Internal Auditing Around the World, Volume 15: Mitsubishi UFJ Financial Group (MUFG)

Internal Auditing Around the World Vol 15 Profiles
Internal Auditing Around the World, Volume 15: Mitsubishi UFJ Financial Group (MUFG)
Mitsubishi UFJ Financial Group

"We have very strong audit functions around the world. Through transformation, we’re establishing the vertical alignment we need to unlock all of that value."

- Katsunori Yokomaku, Executive Officer, Managing Director, Head of Internal Audit


Tokyo-based Mitsubishi UFJ Financial Group, Inc. (MUFG) ranks among the world’s largest global financial services organizations with over 180,000 employees in more than 50 countries. The company’s numerous subsidiaries and operating entities serve customers in Japan (home office); the Asia-Pacific region; the Europe, Middle East and Africa (EMEA) region; and the Americas region. Historically, each of those four regions (including the home office) has been supported by its regional internal audit function.

Under a three-year, medium-term business plan (MTBP), MUFG is adopting a more integrated and unified management approach across all regions while transforming all of its business operations according to its core principles: (a) customers define the business segments; (b) customers come first when MUFG determines how to allocate resources; and (c) strategic priorities remain focused on high-potential sectors by integrating related and relevant operations.

Structural changes play a central role in enabling this enterprisewide transformation. MUFG was traditionally organized into three primary businesses: MUFG Bank, Mitsubishi UFJ Securities, and Mitsubishi UFJ Trust Bank. As part of the MTBP’s emphasis on integration, several new business groups are being created. These business groups, whose activities will cut across the three primary businesses and across geographies include:

  • Retail and commercial banking
  • Japanese corporate and investment banking
  • Global corporate and investment banking
  • Global commercial banking
  • Asset management and investor services
  • Global markets

Dozens of other major changes to processes, technology and teams are also occurring as part of the MTBP and MUFG Re-Imagining Strategy, which is scheduled to take place through 2023. Digital transformation features prominently among these improvements. Most, if not all, of the changes occurring under MUFG’s transformation are designed to foster greater collaboration, information-sharing and consistency (captured in the company’s “ONE MUFG” slogan) throughout the global enterprise. “We’re confident that we will be able to execute this strategy despite a rapidly changing external environment in many of our regions,” notes Katsunori Yokomaku, Executive Officer, Managing Director, and Head of Internal Audit for MUFG and MUFG Bank.

"Most, if not all, of the changes occur­ring under MUFG’s transformation are designed to foster greater collaboration, information-sharing and consistency (captured in the company’s “ONE MUFG” slogan) throughout the global enterprise."

From Problem Finder to Trusted Adviser

Yokomaku leads global auditing and ongoing monitoring activities for reporting to the MUFG Audit Committee and the Audit and Supervisory Committee of MUFG Bank. He also leads global audit initiatives with his global leadership team, which includes Denise DeMaio, Chief Audit Executive for the Americas; James O’Shea, Head of the EMEA Internal Audit Office; and Andre Painchaud, Head of the Asia Internal Audit Office. The MUFG Group has around 1,200 internal auditors working for the Group globally.

“The most notable challenge our internal audit functions face is to continue to provide effective assurance services and coverage across legal entities, business groups and countries while the organization continues to integrate and globalize,” Yokomaku says. He explains that internal audit must keep pace with the transformation of the business while conducting its own transformation to maintain an effective coverage model. “This is a significant challenge,” he adds, “and one that requires a change management effort on a massive scale.”

Yokomaku also notes that one of the overarching objectives of internal audit’s longer-term transformation within MUFG is to transition from operating as a problem finder (as it did in the past), to behaving as an assurance provider and problem solver (as it has accomplished more recently), to becoming an insight-generator and trusted adviser. “We have very strong audit functions around the world. Through transformation, we’re establishing the vertical alignment we need to unlock all of that value,” Yokomaku says.

As is the case with MUFG’s business transformation, the purpose of internal audit’s transformation is to operate in a more collaborative and unified manner across all global regions. This will foster a more effective and efficient sharing of leading-edge internal auditing practices and technologies, according to Yokomaku. This is easier said than done, of course. Since MUFG took its current structural form in 2005, the operation of (and governance over) individual business entities has been emphasized over a more centralized operational and governance model. This has been the case for how internal audit operates as well. Moving toward a more centralized model, Yokomaku continues, requires “a change in mindset.”

A “Complex” Transformation

The “global audit transformation (GAT)” that MUFG has begun qualifies as “complex,” according to Yokomaku. The size and global reach of MUFG marks one source of that complexity. Consistent approaches must be established across numerous cultures, languages and business practices.

"As is the case with MUFG’s business transformation, the purpose of internal audit’s transformation is to operate in a more collaborative and unified manner across all global regions."

The GAT plan calls for changes to harmonize and converge business policies, processes, talent management practices, organizational alignment, management and stakeholder reporting, audit methodologies, and support­ing systems and data. The GAT timeline is aligned with the company’s overall business transformation timeline. The plan’s multi­phased approach is designed to initially lay a foundation for the move to a fully global function before implementing the unified set of methodologies, reporting mechanisms and supporting technologies. This year, for exam­ple, some types of audits will be conducted in a unified manner around the world. These global audit areas include financial crimes, global systems, Sarbanes-Oxley, market conduct, etc. Next year, the plan is for all audits conducted in all regions to follow the same methodology with limited exceptions.

It is important to note that the leading prac­tices concerning auditing methodologies and supporting technology already exist within MUFG’s globally dispersed internal audit organization. For example, internal auditors in select regions are using data analytics techniques, and the home office is using artificial intelligence (AI) technology to embed efficiency and effectiveness in the document review process. The purpose of GAT is to ensure that these types of leading practices become standard operating proce­dure throughout all global auditing divisions.

These practices extend well beyond technology. The internal audit function is currently assessing ways to improve its talent management processes so it can expand its future supply of senior-level internal auditors. Yokomaku and his team are discussing with MUFG’s human resources (HR) function new ways to expose early-career professionals to internal auditing expertise, methodologies and technologies through rotational assignments. Moreover, the internal audit function plans to increase its hiring of external talent, especially those in the early stages of their careers, so that they can simultaneously gain auditing experience and amass industry and organizational knowledge. To that end, MUFG is also considering the use of internal audit exchange programs through which internal auditors in one of the company’s regions join a different region’s internal audit function on a temporary basis to facilitate practices sharing and support the “ONE MUFG” objective.

"The internal audit function is currently assessing ways to improve its talent management processes so it can expand its future supply of senior-level internal auditors."

The MUFG GAT program is designed to achieve standardization, consistency and efficiency. “Being able to provide a common audit perspective, assessment and opinion on a global basis is an innovation — one that requires a major transformation at a company of our size and global reach,” says Yokomaku.

 

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