Internal Auditing Around the World, Volume 15: Country Road Group and David Jones

Internal Auditing Around the World Vol 15 Profiles
Internal Auditing Around the World, Volume 15: Country Road Group and David Jones
Country Road Group and David Jones

"Few companies experience as much change and transfor­mation as we’ve experienced in the past two years. Retail is an incredibly fast-paced industry, so our internal audit team needs to do everything possible to keep pace and remain relevant."

- Mark Brogan, Regional Head of Internal Audit, Australia and New Zealand


Founded in 1838 by Welsh merchant David Jones after he immigrated to Australia, the eponymous company is the oldest continuously operating department store in the world still trading under its original name. David Jones currently operates 45 stores in Australia and one store in New Zealand. Country Road Group consists of five distinctive retail fashion brands — Country Road, Mimco, Politix, Witchery and Trenery — and operates approximately 440 stores across Australia and New Zealand.

"Transformation is vital for the team to remain relevant in the face of all the changes that have taken place over the past two years."

Since the unification of the two companies, the pace of change has been intense, according to Regional Head of Internal Audit, Australia and New Zealand, Mark Brogan. “Few companies experience as much change and transformation as we’ve experienced in the past two years,” Brogan asserts. “Retail is an incredibly fast-paced industry, so our internal audit team needs to do everything possible to keep pace and remain relevant.”

Since David Jones moved its headquarters from Sydney to co-locate with the Country Road Group in Melbourne in 2017, David Jones has implemented new systems relating to e-commerce, merchandising, finance and warehouse operations. Continually improving and enhancing the customer experience represents a strategic goal.

Identifying Commercial Value

The internal audit team in Australia and New Zealand consists of six members who are organized into a business audit team (led by Ian Pigdon) and a retail audit team (led by Peta Alexander). The head of internal audit reports functionally to both the chair of the Country Road Group and David Jones’ audit committee and the head of internal audit at parent company Woolworths Holdings Limited. The audit team’s purpose is to “identify commercial value and make a positive difference by proactively focusing on the right outcomes.” The team strives to achieve this objective through five approaches:

  1. Behaving with integrity
  2. Focusing on our customers
  3. Communicating with influence
  4. Supporting each other
  5. Continually learning and growing

The team is dedicated to active career management. They enthusiastically point out a number of team member promotions and transition opportunities into a diverse range of business areas, including retail state area management, risk and compliance, retail space planning, central planning and merchandise, and multisite retail store management. When hiring new auditors, the team places value on culture fit, retail experience, technical auditing expertise and effective interpersonal skills.

Transformation is vital for the team to remain relevant in the face of all the changes that have taken place over the past two years. The internal audit team’s fiscal constraints have led them to be creative when using Excel tools combined with data visualization techniques when reporting results. The team continues to build data analytics coverage across a number of key business processes, and this will help generate commercial insights — quantified in financial terms — that drive tangible benefits for the group.

Business Audit Manager, Australia and New Zealand, Ian Pigdon, emphasizes that new ways of thinking and interacting with internal audit stakeholders mark an equally important facet of the function’s innovative transformation. “In this pressured environment,” Pigdon says, “it is critical that internal audit communicates with influence and makes recommendations that are impactful and drive sustainable changes.”

Providing Insights and Minimizing Stakeholder Surprises

To deliver on its mission to identify value-generation opportunities for the business, the internal audit team takes a “commercial, insights-driven approach” in its audit reviews while producing reports that incorporate data visualization. “We’re acutely aware that our senior stakeholders are incredibly time-pressured,” Brogan comments. “Thus, we need to communicate our key messages and insights quickly and effectively. A key way to do so is by using quantified examples and engaging visuals.”

The business audit team previously sought to gain a better understanding of customer pain points arising during the online delivery process. The team examined existing data — detailed customer feedback provided from a customer contact center, as well as Net Promoter Score (NPS) feedback (“verbatims”) — and then recommended improvements that were subsequently implemented to enhance the customer experience. Internal audit team members also used financial modeling (on a sample basis) to quantify how subsequent customer spending changed following their online shopping experiences (correlated to the customers’ NPS verbatims).

The internal audit function has used fraud analytics software to enhance the commercial insights it shares with Country Road Group brands. Auditors analyzed transactions of interest, which include refund transactions, staff discounts and customer loyalty rewards. The team financially quantified these observations and then presented this information to their senior stakeholders, which helped their stakeholders make better, more risk-informed decisions.

"To deliver on its mission to identify value-generation opportunities for the business, the internal audit team takes a “commercial, insights-driven approach” in its audit reviews while producing reports that incorporate data visualization."

In addition to increasing its use of analytics, the internal audit team is innovating from a process perspective by borrowing certain facets from the agile methodology. For example, the audit team issues flash reports — interim updates containing observations that are issued several times during the audit review. Business process owners respond to the observations, and internal auditors adjust their subsequent work in response to that feedback. Senior stakeholders understand that each flash report is a working draft and that the observations are in the process of being validated. The team notes that these reports have helped minimize surprises while reducing the time needed to finalize formal audit reports because business process owners have provided their feedback throughout the course of the review.

People Drive Improvement

As valuable as advanced analytics and innovative processes are in delivering commercial insights to the business, the team emphasizes that the human aspects of transformation are even more important — primarily because internal audit’s credibility, relationships and influence determine the extent to which business partners translate those commercial insights into tangible improvements. Brogan emphasizes that “nothing of significance or importance is achieved without people.”

"The TED Talks help challenge how the team thinks, and they also help signify why diversity of thought is important when communicating with stakeholders."

The majority of senior leaders in the business have completed a personality profiling tool that helps them better understand their strengths and weaknesses when communicating and interacting with colleagues. Insights gained from this profiling have helped improve how they communicate with their colleagues throughout the organization. In addition, the internal audit team uses one another as sounding boards to ensure that they are sharing information, insights and recommendations that will be relevant to their stakeholders. Prior to important meetings with senior stakeholders, internal auditors will share those presentations with their auditor colleagues who challenge their narratives and help strengthen and improve them.

Peta Alexander, National Retail Stores Manager (Australia and New Zealand), was responsible for the internal audit function holding weekly TED Talk Tuesday sessions during which internal audit team members take turns sharing a recent TED Talk or a thought-provoking article with the rest of the team. The team has a strong commitment to knowledge management, sharing information and continuous improvement. The TED Talks help challenge how the team thinks, and they also help signify why diversity of thought is important when communicating with stakeholders.

The team acknowledges that not everyone wants to spend their career in internal audit and thus they are committed to finding talent who can come into the team and make a positive impact before springboarding into the business. It is incredibly beneficial to have a blend of business audit knowledge (with knowledge of business processes) combined with retail store knowledge. The retail store team has over 30 years of combined retail knowledge and can speak with store managers about the challenges faced, having “walked in their shoes.”

In summary, the team’s creative, cost-effective approaches toward analytics and a strong focus on communication and relationships are the key differentiators when developing effective and cost-efficient next-generation capabilities.

 

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