Process Mining for Auditing and Compliance

As today's risk management landscape is changing rapidly, your company's ability to adapt quickly to such changes will become a critical competitive advantage. However, in large organizations, countless complex processes have been established in an outdated fashion that simply cannot keep up with the business' evolvement.

Such dilemmas create tremendous pressure on your organization's internal audit team, who are expected to gain quick, precise and comprehensive insights into how your company is operating. Traditionally, auditors and risk analysts would have to examine the manually documented process reports, interview people and form their own opinions on what's happening. Stewart Wallace, Director in Risk Analytics at EY UK, estimates that such laborious and expensive assessments would only give you 40 percent of the truth.

Enter process mining. Process mining software such as QPR ProcessAnalyzer not only give you 100 percent coverage of your processes, but also pick up the unexpected events that traditional analytics cannot. This blog post will discuss how you can achieve efficient internal control and a proactive approach to errors using process mining.

 

New to the process mining concept?
Read the "Whats, Whys, and Hows of process mining" on our pillar page.
Check out our "What is process mining?" blog post.

 

If you're already familiar with the process mining basics, continue reading as I'll dive deeper into today's risk management landscape, and four use cases of process mining in internal auditing and compliance:

1. Discover 100% as-is transactions with a click

2. Analyze and produce high quality audit findings

3. Mitigate risks and save millions in costs

4. Engage all business operations for organizational transformation

 

See the on-demand webinar in this topic and download the presentation slides here.

Writer's notes: This blog post was originally published in May 2020, and has been updated in 2022 for accuracy and comprehensiveness.

Internal audit and risk management challenges

We live in a time when the threat management landscape is constantly evolving along with disruption and transformation, global risks, digital threats, and regulatory complexity. More than ever, organizations now realize the importance of internal auditing and risk management. In order to cope with those threats, companies need to ask themselves what is the current state of their operations and have their complex processes evolved along with their businesses.

Better performances, lower costs, stronger connectivity to the outside world and regulatory solutions are among the most prominent goals of process evolution. Where and how should your company start? With more than 30 years of experience in process excellence, we at QPR suggest you take a look at your "as-is" processes. You should be able to find the bottlenecks and efficiency improvement areas, the unexpected deviations, the processes where you are over- or under-controlling, and last but not least, the security and fraud vulnerabilities.

It's certainly not an easy task. If you wish to make a change of such caliber, there isn't a better method than process mining. In the next section, I'll discuss a framework of Discover-Analyze-Mitigate-Engage using our process  mining software to achieve precise internal control, reactive approach to errors, identify and adapt to changes in the risk management landscape.

challenges for internal audit and risk management

 

1. Quickly discover 100% as-is transactions

The following graph shows the contrast among three common perceptions of processes. The "textbook" process, covering about 20 percent of the real process, is used to demonstrate or explain the process in the simplest way. When you experience a real-life process yourself, you'd realize that the process includes many reworks, variations and exceptions. As people in the same roles have different ways of working, they would only understand about 40 percent of how the end-to-end process behaves in reality. With process mining, you'd have access to 100 percent coverage of all processes and transactions.

process expectations and reality

 

In order to accomplish process discovery, you can either work with a data scientist gradually or use a process mining tool. QPR ProcessAnalyzer, for example, gives you a thorough, automatic analysis of your processes at once. Process mining as a methodology can result in an efficient, fact-based view of your processes, in contrast with traditional analytics, by removing the extensive inquiries and inherent bias.

 

2. Analyze and produce high quality audit findings

Using process mining, you can quickly produce fact-based findings based on the data in your information systems. In practice, our customers use QPR ProcessAnalyzer as soon as they close the month or quarter review period. Once the fresh data are in the systems, the tool immediately shows you both standardized or customized analyses and findings.

An advantage of using process mining instead of traditional analytics for internal audit is selecting target audits by any dimension, such as company codes, transaction types, or purchase and sales organizations. This method offers your internal audit team an efficient and comprehensive reporting system. You also have the options to analyze all of your data at once or slice and dice to increase your workflow speed.

 

3. Mitigate risks and save millions in costs

One of the most basic process mining functions is to quickly compare your as-is processes with their design model by creating visualized process flows based on data from company IT systems. You can quickly identify the non-conforming events and track down their sources with automatic root cause analyses.

 

https://www.qpr.com/hubfs/main/front-page/process-mining-visualizes-process-flows+illustration.jpg

 

By uncovering hidden bottlenecks and inefficiencies in your processes, you can save up to millions in compliance costs and auditing costs itself. But what if I tell you it's also possible to eliminate future compliance costs? Experts at QPR have developed the next generation of process mining - intelligent process mining. Equipped with machine learning and artificial intelligence algorithms, QPR process mining software can estimate future risks and suggest corrective actions to the process owners and stakeholders. You can now fix the problems in your processes before they happens.

 

4. Engage all business operations for organizational transformation

With QPR process mining tool, you can publish live process KPI reports including the audit findings and present them to the business side of your organization. They can then see the problems in the processes, find out the root causes to these cases, and even rerun the analysis with data as they are improving their operations. This engagement with the business operations is critical in the success of your organization's process excellence. The internal auditors can now be on the same side as the business operators, both work towards the goals of process improvement together.

 

process mining for auditing and compliance

 

It’s a good time to take a look at Process Mining if your company hasn’t already. The capabilities and usability of Process Mining software are improving rapidly, and the market is quickly becoming mature, although there’s still much work to be done.

If you think your company is ready to step it up with the future of as-is process modeling and process efficiency maximization, the fastest way to get things moving is to follow these steps:

Written by
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Yen Do

Marketing specialist in Process Mining at QPR Software.

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