A conversation with Peter Beets, Procter & Gamble

A conversation with Peter Beets, Director of Global Audit and Consult at Procter & Gamble

As part of ‘PwC 2019 Global Risk, Internal Audit and Compliance Survey’, we interviewed Peter Beets, Director of Global Audit and Consult at Procter & Gamble. In an interview with Richard Thomas, Partner and Leader Internal Audit at PwC, he talked about how their internal audit takes into account the digital transformation and how their risk appetite responds to these changes.

What does digital transformation mean to you?

Digital transformation could be for our generation what the Industrial Revolution was for our ancestors. If we do this right it’s going to allow us, to a significant degree, to transform the way work is done. Work that had to be done in a more manual way – like transactions and processing, and even day-to-day processes like shopping – can be made significantly more efficient, and free up resources and capacity for ‘the next level’ of work. The same applies to internal audit, which can benefit a lot from the new digital capabilities.

How would you describe your organisation’s level of digital maturity, meaning the integration of digital technologies and capabilities into your operations, services, products or experiences?

Digital comes with both new risks and new opportunities for the Company. On the risk side, we’ve made significant investments to manage the ever-growing information security risks. This includes investments to change infrastructure, systems and processes as well as to build the capability of our people in order to protect the company’s assets. From internal audit side, information security testing is now part of most engagements we do.

On the opportunity side, consumers want a highly personalised experience for brands and services. We are meeting that need by developing connected and innovative consumer products that are transforming everyday life. Examples include Genius X (toothbrush with artificial intelligence), Opté (handheld beauty device that scans users’ skin, detects small imperfections and applies concealer to even out skin tone) and Airia (home fragrance device controlled via a convenient app.) For internal audit, it is important we understand the technologies that are being used, and the risks that may be associated to these technologies.

Would you say there are areas of the business that are further along in that digital journey than others?

We are leveraging digital in multiple aspects of our business. For instance, on the financial operations side, we are making continuous progress on improving the Accounts Payable, Accounts Receivable and General Ledger processes. In Internal Audit, we are using analytical tools to better detect and assess risks – for instance risk dashboards and transaction screeners.

Our products are also integrating and benefiting from digital transformation. All our categories have plans with digital tools to improve their performance or personalise the consumer experience. This journey started several years ago … for example, think of the Oral-B toothbrush with Bluetooth technology, which gives you real-time feedback on how you’re brushing your teeth.

What does being a smart risk taker mean to you?

You achieve the best risk management when the organisation understands why we have controls, because they understand the underlying risk and then evaluate, based on the profile and size of the risk, where it’s going to materialise, and what is the right level of control.

Right sizing of controls is really important. As an internal audit function, we assess both whether the control is effective and efficient. We work with policy owners to assess the cost of control versus the risk that is being mitigated. In some cases, that leads to simplification of processes, policies and/or controls. But in other areas, we also see risks that are not yet sufficiently managed, and where controls need to be strengthened. Digital media and e-commerce are two examples where controls have been strengthened.

For internal audit to play this role, we need to have the right talent in the function. We have a rotation model between the business and internal audit. Employees will flow into internal audit for a number of years, and then move back to the business and new people will come in. That exchange of talent is really important for me, because internal audit can only be a strong function that helps the business if people in internal audit have a deep understanding of the business and how the day-to-day operation is run. At the same time, through the rotation of talent back into the business, it also helps build stronger stewardship and risk management capabilities in the business teams.

Has P&G’s risk appetite changed as it advances on its digital journey? How?

I don’t believe that digital by itself has changed our risk appetite. Digitalisation enables us to optimise the way we assess risk management. Through those tools, we can provide better assurance than in the past. A typical, traditional audit would have involved looking at the process, assessing it and taking a number of samples. We now have tools to screen much larger samples or even a total population.

Do you have an example of a significant digital initiative that has helped P&G achieve a superior outcome in the organisation as a whole?

Taking a risk focus, we have made significant investments in information security over the last two or three years. I don’t think that any company can ever say it’s fully secure on the information security level, but we have made very good progress. The same holds true for privacy.

How is P&G internal audit considering integrating digital transformation in its own plan?

We now have, within our function, a small group of people who are dedicated to developing analytical tools that help us to do audits either more effectively or efficiently. We assess the risks more effectively, for example, by covering a much larger part of our transactions, rather than a selective sample. On the efficiency side, the tools do a lot of the manual work that people would have done in the past, allowing them to increasingly focus on what the data tells us, how we should evaluate it, and recommending improvements.

How do you keep your eye on developments so that when something new comes up you say, ‘that’s what we need, let’s go with that’?

We talk to companies like you, your peers in the industry and attend conferences around these topics. At the same time, we’re working with other departments in P&G. There are tools that can have a certain use for the business but also have a use for internal audit.

Are you providing or planning to provide any new services to P&G, to your colleagues, that you couldn’t have offered without these digital capabilities?

The biggest thing for us, in internal audit, is effectiveness and efficiency. Digital capabilities are a key enabler for that. What we do to drive effectiveness and efficiency, may in some cases also halo over to our clients. On the one hand, on an engagement level, the goal is to do audits that are less disruptive to the client because tools allow us to do more without having to interfere with the operations. On the other hand, some of the tools we develop in internal audit, are being re-applied by our clients to improve day-to-day operations. Accrual analytics is an example of that.

Are digital capabilities changing how or how often, you engage with stakeholders like the board and business leaders?

It doesn’t change frequency of our reviews or the meetings we have. We use ever-improving technology to communicate with the business on issues, to track the remediation of those issues, and so on. But that doesn’t change the frequency of our communication with the board or business leaders.

How do you see the organisation evolving at P&G to handle the changes and take on the challenge of digital transformation?

We’re investing into our systems, processes and getting our people more up to speed with the new digital tools. About nine months ago we launched a new internal capability program - basically a training platform on digital. We are also encouraging people, within the internal audit function, to learn new tools like KNIME for data analysis.

What are some of the new technologies you’re using in internal audit to boost productivity, cut your costs and ultimately improve the quality of the services you provide to P&G?

I don’t have a single answer, because depending on the tool, we use a different combination of technologies. For example, for one of our tools, we use a combination of KNIME for the analytical part and Spotfire or Tableau for the visualisation.