SAP ERP system instances, the EY and KH’s Internal Audit team was able to create and automate a more comprehensive and reliable analysis of risk using technology to pull incomplete datasets and analyze the entire business process real-time.
For example, raising purchase orders (POs) on a timely basis is key to ensuring an effective procurement process. Risk Navigator has a KRI that identifies POs which have been raised late. The Kraft Heinz analysis of this KRI identified approximately 5% of the POs were raised after receipt of goods or invoices in a particular business unit. Through this analysis, the Kraft Heinz Internal Audit team was able to review this disparity and help the team drive changes to the existing process.
Fernando Garcia Bueno, Head of Internal Audit at Kraft Heinz explains: “Now we have risk analytics in real-time, these analytics can pull the latest 12 months’ data at any point in time. Now the internal audit team can review and monitor these key risk indicators as part of our risk assessment and audit planning process, which makes the audit more efficient and value-adding.”
Continuous monitoring to determine the root cause of underperformance
The risk analytics solution was developed with an enterprise-wide mindset so it would be beneficial not only for the KH GIA team but could also be accessed by process and risk owners to regularly monitor risks.
The solution included the implementation of 75 key risk indicators (KRIs) across core business processes and delivered an interactive visualization dashboard that enabled easy monitoring of those indicators. These indicators not only flag breakdowns in process, but also identify where breakdowns repeatedly occur. The solution provides summarized KRIs, visualization of the results, plus drill-down capabilities that give the KH GIA team better understanding and provides the detailed information the business needs to more effectively monitor the processes.
“The implementation of the Risk Navigator analytics tool at Kraft Heinz is going to enhance our control environment as we operationalize continuous and proactive risk monitoring into the first and second line of defense,” says Vince Garlati, Global Corporate Controller, Kraft Heinz. “We are partnering with internal audit and cross-functional teams within the business to expand our ability to leverage Risk Navigator as it supports our ongoing evaluation of the internal control environment and responds with real-time insights and actions.”
Smart cloud integration allows data insights to be used across the organization
Once Risk Navigator was in place, internal audit set out to train the management team on how to best incorporate the tool’s insights into their business strategy. Smart Data Integration (SDI) enables a seamless connection between back-end systems and the cloud. This means managers can access insights from the tool.
“The implementation of Risk Navigator at Kraft Heinz is a very good example of bringing to life our “digital decisioning” aspiration,” says Corrado Azzarita, Global CIO, Kraft Heinz. “I firmly believe that data-driven decision making can become a reality in several business domains, improving both efficiency and effectiveness. In this case Risk Navigator will help us mitigate risk and improve controls and processes. Risk Navigator effectively implements real-time monitoring of key risk indicators, which will allow process owners and risk owners to proactively look after the areas they are accountable for. ‘Continuous risk monitoring’ is now a reality and will be the best practice going forward.”
And while the Risk Navigator solution’s initial focus is driving the transformation of Internal Audit, it also provides insights to the business and other compliance functions to transform their process for monitoring and testing risk and controls.
“Risk Navigator serves as a prime example of digital transformation in alignment with our aspiration of becoming a more data-driven, insights-led company,” says Dan Vierneisel, Head of Global Business Services, Kraft Heinz. “By reducing the time required to gather, assess and detect control weaknesses, we deliver capacity for humans to focus more attention on remediating process deficiencies in order to mitigate and prevent recurrence from repeating in the future. By expanding the sample size to include the entire population of data, we ensure a more robust and comprehensive control environment. By automating the process, we gain real-time visibility of potential risks before issues become material. EY Risk Navigator provides the answer to the question before an audit occurs, thereby eliminating surprises whilst ensuring a continuous control monitoring framework.”
THE BETTER THE WORLD WORKS
Transforming the role of internal audit for business
Predictive analytics creates a platform to drive transformative solutions across the whole business.
By creating a stronger system to monitor risks, EY and Kraft Heinz gave the business the ability to continually track results, harness insight, and make a change for the now, next, and beyond. Since the implementation of Risk Navigator, Kraft Heinz has also gained efficiencies in executing the internal audit work, while providing greater risk insights and value. In addition, the internal audit team now monitors the KRIs on a regular basis and provides feedback to process and risk owners on areas that require their attention.
“Our internal audit vision is to enhance risk management while being recognized as a trusted risk advisor. We believe the implementation of Risk Navigator combined with the risk analytics roadmap that we have ahead of us, will help us to deliver on our vision,” says Fernando Garcia Bueno. “We were thrilled by the innovative thinking and ideas that EY brought to the table. From the evaluation of the different risk analytics tools to the implementation of Risk Navigator, EY helped us conceptualize how internal audit could play a more important role in monitoring key business processes across the business. We are now piloting predictive risk analytics and developing an ambitious risk analytics roadmap for the next 3-5 years to fulfill our vision to enhance risk management at Kraft Heinz.”
“The implementation of Risk Navigator has allowed us to continue being effective and provide great visibility to key risk areas during the COVID-19 pandemic and the challenge of remote auditing,” concludes Fernando Garcia Bueno.
The EY and Kraft Heinz Internal Audit team continue to challenge the status quo and this year has piloted predictive risk analytics in three areas. They are also exploring moving to other risk areas outside their SAP ERP system to expand the risk coverage. EY, an SAP Global Strategic Services Partner, is now helping Kraft Heinz implement solutions in many other parts of their business. This is just the beginning of an innovation journey that is bringing value and enhancing risk management at Kraft Heinz.
By Milene Carvalho Melanie Dotson Mike Rambasek. Courtesy EY. Insight available here