Internal Auditing Around the World, Volume 15: Synchrony

Internal Auditing Around the World Vol 15 Profiles
Internal Auditing Around the World, Volume 15: Synchrony
Synchrony

"In the future, I think internal auditors, in general, will use more data analytics and digital dashboards to get a better sense of whether a risk is going up or down. So, there will be a little bit more science and a little bit less art in our reporting."

- Mark Martinelli, Executive Vice President and Chief Audit Executive


Synchrony is a consumer financial services company that delivers customized financing programs across a range of major industries, from retail to automotive to travel. It is the largest provider of private-label credit cards in the United States and has established partnerships with national and regional retailers, healthcare providers, and other businesses in the United States and Canada. Synchrony also provides an array of consumer savings products through Synchrony Bank, its wholly owned online bank subsidiary.

Synchrony, headquartered in Stamford, Connecticut, split off from GE Capital, General Electric’s financial services unit. So, while Synchrony is technically a new company, its roots extend back to 1932, when GE Capital Retail Bank began providing customers a line of credit to purchase GE appliances. In 2014, Synchrony went public, raising more than US$2.8 billion in its initial public offering (IPO).

Synchrony is a digitally forward company that invests in technology across multiple platforms — in-store, online and mobile. It has as a goal to shape the future of financing and customer engagement by combining technology and analytics to stay ahead of emerging trends, and then pilot new programs and partnerships to deliver innovative solutions fast. And as Synchrony pursues those investments, its internal audit team is on hand to assess potential risks.

“Synchrony is essentially a technology company that does consumer finance,” according to Synchrony Executive Vice President and Chief Audit Executive Mark Martinelli. “So, a big portion of the internal audit team’s work, in addition to providing assurance services to the company, is to audit technology. That includes cloud and mobile technology, as well as other innovations designed to make Synchrony’s interactions with our customers more frictionless.”

"To help them learn, Martinelli collab­orated with the data scientists and professional practices group within the function to set up a data analytics “university” for internal audit."

Spending Two Weeks in the “Data Intelligence Academy”

Martinelli oversees an internal audit depart­ment that is divided into five teams, as well as a professional practices group. He has expanded the staff size from 10 to 60 since joining the firm in May 2014, a month before Synchrony’s IPO. About 20 team members work with Martinelli at Synchrony’s Stamford headquarters. The other 40 individuals are spread across offices in Georgia, Illinois, Utah and India.

“I had an opportunity to build a new internal audit department at Synchrony,” Martinelli says. That work included creating a data analytics function within internal audit, which was something Martinelli says he wanted to do right from the start. Today, data scientists make up about 10% of Synchrony’s internal audit team. “We’re now trying to retool and rescale the department so that everyone on the team has real working knowledge of data analytics by the end of 2020,” says Martinelli.

To help them learn, Martinelli collaborated with the data scientists and professional practices group within the function to set up a data analytics “university” for internal audit. The Data Intelligence Academy (DIA), which is self-funded by the department, launched in 2018. “We’re training individuals on data analytics and related techniques in a two-week immersive course,” Martinelli says, adding that about 25% of the auditors had completed the training as of early 2019.

“My view is that the next generation of internal auditors will need to know data analytics,” he says. “I’m already thinking about what we’ll be able to do in our organization by the end of next year when everyone in the department has deeper knowledge of data analytics and techniques. We’ll then be able to use our true data scientists in a much more specialized way.”

"While Martinelli is intent on helping his team become proficient in using data analytics, his “digital vision” for the department extends well beyond that effort. His goal is to use technology to help evolve a more real-time assurance model for Synchrony."

Martinelli says there was no trouble finding volunteers for the inaugural class of the Data Intelligence Academy. “We had many team members raise their hands to say, ‘Yes, I want to be a part of that.’” That level of enthusiasm, along with the success of the program to date, is motivating other internal auditors at Synchrony to embrace the opportunity to learn this new skill set.

“People are sometimes wary of new tech­nologies — and the impact they could have on their jobs,” Martinelli says. “The Data Intelligence Academy is a way to introduce data analytics to our team in a comfortable way, and it’s working really well for us. The combination of an auditor’s knowledge of the process, coupled with their new DIA data analytics skills, is really providing measurable early wins for our DIA graduates.”

The internal auditors who completed the Data Intelligence Academy’s curriculum have already developed several case studies that they’re using in their work, according to Martinelli. “We’re starting to see the benefits of those case studies, too,” he says. “We have individuals and teams coming up with findings that they wouldn’t have been able to uncover without data analytics. I also think that our use of data analytics is helping us to deliver audit work to Synchrony that’s timelier, as well as more aligned with the needs of the business.”

Measuring Internal Audit Efficiency Through “The 2020 Initiative”

As Synchrony’s internal auditors expand their use of data analytics in their work, the business’s appetite for data-driven insights and tools from the function grows, says Martinelli. “I’ll tell you why that’s the case: We’re now able to give them deeper assurance,” he explains. “We can also identify and share opportunities for automation or efficiencies within a process, including sharing best practices for data analytics used in those processes.”

While Martinelli is intent on helping his team become proficient in using data analytics, his “digital vision” for the department extends well beyond that effort. His goal is to use technology to help evolve a more real-time assurance model for Synchrony. “Auditing, both internal and external, is a bit historical in nature,” Martinelli says. “We, as auditors, show up, perform the audit, and then issue a report three months later telling you what we found. What we want to do is shorten our auditing spans, deliver faster reporting and conduct better risk assessments.”

Eliminating manual work is one key to realizing that vision. Employing data analytics and dashboards is another. “We could look at certain key performance indicators, changes in balances, the number and type of complaints coming in from consumers, and many other things,” says Martinelli. “And maybe we combine that information with internal and external data to come up with risk indicators that can tell us if a risk in a certain area of the business might be increasing or decreasing.”

He continues, “What I’m describing is not exactly predictive modeling. But the idea we’re working toward is to create dashboards that could tell us whether we should look at an area of the business sooner rather than later because something has changed and is potentially creating risk.”

Martinelli says, “In the future, I think internal auditors, in general, will use more data analytics and digital dashboards to get a better sense of whether a risk is going up or down. So, there will be a little bit more science and a little bit less art in our reporting.” Martinelli also envisions internal auditors at Synchrony using dashboards to show business owners broad trends over time, instead of offering a point-in-time assessment.

Soon, the internal audit department at Synchrony will be using dashboards to gauge the performance of the function itself. That digital project, now in development, is called “The 2020 Initiative.” Martinelli offers this background on it: “One of the goals I set for the department this year is to run internal audit like a business. We’re becoming more efficient in our work by using tools like data analytics, but how efficient are we as a department? So, I want us to have a series of simple dashboards that can tell us, every day, how efficient and effective we are in terms of using our team, in getting audit reports out, how fast we’re validating issues, how well we are utilizing our resources, and more.”

One dashboard being designed now will provide visibility into audit work papers, according to Martinelli. “Work papers have to be signed off within a certain amount of time,” he says. “So, how fast do they get signed off? And are we falling behind on the work?”

He adds, “I’m trying to find better ways to make us more aware of where we’re efficient — and where we’re not. I think it’s important to shine a spotlight on our department to make sure we’re as effective as we can be using digital and data to create dashboards to show my leaders and to see for myself how well we’re running the internal audit department.”

"As the internal audit team at Synchrony uses technology and data insights to work more efficiently, Martinelli says they are finding more time to focus on value-adding projects for the business."

Getting Comfortable With the Speed of Change

As the internal audit team at Synchrony uses technology and data insights to work more efficiently, Martinelli says they are finding more time to focus on value-adding projects for the business. “We need to do more work around data privacy and cybersecurity, for example,” he says. “And, as we automate more of our work, we are reinvesting our time in these and other areas.”

Pivoting to new assignments isn’t always easy, though — nor is adapting to new technology. But Martinelli says next-generation internal auditors will need to do both to succeed in the profession. And that’s not all: “Internal auditors need to get more comfortable with the speed of change,” he says. “There is always change, and there always will be change. But the pace of change today is rapid, and that’s driven largely by technology.”

So, for internal auditors, getting comfortable with the speed of change will include learning how to audit emerging technology — and perhaps in real time, Martinelli says. “We have to figure out how best to audit new technologies, which present new risks,” he explains. Martinelli points to systems that use machine learning and artificial intelligence, which could “make changes in coding on their own.” He says, “I think, in the future, internal auditors will need to audit while operational systems and controls are being built, as opposed to after the fact.”

"So, for internal auditors, getting com­fortable with the speed of change will include learning how to audit emerging technology — and perhaps in real time."

 

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