Internal Auditing Around the World, Volume 15: Zain Group

Internal Auditing Around the World Vol 15 Profiles
Internal Auditing Around the World, Volume 15: Zain Group
Zain Group

"Now, you might say, ‘That sounds like an operational activity and not something internal audit should do.’ But we view CapEx [capital expenditures], and whether they are generating the returns that were originally projected, as a strategic risk if projections are not met … and we know that we can deliver immediate value to the organization once we complete our advanced integrated analytics initiative."

- Venkatesh Jandhyala, Chief Internal Auditor


Established in Kuwait in 1983, Zain Group was the first mobile telecommunications operator in the Middle East. Today, on the heels of a successful expansion strategy initiated in the early 2000s, Zain Group is a leading mobile voice and data services operator with a commercial footprint in eight markets across the Middle East and Africa, with 6,000 employees, over US$4.4 billion in annual revenues, and 50 million individual and business customers. Zain Group operates in Kuwait, Bahrain, Iraq, Jordan, Saudi Arabia, Sudan, South Sudan and Lebanon (where it manages the local operation “touch” under a management contract). The Zain brand is one of the most recognized and loved brands in the region, having won numerous prestigious marketing and advertising awards across the globe, with the brand being valued in the vicinity of US$2.3 billion.

"To counteract the shrinking margins that all voice and data services infrastructure providers confront, Zain Group is remaking itself as a digital lifestyle services provider."

In 2016, the company embarked on an ambitious transformation under the current Group CEO and Vice Chairman, Bader Al Kharafi. To counteract the shrinking margins that all voice and data services infrastructure providers confront, Zain Group is remaking itself as a digital lifestyle services provider. Across its operations, the company is offering a broad array of appealing individual customer digital services and applications (many through key partnerships), as well as a range of enterprise (business-to-business or “B2B”) services, offering government bodies and companies of all sizes business-enhancing communications services. Most recently, in Kuwait, the operator launched Zain Drone-as-a-Service, which helps utilities remotely oversee and manage their vast infrastructures in an efficient and safe manner. Zain Group’s transformation in recent years has consisted of major initiatives in six focus areas: customer experience, operational effectiveness, value management, B2B, digital frontier and innovation, and talent development.

“Technology evolves rapidly in the telecommunications industry and having the foresight to plan and adapt is critical,” notes Zain Group’s Chief Internal Auditor Venkatesh Jandhyala. The swift pace of technology-driven change combined with Zain Group’s strategic transformation efforts, as well as the company’s large and highly varied geographic footprint, keeps Jandhyala’s internal audit team on its toes. “Given the ongoing adoption of new technologies throughout the business, some of the processes that our auditors document are no longer relevant just a few months after we complete an audit,” says Jandhyala.

This dynamic also spurred Zain Group’s internal audit function to deploy an impressive, steadily expanding collection of advanced technology, including process mining tools, robotic process automation (RPA), continuous monitoring activities (CMA) and advanced integrated analytics.

Monitoring Fuel Cost Swings During a Civil War

The majority of Zain Group’s largely centralized internal audit group is based in the company’s Kuwait City headquarters. A small internal audit division also operates from the company’s Saudi Arabia office, primarily to address auditing work related to unique Saudi regulatory requirements.

Jandhyala leads a team of 25, which includes eight full-time employees and 17 co-sourced internal auditors. He describes the co-source arrangement as crucial to his function’s operation because it gives him access to specific skills and technical expertise (e.g., process mining) while also letting him scale up and down in accordance with fluctuating workloads. His team audits processes performed by 6,000 employees across eight countries on two continents. “We are very, very lean,” Jandhyala points out. “As a result, we’ve needed to be a much earlier adopter of new internal auditing technology. We are also highly influenced by our company’s overall digital strategy. That means we continually look for innovative ways to maximize the value we provide despite our lean size.”

A prime example: Back in 2015, Jandhyala’s team developed a homegrown continuous monitoring capability in response to price spikes in diesel fuel that hammered Zain Group’s South Sudan operations during that country’s civil war. In most parts of South Sudan, as well as in many other regions of countries in which Zain Group operates, cell phone towers run on diesel generators (making diesel fuel the company’s second-highest cost contributor to network management expense). Cell site operations management was largely outsourced in South Sudan, and the outsourcers maintained contracts with a number of different fuel providers that delivered diesel to numerous cell sites — both inside and outside war-torn regions. That arrangement meant that internal audit’s sampling of fuel-cost data would be ineffective, if not useless.

"Back in 2015, Jandhyala’s team developed a homegrown continuous monitoring capability in response to price spikes in diesel fuel that hammered Zain Group’s South Sudan operations during that country’s civil war."

Instead, internal auditors went to Zain South Sudan, which did not have an enterprise resource planning (ERP) system at that time, and scanned and loaded fuel procurement and cell site operations management data into a database. The auditors ran SQL queries and integrated that information with a geographic information system (GIS). The application they developed enabled local management to get the previous six months’ fuel-cost information on nearly 200 cell sites, individually or by region, at the click of a button. Those views helped management determine which suppliers were gouging and which ones were raising costs in response to legitimate supply chain disruptions. Based on this information, internal audit also suggested the use of a new outsourcing approach, the selection of a new fuel vendor, and the implementation of new key performance indicators to monitor and manage fuel costs moving forward.

Utilizing Process Mining and Social Media Monitoring

The internal audit function has refined its use of advanced technologies since equipping the South Sudan operations with that continuous monitoring application four years ago. Jandhyala emphasizes that all of his function’s innovation-related activities are squarely centered on managing risk. “We look at everything we do from a risk management perspective,” he says, while describing recent process mining and RPA initiatives.

"Based on the success of its RPA pilot in Saudi Arabia, internal audit is now planning how to implement similar bots in other regions."

Zain Group’s internal auditors recently applied process mining, with the help of technology from Celonis, to audit the procure-to-pay life cycle in the company’s Jordan operations. Those operations were attractive for process mining thanks to the existence of mature processes, a well-structured ERP system and a relatively smaller number of transactions (compared to Zain Group operations in other countries). The initial audit with the process-mining tool is currently wrapping up, and Jandhyala reports that the new approach reduced the time auditees needed to devote to the process definition stage of the audit by 25% to 30%. “Now we’re able to give auditees real-time examples of any anomalies that require their quick review to determine whether what we discovered makes sense and, if so, what type of follow-up the issue requires,” Jandhyala explains. “We’re seeing a lot of value for this, and we’re trying to figure out how we can use the tool to give our auditees a real-time understanding of what’s occurring in their areas on an ongoing basis.” Jandhyala and his team are also evaluating how to apply process mining to accounts payable (AP) — while zeroing in on fuel costs — more broadly throughout the company.

Internal audit’s recent use of RPA in the company’s Saudi Arabia operations involved a more targeted effort. Internal auditors wanted to address the lack of integration between the internal audit management software (IAMS), including open issues and follow-up actions by business partners, and the operation’s email system. The IAMS is managed by an external services provider, so, due to internal information security requirements, direct integration between those two systems was not an option. As a result, prior to the RPA implementation, internal auditors manually uploaded relevant reports and status updates from the IAMS into SharePoint, which is integrated with the email servers. That manual work consumed significant amounts of time on an ongoing basis.

The RPA application automated the transfer of information from the IAMS to SharePoint. “Rather than sending out manual emails as we used to do,” Jandhyala says, “automated emails are now sent to the auditee six weeks before the due date of a specific action. If we do not receive updates from the auditee on the status of a particular issue within one week following the due date, an email is automatically sent to the auditee’s supervisor.” Based on the success of its RPA pilot in Saudi Arabia, internal audit is now planning how to implement similar bots in other regions.

Other forms of internal audit innovation at Zain Group have served to address strategic risks rather than internal auditing efficiency and efficacy. Internal auditors just completed the function’s first social media sentiment analysis for the company’s Saudi operations. The review gauged what customers and employees are expressing on social media platforms about their experience with the company. “From a risk perspective, social media can affect the value of our brand, so we conducted the sentiment analysis from that perspective,” notes Jandhyala.

Delivering Immediate Value With Advanced Integrated Analytics

By 2020, Jandhyala plans to complete a new, advanced integrated analytics initiative that his function will begin in the coming months. This multilayered analysis will evaluate the extent to which capital expenditures (CapEx) in a given region are generating the returns they were expected to yield. The analysis will pull in a large collection of varied internal and external data, including budgets, revenue forecasts, spending and actual revenues, as well as population and demographics information, GIS data, local economic trends, information on transportation networks, and more. The idea is to help business partners understand which factors have the greatest influence in ultimately determining the efficacy of their investment planning and decisions.

“Now,” Jandhyala adds, “you might say, ‘That sounds like an operational activity and not something internal audit should do.’ But we view CapEx, and whether they are generating the returns that were originally projected, as a strategic risk if projections are not met … and we know that we can deliver immediate value to the organization once we complete our advanced integrated analytics initiative.”

"By 2020, Jandhyala plans to complete a new, advanced integrated analytics initiative that his function will begin in the coming months."

“While there is pressure on us to manage our resources judiciously and still keep pace with rapid technological changes, we are able to do our jobs effectively and experiment with new methods and technologies in our work thanks to our forward-thinking audit committee, and our progressive board and executive management,” Jandhyala says. “Without their combined support, any change would have been very time-consuming and delayed internal audit’s transformation.”

 

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