Europaudvalget 2018-19 (1. samling)
EUU Alm.del Bilag 78
Offentligt
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SPECIAL THEME
F
ORESIGHT
EXPLORING POSSIBLE
FUTURES FOR BETTER
DECISIONS TODAY
Journal
Copyright: Sarah Holmlund ©123RF.com
What is critical here is your mind-set
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10
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O C TO B E R 20 1 8
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Table of contents
08
ECA JOURNAL LONG READ
By Stefanie Babst, Strategic Analysis
NUMBER 10
October 2018
Capability, NATO
Strategic foresight:
inspiring our thinking
about the (un) known
(un) knowns
22
INTERVIEW
Juhan Parts, ECA Member
Engaging in foresight: a must for the
ECA to be a global leader in public
auditing
EDITORIAL
It is not written in the stars – methods
used by foresight professionals
By Angela Wilkinson, World Energy Council,
and Betty Sue Flowers, Emeritus Professor at
the University of Texas, Austin
08
ECA JOURNAL LONG READ
Strategic foresight: inspiring our
thinking about the (un) known (un)
knowns
By Stefanie Babst, Strategic Analysis Capability,
NATO
13
‘No Crystal Ball’
Interview with Interview with Lars Brozus,
German Institute for International and
Security Affairs (SWP)
By Candida Splett, German Institute
of International and Security Affairs
16 Scenario mapping: helping regulators
to imagine possible futures
By Paul Moxey, Professor at London South
Bank University and with SAMI Consulting, and
Gill Ringland, SAMI Consulting
19 Using strategic foresight to navigate
digital transformation
By Duncan Cass-Beggs, Organisation for
Economic Cooperation and Development
22 Engaging in foresight: a must for the
ECA to be a global leader in public
auditing
04
05
27
32
35
38
40
42
Interview with Juhan Parts, ECA Member
By Gaston Moonen, Directorate of the
Presidency
Task Force charts foresight territory
for the ECA
By Andreas Bolkart, Directorate of the
Presidency, ECA
The 2018 ECA seminar: all about
making the ECA ‘future proof
By Barbara Auer, Directorate of the Presidency
Work on Long-term Trends and
Uncertainties at the IMF
By Alberto Behar and Kristina Kostial both with
the International Monetary Fund, and Professor
Rafael Ramirez , University of Oxford, and with
Normann Partners
The European Political Strategy
Centre’s Experience with Strategic
Foresight: safe-spaces, networks and
walking-the-talk
By Ricardo Borges de Castro, European
Political Strategy Centre, European Commission
How foresight helps parliamentary
work: the European Parliament’s
experience
By Danièle Réchard-Spence, European
Parliamentary Research Service
The future of Europe:
a collection of opportunities
49
52
55
59
62
Presentation by and interview with Klaus
Welle, Secretary-General of the European
Parliament
By Derek Meijers and Gaston Moonen,
Directorate of the Presidency
Designing a new audit manifesto –
the ICAEW AuditFutures programme
By Martin Martinoff, Institute of Chartered
Accountants in England and Wales
Digital transformation – where
private audit firms stand
By Brice Lecoustey, Ernst & Young Business
Advisory Services
Assessing future readiness: how
a private audit contributes to
addressing foresight
By Karl Braun, KPMG Germany, and Assoc. Prof.
Dr. Heiko von der Gracht, KPMG Germany
Moving from hindsight to insight and
beyond: how the Commission’s IAS
embraces foresight
By Manfred Kraff, Internal Audit Service of the
European Commission
Strategic Foresight at the U.S.
Government Accountability Office
By Stephen J. Sanford, U. S. Government
Accountability Office
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3
PRODUCTION
42
62
Editor in chief:
Gaston Moonen
Tel.: +352 4398 - 45716
E-mail:
[email protected]
23
Strategic Foresight at the U.S.
Government Accountability Office
By Stephen J. Sanford, U. S. Government
Accountability Office
Deputy editor:
Derek Meijers
E-mail:
[email protected]
Layout, distribution:
Directorate of the Presidency
Photos:
Reproduction prohibited
© ECA
© European Union, 2018
Reproduction is authorised
provided the source is
acknowledged
The contents
of the interviews and the articles
are the sole responsibility
of the interviewees and authors
and do not necessarily
reflect the opinion of the
European Court of Auditors
Unless indicated otherwise,
all pictures and graphical visuals
originate from the ECA
FOR MORE INFORMATION:
European Court of Auditors
12, rue Alcide De Gasperi
1615 Luxembourg,
LUXEMBOURG
[email protected]
Past editions of the Journal
can be found on ECA’s website:
eca.europa.eu/en/Pages/Journal.aspx
European Parliament
The future of Europe:
a collection of opportunities
Presentation by and interview with Klaus Welle,
Secretary-General of the European Parliament
By Derek Meijers and Gaston Moonen,
Directorate of the Presidency
European Council
Council of the European Union
?
69
The ECA's future institutional
positioning: conditions and
options
By Matthias Rossi, Professor at Augsburg
University
66
69
72
77
79
83
How foresight is used by auditors:
some first-hand insights from the
National Audit Office of Finland
By Jenni Leppälahti, National Audit Office
of Finland
The ECA's future institutional
positioning: conditions and options
By Matthias Rossi, Professor at Augsburg
University
DIRECTOR'S CUT
Technology will be everything, also
for the ECA
Interview with Magdalena Cordero,
Director Information, Workplace and
Innovation directorate
By Gaston Moonen, Directorate of the
Presidency
From foresight to audit selection:
examples at the ECA
By Matteo Tartaggia, Sustainable Use of
Natural Resources Directorate
Peer learning on foresight: experts
meet at the OECD
By Gaston Moonen, Directorate of the
Presidency
REACHING OUT
2018 ECA Award for Research into
Public Sector Auditing 2018: a tribute
to former ECA President Jan O.
Karlsson
88
91
93
95
96
99
By Roberto Gabella Carena, Directorate of the
Presidency, and Gilberto Moggia, information,
Workplace and Innovation Directorate
Drawing attention to the ECA’s
‘flagship’ product: the annual report
By Vincent Bourgeais, Directorate of the
Presidency
ECA congratulates Kosovo’s National
Audit Office on its 15th anniversary
By Mindaugas Pakštys, Private Office of
Rimantas Šadžius, ECA Member
Reinforcing cooperation in the
common interest: the European
Parliamentary Research Service
visits the ECA
By Helena Piron Mäki-Korvela,
Directorate of the Presidency
Austrian presidency of the Council:
Federal Minister Josef Moser visits
the ECA
By Arjen Lok, Private Office of Lazaros S.
Lazarou, ECA Membe
FOCUS
ECA
Publications in
October 2018
NEXT EDITION
eca.europa.eu
@EUauditors
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Editorial
What if…? Audit and the future(s)
4
A few days ago, I heard the following radio ad: ‘Contact us so we can solve your problems
through our audit intelligence robot.’ It turns out that audit firms in the private sector
now use audit robots to examine process and transaction flows, including auto-learning
capacities. I knew this was happening, but what surprised me from the radio ad was how
mainstreamed it already is for audit firms. Audit work being done by robots is a scenario
three colleagues and I identified about three years ago, based on the feedback we received
through an internal survey we had organised about imagining the future of the ECA in
2040. The big difference is that most respondents thought it would happen in a decade or
so. As technology moves on, can people keep up? Or better, can we stay ahead?
Auditors are specialised in looking at facts, which many of us relate to the past tense.
In doing so, auditors- and certainly auditors in the public sector - try to contribute
usefully to future decisions, both for accountability reasons and for the sake of a learning
government. As important as facts from the past are, so are changes in the future, whether
presented as risks or as opportunities. As hypothetical these changes may be, being
prepared to cope with them as individual, company, government or society will make you
better off. Not being prepared will quickly push you into crisis management. While the
essence of politics is to imagine what the desired future might be, the underlying thought
is that we can create our future instead of being subject to it.
Foresight – exploring information on possible developments and their potential impact - is
not as far away from audit as people may think. In financial audit, some form of foresight
is embedded in the accruals accounting system. Future liabilities and returns need to be
accounted for, and it is the auditor’s role to examine how well this is done. In a rapidly
changing environment, insights into future scenarios that quickly change these liabilities
become more and more important. Audit firms approving the accounts of companies
which go bust a month later may otherwise face liabilities themselves.
Performance audits often look at future risks, such as the sustainability of the programmes
implemented or envisaged, and their impact, whether realised or foreseen. This provides
insights which can easily be related to foresight, as for example can be seen in the
challenges the ECA formulated in its landscape review on climate change. How quickly
these challenges become real, and even may turn into concrete liabilities, is shown by a
recent court ruling holding government accountable for not acting on foreseen climate
changes. Foresight, in this case with climate change scenariosinvolving impact predictions
and possible remedies, becomes a more and more powerful tool. Otherwise even financial
liabilities might be looming, to be reflected in…the accrual-based accounts.
Within the ECA, the discussion about the relationship between audit and foresight, and
how better to link the two, is ongoing. It was the main topic of the annual seminar of the
ECA leadership last September. In view of this discussion, we have made foresight the main
theme of this Journal, to provide more information about foresight as expertise and to
show the possible links between audit and foresight. We have a range of articles providing
insight on what other organisations, be it EU institutions or international organisations, do
to be more future proof. We look at what foresight entails for auditors in the private sector
and other supreme audit institutions and we conclude with some perspectives on what
foresight can imply for the ECA.
There seems little doubt that technology will change the way we conduct our audits in
the future. One only has to look back twenty or even ten years to realise that. And the
expectation is that the digital transformation will only speed up this process. Will the
ECA be a leader in using this technology? Even more interesting is the question how this
transformation will affect the activities of the ECA. How will the ECA remain relevant and
provide the best possible information – be it based on hindsight, insight or foresight? How
will public auditors help policy makers and decision makers to steer the future, instead of
reacting to it?
Gaston Moonen
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It is not written in the stars – methods used by
foresight professionals
By Angela Wilkinson, World Energy
Council, and Betty Sue Flowers, Emeritus
Professor at the University of Texas, Austin
5
Forecasting the future is a skill that humans have been trying to develop since the
beginning of time. However, even with modern quantitative approaches, forecasting a
single future can prove fatal. By working with foresight in relation to alternative futures,
leaders are engaging with uncertainty as an opportunity. Angela Wilkinson, Senior
Director with the World Energy Council, and Betty Sue Flowers, Emeritus Professor at
the University of Texas, focus on some core elements that foresight professionals of
today use to generate insights about possible futures.
Forecasting: building on the past
The most important responsibility of the leader of any organization is to think about the
future and to design ways that the organization can thrive within it. From that perspective,
every leader is in the business of foresight – usually with the help of professionals. In the
ancient past, these professionals
did
use crystal balls, or the entrails of sacrificed animals, or
the patterns of stars to predict the future. In modern times, professionals are more likely to
extrapolate the trends of the recent past into the future and give the leader or CEO a more or
less useful
forecast.
Quantative forecasting
is still the most common method of predicting a single, most likely
future, even though it can produce dangerous and deeply flawed results. The danger comes
from the complacency that forecasts generate, based as they are on the assumption that the
future will be like the past. The only thing we know with any certainty about the future is
that whatever it will be, it will
not
be like the past. In other words, the future is uncertain, and
uncertainty creates anxiety. Forecasting alleviates anxiety in that it is an organized, data-rich
way to go wrong with confidence.
Forecasting has other advantages as well. It reduces uncertainty into quantifiable and
manageable risk. In addition, it’s linear, and human brains are hard-wired for linear thinking.
This linearity makes it a natural fit for working with cost-benefit analysis. Assuming that the
future will be like the past in predictable ways also avoids a challenge to the status quo,
which is usually more comfortable for the powers-that-be as well as their corporate partners,
who, like all of us, prefer to avoid thinking about the possibility of unpleasant surprises.
Foresight: capability towards a flexible and creative future orientation
Foresight, which is
not
the same as forecasting, requires the building of new organizational
capabilities. While forecasting can be valuable, especially in the short term, foresight
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It is not written in the stars – methods used by foresight professionals
continued
6
professionals know that what organizations need is not simply a crystal-ball
vision of the future, but the
organizational capacity
for engaging in a process
of social learning that leads to a flexible and creative orientation to the future.
Such an engagement with the future takes a number of forms, but four of
them, in addition to forecasting, are of greatest use:
Source: European Commission
-
-
-
-
Megatrend identification;
Horizon scanning;
Scenario building;
Visioning with back-casting.
Megatrend identification: new pattenrsn with unfamiliar impacts
Megatrend identification
helps loosen up forecasting to include combinations
of different trends that might interact in new ways to produce new patterns
with unfamiliar impacts. Imagining possible pattern shifts can also disconnect
leaders from the habit of looking at forecasts as isolated linear trajectories.
Of course, megatrends cannot provide the assurance of the numbers that can be attached
to single-trend forecasts. Instead, leaders have to develop the capacity to see possible larger
systems at play, some of which might include elements that seem to have no direct bearing
on the future of a particular organization, but have a very significant impact when combined
with other trends. Using megatrends, leaders and their organizations can, working with
qualitative futures narratives, to start to 'think outside the box' of the expected, forecastable
future by asking 'What if (the pattern shifts)? So what? (How, when, and with what impacts?)
What does it mean for us? What now? (What options for action and with what impacts?)
What does it mean for us? What now? (What options for action?)'
Horizon scanning: signaling potential trends and trend breaks
Horizon scanning
resembles the identification of megatrends – but in reverse. Megatrends
are important trends arising from the present, which are likely to affect the future; horizon
scanning looks at weak signals ‘coming from’ the future rather than the past or present to
see trends that are starting to bend or break and what new trends might emerge. Dialogues
about outlying technologies or nascent political or social movements can be stimulating
in themselves, but horizon scanning is of limited usefulness unless it is linked to other
processes, such as scenario building.
Scenario building: using plausible futures to engage uncertainty as opportunity
Scenario building,
like forecasting, creates fictions about the future, but these stories differ
from forecasts in three very important ways. First, while scenarios must be plausible to
be useful, and while they often employ data-based research for their content, they are
not extrapolations of present trends. Many times, in fact, they challenge those trends,
introducing ‘bends’ in the trends designed to challenge forecasts in useful ways.
Second, they always come in sets, usually of two to four. A scenario is not a picture of ’the’
future but is presented as one of several different possible futures. If each scenario in a set
of scenarios is equally plausible, then the leaders for whom the scenarios have been created
cannot choose a future to believe in, but must act as if any of them might come true – or
any of a number of other futures. The practice of testing strategy within the different futures
presented by the scenarios trains the minds of leaders to treat the future as a necessary
fiction rather than as a prediction.
Third, the key purpose of a scenario set is the creation not of the stories in themselves, but
of a platform for rich and wide-ranging dialogue that will bring assumptions to the surface.
Scenarios are designed to encourage constructive engagement with uncertainty in order to
avoid missed opportunities and blind spots. Such dialogues can lead to a shared sense of a
desirable future that a team wishes to move towards, even in the face of this uncertainty.
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It is not written in the stars – methods used by foresight professionals
continued
7
Among the many subtle by-products of engaging with scenarios is a greater sense of
confidence in relation to an uncertain future. This confidence is quite different from the feeling
of security that arises from accepting a single predicted future as ‘true.’ It is related, instead,
to the capacity for agility and resilience – getting ahead of connected challenges through
imagining different potential paths.
One of the most profound uses of scenarios is as a stage for dialogue on extremely complex,
contentious issues. Where there is deep disagreement, a wide-ranging, open, and honest
discussion is almost impossible under normal circumstances. Champions of one side or
another must consistently argue their strongest position, for example, and often it is politically
dangerous to step into the shoes of an opponent to explore how the issue might appear from
another point of view. In most such politically charged situations, discussions quickly become
arguments; or, if the atmosphere is congenial, the ‘elephants in the room’ are politely ignored.
In such a situation, a team comprised of people from many different perspectives can create
scenarios together even when they cannot agree on policy positions. After all, scenarios are
only stories. Any team member can create a story from another point of view. Often, in the
process of creating that story, those who hold an opposing position begin to understand the
other point of view and to see possible opportunities for collaboration. A different kind of
listening occurs, and often, a shared understanding emerges.
Ideally, scenarios are created by a team that represents the whole of the organization. From this
divergence of viewpoints sometimes a vision of a preferred future arises – and then foresight
actually leads to a design for the future rather than simply a reactive attempt to predict it. Once
a vision has emerged, a pathway from the future can be built back to the present.
Visioning with back-casting: not prediction, but aspiration to implement imagination
Visioning with back-casting
can translate a symbolic picture of the future into a rational strategy
and functional plan with actionable milestones and budgets.
Creating such a vision and stress-testing it against different future contexts (scenarios) that
would include the results of forecasts and megatrend analyses would require the use of all
these methodologies. An inspiring and actionable vision of the future is, after all, what leaders
need to give us. In effect, it is the leaders who show us the picture of the future in the crystal
ball – not as a prediction but as a powerful aspiration. The future is not for seeing, but for
creating.
Towards a futures-centric auditing profession?
Auditing
is a retrospective activity – looking back to assess whether financial aspects of decision
making by leaders and organizations have followed the agreed rules of accounting and, if
relevant, cost-benefit analysis. Auditors engage with the push of the past but, as yet, are not
equipped to work with the pull of the future.
What social need and purpose would a futures-centric auditing profession serve? Would the
emphasis be on demonstrating social benefits of economic efficiency and/or anticipating
the return-of-investment in terms of human-centric wellbeing and social flourishing? Such
a shift would also require a new leadership culture, not just a change of tools. Building
an organizational futures muscle – that is, a strategic foresight capability – would involve
grappling with the quality of imagination and social learning processes involving inter-
subjective judgements, rather than relying on the numbers alone to speak the truth.
an organizational futures muscle – that is, a strategic foresight capability – would involve
grappling with the quality of imagination and social learning processes involving inter-
subjective judgements, rather than relying on the numbers alone to speak the truth.
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ECA Journal Long Read
Strategic foresight: inspiring our thinking
about the (un) known (un) knowns
By Stefanie Babst, Strategic Analysis Capability, NATO
8
If there is one area where strategic thinking
and scenario planning has a long historical
record, it is most likely in the military. This
is certainly so for the North Atlantic Treat
Organisation (NATO) where detecting trends,
anticipating possible future developments and
‘looking out of the window’ are seen as crucial
for defence and security decisions. Dr. Stefanie
Babst, Head of the Strategic Analysis Capability
for the Secretary General and the chairman
of the Military Committee at NATO, presents
in this article
*
her views on why it makes
sense to engage in foresight, and also various
conceptual aspects of such activity.
Source: pixabay
Strategic foresight is in vogue. In the past few years private foresight companies and
consultancies have mushroomed across the globe, offering their services and products
to businesses, governments, international organizations and individuals; in short,
to all those who seek to obtain
insights and analyses about future
ECA Journal short read
geostrategic developments and
potential risks. National governments
Increased strategic foresight resources and structures
Both public and private
organisations engage more in future challenges and risks. The continuously
and international organizations have
globalized world and technological development contributes to this interest.
perhaps taken a little longer than
private corporations to discover the
Domino effects and hard to predict unknows
The complexity of today’s world
advantages of strategic foresight
reinforces the need to reassess the so-called ‘butterfly effect’ which stipulates the
but many of them have accelerated
way in which small causes can have very large effect in complex systems. Equally,
their efforts recently. Most European
countries as well as the United States
there are unknown threats and challenges that cannot be measured beforehand
by strategic and systematic human thinking. In addition, human beings have
and Canada have started to invest
cognitive biases leading to blind spots for emerging issues.
in strategic foresight resources
and structures. In many European
Multiple futures
Understanding the past does not necessarily bring forward
capitals, dedicated foresight teams
useful future strategies. Foresight mechanisms can offer a way of engaging in
and tools have been created in order
the unknown challenges and risks and sharpen our eyes, with the aid of scenario
to complement traditional policy
planning, about multiple futures and provide inspiration.
planning and intelligence gathering.
In Brussels, the center of the
Optimising strategic foresight
If organised in an interdisciplinary and inclusive
European institutions, the strategic
manner and taken up at policy-making level, strategic foresight may provide a
foresight vocabulary has entered
useful mind-set and method for decision-makers ‘to look out of the window’ with a
the language of policy-makers and
fresh pair of eyes.
bureaucrats alike.
* The views expressed in this article are those of the author and do not represent any official NATO position. This
article was also published on the website of the Munich Security Conference, held from 16-18 February 2018.
See
https://www.securityconference.de/.../natos-strategic-foresight-navigating-between-bla...
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Strategic foresight: inspiring our thinking about the (un) known (un) knowns
continued
9
Complicated is not complex
The reason for the growing interest in strategic foresight is obvious: in our
increasingly globalized world, decision-makers want to guard against the
many strategic surprises out there. Arguably, comprehending the complex
realities of today's world is hard enough, yet trying to grasp the future seems
even harder. Stephen Hawking, the British theoretical physicist, once (2000)
said that the 21st century will be the century of complexity and he was right.
It is mostly due to profound technological advances in the past few decades,
particularly in the areas of telecommunications, the internet and more
lately block chain technologies and artificial intelligence, that our world has
become deeply interconnected and complex. Indeed, one could argue that
we are now at the beginning of what may become the most dramatic change
in the international order in several centuries, the biggest shifts since a group
of European rulers signed the Westphalian Peace Treaty in 1648 and thus
created an entirely new concept of sovereign states.
‘Look out of the window!’
The profound and fast changes we are witnessing every day illustrate that
complex is different from complicated. For a layman, the inner workings
of a battle tank may look like a highly complex thing but in reality, they
only reflect a complicated process. Complicated systems, in principle,
follow Newtonian characteristics in that they perform predetermined and
repeatable functions. By contrast, a complex system contains a large number
of autonomous elements that constantly interact with each other in non-
linear ways. Complex-system scientists - when asked ‘What is a complex
system?’- usually just reply ‘Look out of the window!’ Clouds, mountains,
rivers, the entire landscape of our world are expressions of what results
from unpredictable interactions. Changes in complex systems – whether
ecosystems, stock markets or human-centric domains like cities or states –
can sometimes take place not in a smooth progression but in a sequence of
fast catastrophic events.
Butterfly effects
The US mathematician and meteorologist Edward Lorenz, a pioneer of the
chaos theory, coined the famous term ‘Butterfly effect’ for describing the
way in which small causes can have very large effects in complex systems
such as the weather. In the same vein, Per Bak, the well-known Danish
theoretical physicist, reminded us that the domino effect in complex
systems can sometimes have catastrophic effects: ‘Cracks in the earth's
crust propagate this way to produce earthquakes, often with tremendous
energies.’ Translated to our political world of today, we seem to be faced with
exactly this: propagating effects and surprising energy. Radical change in one
area produces radical change elsewhere. The days of simple interactions and
easy-to-map dynamics lie definitely behind us. It is the complexity of change
and its unpredictable outcomes that pose a genuine challenge for decision-
makers.
Source: Pixabay
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Strategic foresight: inspiring our thinking about the (un) known (un) knowns
continued
10
Black Swans or Unknown Unknowns
What governments fear most are strategic surprises or so-called Black Swans,
a category of futures that the philosopher and statistician Nicolas Nassem
Taleb (2007) described as ‘rare, hard-to-predict developments that have
a large, game-changing impact’ on peoples, national interests, policies,
processes and many more areas alike. In 2002, not long after the terrorist
attacks of 9/11, the former U.S. Defense Secretary Donald Rumsfeld referred
to Black Swans as ‘unknown unknowns’: ‘There are known knowns. These are
things we know we know. We also know there are known unknowns. That is
to say there are some things we do not know. But there are also unknown
unknowns, the ones we don't know we don't know.’ This well-known phrase is
often quoted in a satirical way but it contains a large kernel of truth.
In the past few decades, the world has had to cope with some Black Swans
or unknown unknowns; for example, the Asian financial crisis in 1997/98;
the global economic and financial crisis caused by the sudden collapse of
Lehman Brothers in 2008/09; the Arab Spring in 2010; the Fukushima nuclear
disaster in March 2011 and, of course, the 9/11 terrorist attacks on the United
States. They not only caused major disruption but had large, far-reaching
repercussions on numerous states, their policies, concrete actions and
ultimately a huge number of people.
Blind spots
It is our own human nature that hampers our efforts to think about the
future more systematically, with a long-term, open-minded view. Indeed,
all human beings – including those in power positions – are afflicted with
cognitive biases or, simply put, blind spots. Many of the past and current
crises, political upheavals, natural disasters or pandemics do not fall into the
category of Black Swans. We could have guarded against some of them or at
least mitigated their effects if decisions makers had been prepared to read
the signals announcing these events correctly and if they had spent sufficient
time and effort to prepare for contingencies. But allowing our blind spots to
dominate our thinking and focusing on immediate issues rather than long-
term strategies is not only a tempting choice for policy-makers across the
board - it is also an expression of a deeply engrained human attitude.
Hindsight is not foresight
But even if decision-makers in governments were to become more conscious
of their respective cognitive biases and developed a fresh way of thinking,
detecting plausible signals that point at future strategic surprises remains
an extremely difficult exercise. For one, it is much more demanding than
explaining, in hindsight, why certain events unfolded as they did. True, an
entire industry of scientists, academics, analysts and commentators are busy
offering reasons why the Russian leadership decided to annex the Crimean
peninsula in spring 2014 or why in 2016 a majority of British voters opted for
their country to leave the European Union. While it is obviously important to
make sense of past strategic surprises, these are, in essence, all ‘post-mortem’
analyses. Their thinking and explanation is fundamentally backward-looking.
Yet, providing hindsight of past events – regardless how useful such an
exercise is – does not necessarily translate into foresight. Simply because
we can provide an explanation for, let's say, why the current state of affairs
between Russia and the West has evolved in a certain way, does not mean we
are in a position to forecast the next political drama or catastrophe.
Source: Pixabay
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11
Black Elephants
Sometimes our preparedness to take long views on future trends and events
is challenged by another member of the animal kingdom, the Black Elephant.
Singapore's Peter Ho, one of the intellectual fathers of strategic foresight, has called
a Black Elephant the ‘evil spawn of our cognitive biases.’ It is a cross between a Black
Swan and the proverbial Elephant in the Room: a problem that is actually visible to
everyone but no one wants to deal with it. When it blows up as a serious problem,
a widespread reaction is that of shock and surprise, whereas, in reality, it should not
have come as a surprise.
Was the migration crisis that hit Europe reportedly ‘out-of–the-blue' in 2016 a Black
Elephant? I suppose so. The pull and push factors that drove a dramatically growing
number of refugees and migrants from the conflict zones in Syria, Iraq and North
Africa towards Europe were known for some time; so was the demographic data as
well as the nexus between organized crime and human trafficking; and still many
European governments pretended that the arrival of hundreds of thousands of
people on their doorsteps came as an utter surprise to them.
There are other examples illustrating that most of the recent strategic shocks were
in fact rather known unknowns or Black Elephants. For example, Russia's arrival
in the Syrian conflict zone in autumn 2015 or North Korea's reinvigorated desire
to challenge the international community's resolve with missile tests could be
categorized under this heading.
Strategic Foresight is not about predicting the future
Can strategic foresight make a difference? The cautious answer is yes, perhaps.
Strategic foresight or futures thinking can be a useful way for governments and
international organizations to better understand global complexity and prepare
against Black Swans or Black Elephants. For sure, strategic foresight is not about
predicting the future. Nobody can predict what precisely the year(s) to come
will bring. But understanding key global and regional trends, detecting critical
uncertainties and risk factors and developing scenarios about potential future
developments makes a lot of sense if one wants to avoid nasty surprises.
For strategic foresight to be successfully embraced both as an anticipatory mindset
and a method, we must accept that we will have to continue to live with a high
degree of uncertainty now and in the future. For some politicians, this may sound
banal; in the eyes of others, such a statement is antithetical to what they aim to make
voters believe, namely that they have a firm and clear view of what the future holds.
Strategic foresight methods, processes and products, however, are not meant to
explain the future in linear terms. By contrast, they can help to better understand the
complexities surrounding us; they can help challenge our own assumptions and make
us aware of our blind spots; they can help sharpen our eyes about multiple futures
and inspire our thinking about the unknown unknowns out there – but serious
strategic foresight analyses and scenarios will never seek to tell a group of policy-
makers that the future is straightforward and black or white.
Scenario planning and horizon scanning should be inclusive and
interdisciplinary exercises
Scenario planning exercises can be a meaningful way to make people aware of
uncertainties, risks and problems but also opportunities. Developed by the oil giant
Shell in the 1970s, scenario planning has become a globally acknowledged and
broadly used foresight tool. In countries such as Finland and Singapore, scenario
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Strategic foresight: inspiring our thinking about the (un) known (un) knowns
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12
planning exercises are held regularly on a national level and based on a whole-of-
government approach, i.e. all ministries and offices of the government are involved at
senior level. In Finland, not only the executive but also legislative branch participates
in scenario planning exercises. In both countries, scenario planning is part of the
national strategic planning process and thus taken seriously.
Horizon scanning is another, complementary foresight method. It is not meant to be a
description or analysis of the current state of affairs but rather an effort to distinguish
’noises from signals,’ to observe the unfolding of important, emerging trends and
to identify potential critical game-changers. Data mining tools can meaningfully
support horizon scanning exercises in that they help digest big data and search for
weak signals that could evolve into sudden shocks. Ultimately, however, they cannot
replace the sense-making process that is still the task of a person.
Finally, it should be highlighted that strategic foresight works best if organized in an
interdisciplinary and inclusive manner. If scenario planning, for instance, is purely
exercised by a small group of like-minded individuals that sit on the margin of the
policy-planning process and have no linkages to the other parts of the bureaucracy,
the impact will likely be very limited. Likewise, if strategic foresight products are not
shared at the policy-making level they do not have a great impact either. Ideally,
strategic foresight should help bring the various silos in a bureaucracy together in
order to generate a broad and diverse spectrum of individual assumptions, mental
maps and perspectives.
NATO's strategic foresight
So where is NATO in all of this? In recent years the transatlantic Alliance has
significantly upgraded its intelligence and crisis anticipation capabilities in order
to better guard against unpleasant surprises, risks and threats, regardless whether
they come from the East, the South, cyber space or through technological advances.
Among others, a joint civilian-military Strategic Analysis Capability (SAC) provides
NATO with strategic foresight analyses and scenarios about future developments of
strategic relevance for the Alliance. SAC regularly engages with external foresight
teams, regardless whether they sit in Allied capitals, NATO partner countries, the
private sector or other international organizations.
NATO's strategic foresight themes range from Russia's future course of action at home
and in NATO's eastern neighbourhood, to future scenarios for the conflict-ridden
Middle East and North Africa region, from the future evolution of the terrorist threat
to NATO's member countries to the many strategic unknowns that come with the
global rise of China, and from the question what the cyber threat may look like in five
plus years to the potential impact of new disruptive technologies. These and related
topics cannot come as a surprise to anyone since they are populating the pages of
numerous public outlooks and foresight reports. But geared towards NATO's needs
they constitute hard and substantial work.
After all, strategic foresight is primarily about encouraging everyone involved in a
decision-making process to ‘look out of the window’ with a fresh pair of eyes and try
to comprehend the dynamics that are driving our fast-changing global environment
with a new way of thinking. This is neither easy nor comfortable. But trying to grasp
how the nature of power, and those who yield it, will continue to alter in the years to
come, how future relations between states and citizens will change or future wars be
fought cannot possibly succeed if we still use the mental maps of the past. We may
not find all the answers to these and other questions but at least we should try to
pose them as smartly as possible.
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‘No Crystal Ball’
13
Interview with Lars Brozus,
German Institute for International
and Security Affairs (SWP)
By Candida Splett, German Institute
of International and Security Affairs
The editor of the SWP study 'While
We Were Planning', Lars Brozus,
speaks about the potential benefits of
scientifically grounded foresight.
The interview was conducted by
Candida Splett, online editor of SWP,
the German Institute of International
and Security Affairs.
*
Source: SWP
2019: Turkey leaves NATO and moves closer to Russia. A fundamental
challenge to the Alliance’s cohesion. Scenarios of that kind and their
potential consequences are the subject of your foresight study. What are the
concrete benefits of such an approach?
Scenario and foresight thinking can help us to prepare for unexpected
events. International politics has produced one surprise after another
in recent years: Brexit, Trump, Crimea, to name just three prominent
examples. And more surprises are bound to follow. So it is useful to
think through situations that are conceivable, such as a Saudi-Iranian
rapprochement or South Korea acquiring nuclear arms.
In the introduction to the study you call for expectation management. What
can political decision-makers expect from your foresight analysis? And what
should they not be looking for?
We have no crystal ball, we cannot predict the future. We need to make
that very clear to avoid disappointment. But we can help to sharpen
political sensibility about situations that can arise unexpectedly. That
* This article was also published on 13 September 2018 on the website of
Stiftung
Wissenschaft and Politik,
the German Institute for International and Security Affairs, see
https://www.swp-berlin.org/en/point-of-view/2018/no-crystal
... we cannot predict
the future. [...] But we
can help to sharpen
political sensibility about
situations that can arise
unexpectedly.
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Interview with Lars Brozus, German Institute for International and Security Affairs (SWP)
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14
does not just mean the developments discussed in our study. Instead we
need to emphasise the importance of maintaining awareness of other
potential developments and their consequences in order to be in a better
position to deal with the inevitable surprises.
You have already mentioned two important recent events that were almost
completely unanticipated: Brexit and the election of Donald Trump. Why?
In both cases most opinion polls suggested a different outcome. And
in both cases the result was very close. With Trump, about 90,000 votes
tipped the scale, which is well within the margin of error. It is very hard
to anticipate such a result. However, politicians could have been better
prepared, for example by thinking through the possible consequences
of an unlikely outcome. But to be honest researchers are also often taken
by surprise, just think of the Arab Spring. That is another reason why we
invest time and energy in scientifically grounded foresight.
How does politics need to change in order to predict and prepare for these
kinds of events?
It is important to regularly examine situations that could happen, even
if they appear unlikely. There are two objectives to this. One is to better
anticipate possible developments, the other to run through the very
concrete responses to unexpected events: Who takes part in the briefings,
what questions need to be discussed, and how should information be
communicated? Simulations and scenarios can assist that process. It
would certainly help if there were more incentives for this form of analysis
at the administrative level.
What distinguishes scientifically grounded foresight from forecasting?
A forecast involves a prediction of the timing and probability of a specific
event. Foresight concerns hypothetical developments. What might be
the consequences if the United States, China and Russia agreed to reform
the United Nations in line with their own interests? Or if the EU’s security
databases were systematically manipulated? We draw attention to events
that might occur and how they might develop. And we examine the best
available responses.
What criteria do you apply for selecting foresight contributions?
Three criteria are important: consistency, plausibility and relevance.
Consistency relates to the described situation: Is it coherent? Plausibility
refers to political context: Is this a conceivable situation? You need both
scientific expertise and creativity to do this convincingly. And then there
is relevance: The most interesting situations are those that would have
considerable impact on German and European foreign and security
policy, but are not currently at the centre of political attention.
Your study also includes two ‘foresight reviews,’ revisiting contributions
written in 2013. What is the purpose of this exercise?
The foresight review is a methodological innovation. The authors
review contributions prepared several years ago. They examine which
influencing factors were thought to be especially important at that
... to be honest
researchers are also often
taken by surprise, just
think of the Arab Spring.
It is important to regularly
examine situations that
could happen, even if they
appear unlikely.
( For foresight) Three
criteria are important:
consistency, plausibility
and relevance.
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Interview with Lars Brozus, German Institute for International and Security Affairs (SWP)
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15
time, and contrast these expectations with what has really happened.
This kind of self-reflection allows us to update our ideas about future
developments.
In the first foresight review the author reflects on her scenario of a
breakthrough in electricity storage revolutionising the energy sector. How has
that changed today?
What she did not anticipate in 2013 was the rapid decrease in the oil price
which discouraged investment in energy efficiency. That factor plays a
much larger role in her current contribution.
The second foresight review considers whether the Brexit negotiations
proceeded as the author expected in 2013. What are his conclusions?
Broadly speaking the negotiations have gone pretty much as expected
– and the author was writing three years before the 2016 referendum!
What he underestimated was the potential for conflict within the British
government and the political cohesion of the EU-27.
How can this insight improve future foresights?
Systematic scholarly self-reflection can sharpen our awareness of
important factors we might overlook or discount. So we are learning for
future foresights.
Systematic scholarly self-
reflection can sharpen our
awareness of important
factors we might overlook
or discount.
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Scenario mapping: helping regulators to
imagine possible futures
By Paul Moxey, Professor at London South Bank University and with SAMI Consulting, and
Gill Ringland, SAMI Consulting
16
Scenario planning to identify risks and opportunities
Within the public service,
mapping scenarios for the
future is most often used
by the executive branch, i.e.
those who govern. Paul Moxey
is Professor of Corporate
Governance at London South
Bank University and Fellow
with SAMI Consulting and as
auditor worked in both the
private and public sector. Gill
Ringland is Fellow Emeritus
with SAMI Consulting and she
has written several books on
scenarios in various fields of
activities. Below they present
a short case study on how this
works in practice. Their article
also argues that scenario
planning should be used
by auditors, helping them
to interact better with their
auditees.
Scenarios develop awareness and challenge current assumptions, beliefs
and paradigms. Scenarios can help anticipate risks and opportunities:
they are pictures of how the world might look in the future. Scenarios
are used extensively by regulators, such as the European Commission.
Similarly, EU Agencies such as Frontex (Border Control) and OSHA (Health
and Safety), apply these techniques to explore future risks.
Scenarios however are not forecasts. As
Figure 1
below Shows forecasts
are over precise. Scenarios are based on plausible ways the future might
evolve. Each scenario contains a set of different assumptions about how
the future may play out – but the actual future may well contain aspects
from more than one scenario! Looking at scenarios can therefore help
regulators to imagine possible futures in order to anticipate changed
government priorities.
Figure 1 Forecasts and Scenarios
(Source Gill Ringland and SAMI)
Forecasts are over-
precise
Scenarios
of the
Future
Range
of
Uncertainty
Timing ?
Today
Trends
Source: Gill Ringland and Sami
Foresight Case study: UK water supply
In one of our recent assignments, the UK water services regulator
(Ofwat) organised a (long) one day workshop with stakeholders to gain
new insights about water. Overall, 24 experts from across the industry,
consumer groups, government and other regulators participated. SAMI
Consulting was asked to assist in identifying the factors affecting the UK’s
use of water between 2016 and 2050; imagine how the water industry
might evolve; and hence how this may affect the role of the regulator.
During the workshop, participants identified two main questions which
will frame the possible future world of water supply:
-
-
will water supply, treatment and ownership be global/national
or local/individual?
will water be on the agenda (personal/community/national) or
not?
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Scenario mapping: helping regulators to imagine possible futures
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17
These questions defined the two axes of the scenarios we then developed (see
Figure 2
below).
Figure 2
(Source: Ofwat and SAMI)
Source: Ofwat and Sami
It is in particular the second question, which challenges current assumptions: public
water supply is currently not on the agenda since it is largely taken for granted. However,
this might not remain so if, for example, access were curtailed or the cost were to rise
significantly in the future. Conversely, the importance of water in many domestic and
industrial applications could reduce due to new technologies, e.g. biotechnological waste
treatment or waterless clothes washing. This would support the scenario that water supply
will not be on the agenda.
Given the long time horizon to 2050, it would be foolish to take anything as for granted. At
the same time, some variables – such as the impact of climate change and the growth of
new technology – will surely drive the use and supply of water. The effect of these variables
will however be different in each scenario.
Determining the big questions is always a matter of lively discussion within a workshop
group, while naming the scenarios is often a source of hilarity! The names should be such
that you can describe the world to your mother-in law and she says ‘Oh, I get it!’ In this
workshop, syndicates competed to provide a set of names –the syndicate which used
the names of Hollywood films won, and the four possible future worlds were as in the
figure. Taking the ‘Waterworld’ scenario (see Figure 2) as an example, we could imagine
newspaper headlines such as ‘Standpipes in Downing Street’ and ‘London faces third year
of drought.’
In this scenario, a key challenge would be to ensure the resilience of the water supply
infrastructure: innovative and adaptive companies would have an advantage at times of
volatile water markets, and traditional water companies might not be able to compete. A
major challenge in this scenario would be the cost of building a grid only to be needed at
times of regional shortage. Even if introduced just to make customer billing easier, remote
metering would enable new developments such as seasonal pricing for water, or surge
pricing as a tool of demand management in times of drought. Such changes could be
introduced very quickly; and would need an accelerated regulatory response.
In this example, using these scenarios could help the regulator understand how the
industry might change and to start discussion with stakeholders on priorities. The
scenarios would give the staff confidence in engaging with stakeholders, knowing that
a wide range of inputs had converged on determining the big questions. And all the
participants enjoyed the process and the challenge of thinking about the future without
fear, uncertainty and doubt!
And obviously, we also developed similar scenario stories for the other three quadrants.
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Scenario mapping: helping regulators to imagine possible futures
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18
But what about audit?
Scenarios could clearly be used in financial audits to consider issues of going
concern and viability and in considering the range of uncertainty in considering
the risk of material misstatement. We believe that they could be even more
effectively applied in non-financial reviews and value-for-money audits. Scenario
planning could be particularly useful in the early stages of an audit: both to help
in scoping possible risks and, if auditees are involved, improving engagement
with the client.
In fact, it seems strange that auditors rarely use foresight tools to help them
consider the risks and opportunities associated with the area under their scrutiny.
Examples could be high level, Europe-wide reviews exploring the consequences
of proposed EU policies and programmes, or for exploring risk in specific
budgetary areas.
And a final consideration: the result of using scenario mapping together with the
auditees could also be that the audit would then be more about collaboration
and less, as can sometimes be the case, about confrontation.
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Using strategic foresight to navigate digital
transformation
By Duncan Cass-Beggs, Organisation for Economic Cooperation and Development
19
The sensation of living in a rapidly changing world is often attributed
to technological changes that quickly follow one after the other.
Duncan Cass-Beggs is is Counsellor for Strategic Foresight at the
Organisation for Economic Cooperation and Development (OECD). In
this article he zooms in on the future of the ‘digital transformation’,and
how foresight can play a role in exploring uncertainties, future
scenarios and implications, including for auditors.
Rapid change and highly divergent outcomes
Over the coming years, digital transformation will drive rapid change on an
unprecedented global scale. This pace and scale of change creates a high level
of uncertainty for decision making. The potential for sudden discontinuities and
highly divergent outcomes mean that the future cannot be assumed to resemble
a linear extrapolation of current trends. Responsible decision-making requires
that organisations invest greater effort in considering proactively a range of
plausible future scenarios and their potential implications. Doing so can help
ensure that strategies and policy frameworks put in place today are more likely to
be resilient and adaptive in the face of the various potential directions that digital
transformation could take.
Identifying key uncertainties
An important step in preparing for the future is to identify relevant key uncertainties.
These are issues where, based on the best current evidence, there remains
significant debate and divergence about the potential direction of change and likely
future implications. The following are seven examples of key critical uncertainties
surrounding the future of digital transformation.
A first key uncertainty is data control: will the increasingly vast amounts of data
generated through online activities and the Internet of Things (and the conversion
of this data into value through artificial intelligence - AI) be controlled by individuals,
governments, corporations, or intermediary organisations? Or will data be so
ubiquitous and plentiful that nobody can effectively control its production or use?
A second critical uncertainty is market structure and concentration: will network
effects and increasing returns to scale cause global data-driven markets to be
connected through only a few online platforms serving as intermediaries? Or could
an abundance of data and accessible AI lead to a decentralisation of economic
activity to a large number of smaller organisations and firms?
A third uncertainty concerns the internet and international trade: will the principle
of a globally connected ‘open Internet’ continue or will there be stronger cyber
boundaries between nations, regions, or different technology platforms?
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Using strategic foresight to navigate digital transformation
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20
Fourth is the world of work: to what extent will automation replace or
complement human activities? Will an automated world see higher or lower
unemployment, and to what extent will traditional employment contracts be
replaced by self-employment and gig-work – where individuals provide short-
term labour and may be paid by output delivered rather than time spent?
A fifth uncertainty is around well-being: will further digitally-driven development
worsen inequality? How will the increasing ability of AI to detect moods and
influence opinions impact mental health as well as trust and cohesion in society?
Sixth, security and privacy: will improved security measures lead to lower levels
of digital risk or will more sophisticated malware and greater integration of the
physical and digital worlds increase risks and conflict? Will a more interconnected
world lead to the end of privacy, or will technologies be developed to strongly
protect privacy at the source of data collection or its use?
Finally, there is critical uncertainty on the role for governments: might a
growing number of governments take a more active role in facilitating digital
transformation by providing unique digital identities to citizens and building the
infrastructure digital firms operate in? Who will control the potential next frontier
of governance, namely the ongoing iterative process of ensuring alignment
between AI and societal values?
Exploring Alternative Scenarios
On the basis of key uncertainties one can elaborate a range of alternative
plausible scenarios about the future. Scenarios are neither predictions nor
aspirations, and it is assumed that none of them are likely to come about as
described. Rather, the aim is to provoke discussion about a broader range
of future possibilities than may commonly be considered in policy-making.
The following is an example of four draft scenarios currently being explored
at the OECD, representing broad alternative contexts for the future of digital
transformation:
Scenario 1 ‘iChoose:’ a world where individuals have taken their online data and
identities into their own hands, and are using this in active ways to further their
economic opportunities, civic participation, and personal development.
Scenario 2 ‘Platform governments:’ in this scenario, a number of governments
have taken a highly active role in digital transformation and gained increasing
effectiveness and relevance as a result. These governments are developing their
own online platforms to manage interactions with citizens, business, and civil
society.
Scenario 3 ‘Corporate Connectors:’ large, global technology corporations as one-
stop shops for virtually every aspect of our lives. They take a more active role in
global governance and in addressing challenges such as climate change and
digital security.
Scenario 4 ‘Artificial Invisible Hands:’ a super-abundance of data, artificial
intelligence and universally accessible tools of digital innovation have created
a world where economic activity is highly decentralised and in a rapid ongoing
state of innovation and disruption.Applying foresight to explore implications for
policy
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Using strategic foresight to navigate digital transformation
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21
Applying foresight to explore implications for policy
Using strategic foresight to explore the key uncertainties and scenarios outlined
above can help organisations better anticipate and prepare for the future by
making better decisions today. Some questions that can help start discussion in
your organisation include:
- What are some key uncertainties regarding the future impact of digital
transformation for your organization or in your policy area?
- How might different scenarios relate to your policy area? What new
opportunities and challenges could emerge under each?
- What changes may be needed to your strategies and policies today in order to
be better prepared for different scenarios in the future?
Foresight for Auditors
The high level of uncertainty created by digital transformation has a number of
specific implications for auditors. How could digital transformation impact the
function of auditing? For example, what if the ability to audit algorithms and the
use of big data for their impacts becomes an increasingly important priority, and
what new techniques, skills and capacities would this require? How can auditors
contribute to the readiness of governments and organisations by conducting
strategic foresight studies on emerging issues and their implications? And finally,
how can auditors help to ensure that their clients are adequately preparing for
digital transformation and its uncertainties? For example, how could performance
audits include a requirement to identify and consider key future uncertainties
and scenarios and the implications of these for achieving the objectives of the
program?
By demonstrating, supporting and encouraging good practices in foresight the
audit function can play a major role in helping organisations and governments –
and by extension society – prepare for an uncertain future..
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Engaging in foresight:
a must for the ECA to
be a global leader in
public auditing
22
Interview with Juhan Parts, ECA Member
By Gaston Moonen,
Directorate of the Presidency
At the end of 2017 the ECA College decided to establish a ‘Future
Foresight Task Force.’ This group of five ECA Members and support
staff was asked to develop proposals that would help to make the ECA
‘future proof.’ Juhan Parts is chairing this Task Force, and is keen to
explain why it is so important for the ECA to engage in foresight and
what it entails for the ECA.
Foresight and vision
When speaking with Juhan Parts about foresight it quickly becomes clear
how much he is at home with the topic and determined to make it stick at
the ECA. His replies and analysis are laden with facts, but delivered with wit,
enthusiasm, and visionary perspectives on how to move this topic forward.
And with no fear of being explicit and taking positions: ‘Whatever we do at
strategic level, we should first have a broad picture. This is always a challenge:
what do you do to create a vision! Foresight provides you with tools to
develop such a vision and find answers, answers on how to be at the cutting
edge of digitalisation, to be leaders in public auditing.’
Working on foresight and creating foresight capacity is not new for Juhan
Parts. He explains that foresight was a core element in his previous functions,
which included, respectively, Auditor General, Prime Minister of Estonia and
Minister of the Economy and Communications. ‘When I was a minister we
developed, in 2010, what we called
Growth Vision
in a public body called the
‘Estonia Development Fund`. This was meant to be a ´constant foresight`
institution focusing on economic development. In addition, we initiated
a process in Estonia’s government, asking questions such as ‘What does
government mean in a democratic, free society, with many stakeholders in
business, academia, civil society, local government, and operating in the EU?’ It
means that you cannot govern on your own. The biggest challenge for politics
Foresight provides you with
tools to develop such a
vision and find answers [...]
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Interview with Juhan Parts, ECA Member
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23
is how to come together and have a common platform for understanding
where we are going. The logic here is common goal-setting to create a growth
vision for a country, in my case Estonia.’ Juhan Parts refers to a document
entitled ‘Goals and aspirations for the next decade.’ He adds: ‘We started this
work with an enormous trend mapping exercise for our country, with the
ultimate aim of developing a vision for its future. It was during this effort that
for the first time I had the opportunity to work with professional foresight
people. When we came together in the Task Force I was glad to share my
experience.’
Audit and foresight: natural partners
When elaborating on the relationship between audit and foresight and
why it is important for an auditor to have an idea of the future, Juhan Parts
presents a number of arguments. ‘First of all, foresight is not forecasting, it is
not speculating. If you look at our work in the Task Force, a very important
takeaway is that foresight should always be based on the facts. Looking at the
future does not mean leaving the facts aside!’
The second point he mentions is that the audit standards envisage that
Supreme Audit Institutions (SAIs) should link their work to emerging risks. ‘As
auditors we have to understand the risks – but this is very similar to assessing
the likelihood of events that may or may not happen in the future.’ Thirdly,
he underlines that SAIs always need to have a broad picture to understand
what is going on, globally, Europe-wide, making connections and causal
relationships. ‘Foresight can be a tool to provide answers or at least some of
them.’
‘Focusing your attention’ is the fourth point Juhan Parts raises. ‘We are a
small institution with limited resources. Therefore we need to focus these
limited resources on the most relevant topics now and in the future. We need
a systematic approach to structuring our areas of responsibility.` As a fifth
element of his response, he underlines: ‘Foresight at audit level should give us
a source to set audit criteria and ask questions such as "Are the policies that
we examine addressing problems which are likely to remain relevant in the
future?"
Core elements to make the ECA future proof
Coming back to the work of the Task Force, Juhan Parts explains the mandate
given to the Task Force: what should the ECA do to be future proof? ‘We
came up with three elements. First, we need an autonomous capacity and
skills to do foresight for audit. Secondly, we should integrate this capacity,
this knowledge it provides, into the ECA’s strategy process. And thirdly, this
knowledge must be mainstreamed into our core business process, which is
auditing.’
Another important element Juhan Parts identifies is how the ECA is going
to use technology for its core business. ‘We need to think about new
technologies and the impact on our assurance work. Likewise for our
performance audits, and here we have to be attentive to the goals the two
types of audit work pursue, because they are very different.’
When asked about how to integrate foresight best into the audit process,
Juhan Parts points to three aspects he considers essential. ‘The first result of
any foresight is trend mapping, and the Task Force did this as a pilot exercise.
The outcome is an identification of trends which are most important for
the Union, as we are the EU’s external auditor. This pilot exercise should
The biggest challenge
for politics is how to
come together and have
a common platform for
understanding where we
are going.
... a very important
takeaway is that
foresight should always
be based on the facts.
Foresight at audit level
should give us a source to
set audit criteria and ask
questions...
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Interview with Juhan Parts, ECA Member
continued
24
be discussed at management level. This should be, for example, not only
identifying that migration is important, but why, what possible scenarios
there are with what possible implications. This can serve as input for the next
phase in our strategy.’
As a second stage Juhan Parts indicates a need for a permanent internal
capacity for scanning the ECA’s audit environment, and in particular for
identifying how the auditee is tackling the trends which were identified in
the previous phase. ‘Subsequently we get to the real strategy – what goals
the ECA will set up in the audit work, considering these trends and scanning
information. Once we have those goals we want to achieve with our audit
work, in each specific area, we can ask which audits we need to achieve these
goals. This is where our audit work programming comes in.’ With a smile he
adds: ‘This means that when we come to launching the audit, the background
dynamics are already there!’
Adopting a foresight culture
One of the challenges an organisation faces is how to engage its staff with
new things, with management decisions on which course to sail, whether
it is a new strategy or the internalisation of foresight methods. Juhan Parts
recognises this as a challenge: ‘If you go into depth in foresight you will realise
that this is some kind of art, a way of analysing things, a perspective on how to
look ahead. It is not simply another in-house administrative procedure to be
dealt with.’ He then explains the cultural change that he sees as necessary to
come to applying foresight. ‘There should be triggers, call them drivers, if you
want. There are goals set for every single audit, and these goals are not just
a kind of output, they have to be impactful.’ He clarifies that this goes further
than merely communicating about the audit results or doing a conference. ‘It
is not simply finalising the audit report, submitting it to parliament, issuing
a press release, and done. We need to be clear, beforehand, on what impact
we want to achieve, how we achieve it and how to measure whether we have
achieved it. What are the triggers that can really create the organisational
preconditions to get to such an approach?’ He concludes that the ECA
Members and the senior managers have a common challenge to address.
‘Without leadership in this, you cannot change things – just by saying to staff
‘Do it this or that way.’`
For Juhan Parts making optimal use of technology, in particular given the
ongoing trend towards digitalisation, is ‘an essential building block for making
the ECA future proof.’ He adds: ‘My lesson learned from the past is that you
need to be open to using emerging technologies to create opportunities.
Try to be a leader and not a follower. What is critical here is your mind-set,
because you can always find arguments not to do something. At the ECA we
should go for innovation, and not find impediments in international audit
standards or elsewhere.’ He concludes that this requires a readiness, starting
from the top level.
Juhan Parts is convinced that the audit compliance work of the ECA, leading
to the ECA’s annual Statement of Assurance, needs to make better use of the
new technologies that are already available. ‘Big data, artificial intelligence
(AI) and in the future probably block chain; they are developing rapidly and
everybody is investing in them. We are in a unique position to make such
investments and become standard setters. We are a small institution, but
this may be an advantage. I am sure that we can use this technology for our
purpose.’
if you go into depth in
foresight you will realise
that this is some kind
of art
There should be triggers,
[...] There are goals set
for every single audit...
Try to be a leader and not
a follower. What is critical
here is your mind-set...
We are in a unique
position to [...] become
standard setters.
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Interview with Juhan Parts, ECA Member
continued
25
Main takeaways from the 2018 ECA seminar on foresight
As to the outcome of the discussions he held with his colleagues at the ECA
seminar on foresight, Juhan Parts identifies four main takeaways. ‘As to the
two questions of whether we should introduce foresight into our strategy
process and consider an oversight capacity, I think the overall consensus
was clearly positive. Another important takeaway was that the digital reality
is already here or, if not, coming soon. Our choice is to jump on this train
regarding the digital transformation of our assurance work, or not.’
As a third issue he indicates that the ECA mandate is much broader than
it sometimes is considered to be in-house. ‘We should not diminish our
mandate by not using it to the fullest. Our mandate is what was ratified in
the Treaties and agreements by all EU Member States. Our mandate is a
duty
to protect taxpayers’ interests and the effectiveness of EU policies, no less.
There is sometimes confusion about what we are obliged to do, what we are
entitled to do, etc. On top of this, not questioning certain political decisions
is sometimes used as a pretext. Everything is political, but for us, as the EU’s
external auditor, it is crucial that we assess the effects of these policies in an
independent,
objective and professional way. This is a very big challenge and
makes us an important element in the functioning of EU democracy.’ Clearly
intrigued by the topic he adds: ’If we diminish our role, for whatever reason,
we diminish the functioning of democracy.’ Then, concluding: ‘Then we have
to ask ourselves why the situation in the EU’s neighbourhood is getting
worse, or why the convergence of the less developed economies in Europe is
not happening anymore. What is our responsibility here?’
As a fourth take away, he refers to other SAIs: ‘Others are using foresight for
their work, some have already been doing so for several years.’ He recalls
the case of the U.S. Government Accountability Office, that they have been
applying foresight for over eight years now. ‘The SAIs in the USA and Finland
are probably most advanced, but they are not the only ones.’
Setting our own agenda
For Juhan Parts foresight also provides an opportunity for the ECA to be
in a better position to set its own agenda, making well-informed choices
based on scenarios linked to facts instead of intuition. ‘Of course, the logic is
trend mapping, environmental scanning, goal setting and then the selection
of specific topics to be audited. But always keeping in mind: what impact
do we want to achieve? Every audit should have such building blocks.’ He
underlines that it is not always easy for auditors to have impact and that
another challenge will be to analyse all the facts. Again, he comes back
to the importance of being an objective, impartial guardian of taxpayers’
money. ‘We need to be bold and critical, but also fair when assessing policy
impact. And we need to be aware of preconceptions on certain policy issues.’
In his opinion, the core question should always be what the effectiveness
is of using EU taxpayers’ money through European programmes or EU
regulation. ‘We should not be echoing the Commission, not for our audits,
nor in our opinions on future legislation.’ As for the level of interest in reports
produced according to this logic, Juhan Parts is not afraid: ‘If audits are
chosen in line with our goal setting there will be interest in what we say.’
Apart from what the ECA audits, Juhan Parts believes that the ECA should set
its own agenda on
how
it audits. He expands on an issue he raised before.
‘Take our assurance work. Many things are going on regarding financial
audit topics and everybody is trying to track this, be it in the private audit or
public audit arena. The trick is how to change the whole issue.’ Juhan Parts
can imagine a big impact here: ‘If we change the current logic it will change
If we diminish our role,
for whatever reason, we
diminish the functioning
of democracy
... always keeping in mind:
what impact do we want
to achieve?
We need to be bold and
critical, but also fair
when assessing policy
impact.
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Interview with Juhan Parts, ECA Member
continued
26
the total management and control landscape. If we are able to do this in an
innovative way, calling for a new way of thinking and organising at the level
of the auditee, see how robots can help in audit, how we can use analytical
tools offered by AI to innovate and identify compliance risks, fraud risks, etc. -
then we can trigger a fundamental change. And we need to start here, at the
top of the audit pyramid.’
Setting the agenda also entails fulfilling some conditions. For Juhan Parts it is
clear that much more expertise is required. ‘If we want to be more pertinent
we will need more policy expertise. And I mean confirmed experts in the
areas we choose to focus on. And this means that we should be able to
offer them something interesting.` He believes the ECA is in a good position
to offer an interesting work environment, provided that there is enough
flexibility in the ECA’s human resources policy. For him, this even goes as
far as being independent of the Commission’s staff regulations, which is
currently not the case. ‘For me this is a strange set-up and decreases the
flexibility we need.’ A second element he raises is more networking. ‘In the
areas where we need this expertise we will need more networking.’
Foresight on the ECA: which future(s)?
When discussing the future(s) of the ECA and where it will be in ten years
from now, Juhan Parts expresses a strong hope that foresight will be
embedded in ECA activities, as proposed to the ECA Members: ‘I really think
we need a strong and permanent foresight capacity that is firmly plugged
into the strategic planning and audit processes.’
In addition, he believes that there are at least two decisive factors on
how the ECA will look in the future. ‘I think independence is critical to be
independent of the sector, as an audit institution, vis-à-vis your auditee. It is
not that we just declare, as ECA Members, ‘We are independent.’ We should
really look at the mind-set, motivation and conditions of everybody working
in our organisation in the sense that they optimise such an independent
attitude.’ He links this to performance audits and the choices made there: ‘If
we have the right expertise, if we get the right drivers in place for selecting
the topics that have an impact, then we can be standard setters in adding
value for policy decision-makers.’
The second decisive factor he identifies is the digital challenge. ‘If we take
up this challenge of digitalisation, and we do an extremely good job during
the next ten years … then we will be global leaders in public audit. But it
cannot happen overnight. We should test learning by doing. To become the
standard setter in auditing we need to start today.’
... we need to start here,
at the top of the audit
pyramid.
If we want to be more
pertinent we will need
more policy expertise.
... we can be standard
setters in adding value for
policy decision-makers.’
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Task Force charts foresight territory for the ECA
By Andreas Bolkart, Directorate of the Presidency, ECA
27
At the end of 2017, the ECA decided to create a foresight task force to propose
measures to make the ECA more future-proof. Why was this task force created?
What does foresight in audit mean? Who is behind the Foresight Task Force and
what have they accomplished so far? Andreas Bolkart works in the Directorate of
the Presidency and heads the secretariat of the Task Force. Which makes him the
ideal candidate to shed some light on the background, set-up and activities of the
Foresight Task Force.
Establishing the Task Force
The story of the Foresight Task Force began in September 2017, at last years’ ECA seminar,
the annual ‘away days.’ At that seminar, the ECA Members shared the feeling that while
the then recently adopted
2018‐2020 strategy of the ECA
provided a strong impetus for
improving and extending the range of products and communicating better about them,
the ECA could still do more to develop its forward thinking capacity. The Members saw
the need to improve the ECA’s ability to identify long-term policy problems and to make
use of this information when formulating its strategic and operational priorities.
The 2017 seminar concluded that the ECA needed to reflect on establishing a strategic
capability, almost like an internal think tank,-thinking structure in order to make the ECA
future proof. To follow up on the conclusions of the seminar, a Task Force composed of
five ECA Members ( Ildiko Gáll-Pelcz, Mihails Kozlovs, Leo Brincat and João Figueiredo,
chaired by Juhan Parts) was set up. The Task Force is supported by the Directorate of the
Presidency.
The Task Force started its journey in January 2018 with a clearly spelled-out mandate
from the ECA College: identify future thematic areas of interest for EU citizens and policy
makers and assess the need for a permanent future foresight capacity in the ECA.
The Task Force decided to first explore the future-proofing and foresight theory and
methodology. It did so by studying a wealth of literature and by reaching out to the
vibrant community of foresight professionals in audit firms, European and international
institutions, academia and SAIs. Some of these consultations were conducted as part of
study visits to partner organisations such as the United States Government Accountability
Office, the United Kingdom National Audit Office and private audit firms. As a result, the
Task Force established a firm grip on understanding the foresight toolbox and along the
way made dozens of valuable connections with foresight experts.
Pilot trend watch
The Task Force quickly realised that a frequent starting point, and indeed the backbone of
any foresight activity, is analysing trends and drivers of the future. To get ready for future
challenges one has to scan the environment of the organization to detect indicators and
drivers that give clues about the future. When doing this, it is vital to truly look beyond
the current, imminent challenges in our environment and project the organization in the
future.
Therefore, the Foresight Task Force undertook a pilot trend analysis for the ECA based on
more than 40 internationally recognised trend studies and consultations with more than
60 experts. The resulting study, in its preliminary version, has been presented internally at
the 2018 ECA seminar (see page 32). This study is meant to be a living document that will
form the basis of future ECA foresight work. So far the study has not been published, but a
visual overview in form of a metro map is reproduced on the next two pages.
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28
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Task Force charts foresight territory for the ECA
continued
30
From left to right: Martin Weber, Director;
Joao Figueiredo and Leo Brincat, ECA
Members, Juhan Parts ECA Member and
Chair of the Task Force; Ildikó Gáll Pelcz and
Michails Kozlovs, ECA Members and Andreas
Bolkart, ECA Directory of the Presidency
Task Force Members
Technology wake-up-call in audit
The trend analysis pointed in particular to the opportunities provided by new
technologies for the future of audit, in particular of financial and compliance audit.
The Task Force held several consultations with private audit firms and concluded that
there are many developments, which are analysed and reported to the ECA College
for possible options.
The accelerated development of digital technologies and artificial intelligence
has opened up huge possibilities to improve the quality, efficiency and relevance
of assurance audits. High-level commitments by Commission and Member States
to create a European-wide e-government may create additional opportunities.
Innovation in these areas could lead to large resource savings. The use of these
new methods depends largely on access to and connections between auditee data
sets. Guaranteeing full access to these systems will thus be key. The Task Force also
consulted, particularly for the trend watch, with ECA senior officials and experts
in the Audit Chambers. In addition, it consulted support services like information
technology.
ECA events centred on foresight
Foresight was also the main theme at the 2018 ECA seminar on 20/21 September
that was organised by the Foresight Task Force, with the help of experts from the
Organisation for Economic Cooperation and Development and the U.S. Government
Accountability Office.
Participants discovered what future-proofing and foresight is, how other
organisations introduced it and how they use it fulfil their core mission. The seminar
also explored options for the ECA to use foresight in its core business and discuss
the implications of such an approach on audit and support processes. This event was
organised around a set of thought provoking speeches by external guests, which
allowed the ECA Members to have a very productive discussion on the way forward
with foresight in the ECA.
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Task Force charts foresight territory for the ECA
continued
31
The Task Force was also asked to prepare the Management Seminar on 6 December
2018. This seminar will provide an opportunity to discuss the foresight topic with the
middle management level.
Foresight principles
As regards ECA’s future foresight work, a few basic principles clearly emerged for the
Task Force:
Foresight and future-proofing are umbrella terms for methodologies and
approaches that take volatility, uncertainty, complexity and ambiguity
as their starting point, explore possible and probable futures, including
a preferred one, and generate insights and ‘cross-sights’ that enable
transformative decision making today.
Foresight is about the core business process. For Supreme Audit Institutions
(SAIs) that means it is not an intellectual side-event but impacts the strategic
orientation, the selection of future audits and reviews, methodology and
reporting as well as the development of future capacity and knowledge.
Consequently, foresight is used at key decision-making points on strategy,
work planning, audit methods and reports.
Foresight is an organisational mind-set - a way of doing things - that affects
everybody in the organisation albeit in varying intensity. That means that it
has to be introduced gradually but thoroughly through leadership from the
top and will require time to take effect. While it might be driven from a core
team, it has to be clear for everybody else what it means for them and for the
organisation as a whole.
Finally, foresight is about leveraging external resources and partners. SAIs
are generalist organisations that depend on external expertise and should
be very sensitive to outside signals, in particular when it comes to future
developments.
How will the ECA become future proof?
By the end of the year, the Task Force will submit a proposal to the ECA College on
how to build foresight into the core business processes in order to become more
future-ready. The proposal will build on the experience of other organisations
recollected by the Task Force as well as the input received at the ECA seminar.
Thinking about the future is of course not entirely new to the ECA. The Task Force
will therefore analyse current strategy, planning, audit and support processes to see
where elements of foresight could usefully enhance our practice. If the proposals are
approved by the ECA College, the ECA will continue its foresight journey in 2019.
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The 2018 ECA seminar:
all about making the
ECA ‘future proof’
32
The ECA seminar, the annual ‘away day’ of the ECA leadership, provides a regular
forum for reflection about the ECA’s strategy, work and organisation from a long-
term perspective. This year’s topic, future-proofing and strategic foresight, was very
much in this spirit. The ECA Members discussed how to make the ECA ‘future proof’.
Barbara Auer provides insights on the main issues discussed, also on the input by
this year’s guest speakers to the discussions.
By Barbara Auer, Directorate of the Presidency
This year’s topic for discussion: making the ECA ‘future proof’
This year’s ECA seminar took place on 20 and 21 September 2018 in Überherrn,
Germany. For two days, the ECA Members discussed how the ECA should position
itself to be better equipped to face future challenges and to benefit from future
opportunities.
The seminar, and the different topics discussed, had been prepared by a ‘Foresight’
Task Force led by ECA Member Juhan Parts, with support from the ECA’s Directorate
of the Presidency (see also the article on the Task Force on page 27).
Discover future-proofing and foresight: OECD and the US GAO sharing their
experiences
The seminar's first session focused on future-proofing and foresight at other
organisations. Two external guest speakers shared their organisation’s experiences
and insights with the ECA leadership: Duncan Cass-Beggs, Counsellor for Strategic
Foresight to the Secretary General of the Organisation for Economic Cooperation
and Development (OECD), and Stephen Sanford, Strategic Planning & Innovation
Manager at the U.S. Government Accountability Office (GAO).
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The 2018 ECA seminar: all about making the ECA ‘future proof'
continued
33
Duncan Cass-Beggs recalled that in a world where change happens faster than
individuals or governments can keep up with, foresight is more important than ever
(se for more details on page19). He defined foresight as thinking systematically about
the future to inform decision-making by exploring and preparing for alternative
plausible futures. In his keynote speech, he also suggested that the ECA should look
into the following three ‘foresight’-related questions:
What plausible future changes could impact the ECA – its role, capacities, etc. (i.e.
'foresight for the ECA')?
How can the ECA build foresight into its own work (e.g. foresight influences audit
scope, questions and methods, i.e. 'foresight in ECA audit work')?
How can the ECA support anticipatory governance practice by EU institutions
and governments, i.e. assess if the Commission has considered relevant future
scenarios (e.g. 'auditing for foresight')?
The second guest speaker, Stephen Sanford, presented how the GAO uses foresight
to set priorities and be pro-active in a political context. In his speech he underlined
the strong commitment to foresight by the GAO and its leadership. Foresight is
operationalised across a number of functions; it is integrated in the core of what GAO
does. Stephen Sanford also explained that foresight practice and culture is spread
across the organisation through a range of activities that are coordinated by a central
strategy team. Taken together, these activities form the GAO ‘foresight ecosystem’,
including
Environmental trend scanning
Leadership decision-making support
Planning support (i.e. strategic goals and planning priorities are informed by
trend analysis)
Audit work support (i.e. foresight influences the approach and reports of audit
engagements)
Capacity building such as speaker series, fora and trainings
Participation in external foresight networks
According to Stephen Sanford, foresight at the GAO is aligned with its core mission:
to improve accountability and the performance of the federal budget. His article on
page 62 provides more details on the GAO’s approach to foresight.
Foresight in action – a workshop facilitated by the OECD to introduce the ECA
leadership to scenario planning
The second session was a workshop facilitated by Josh Polchar and Julia Staudt (both
OECD). The workshop consisted in developing scenarios in small groups. Once these
‘stories of the future’ were developed, participants identified concrete changes the
ECA could make to become better prepared to succeed in the future.
The facilitators underlined that scenario planning should not be confused with
predictions; rather it aims to ‘train’ leaders to imagine possible, albeit unlikely,
disruptions and reflect on how their organisation could react to them.
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The 2018 ECA seminar: all about making the ECA ‘future proof'
continued
34
Digital audit - a revolution in the making
The third session was centered around a presentation on the topic of digital
transformation for audit by Brice Lecoustey, partner at the Luxembourg practice of Ernst
& Young (EY). He explained how current technology is already changing the methods
and even the meaning of audit. In the past few years EY has made big strides towards
automating many audit procedures. This has already changed the audit of routine
transactions, and in future will also be extended to non-routine transactions, involving
estimates, judgements and even audit scoping and risk assessment. Brice Lecoustey’s
article on page 52 provides more details.
The lively discussion after this presentation showed that digital audit is also an urgent
matter for the ECA, and the main question to be answered is where to apply it in its audits.
The ECA's future institutional positioning - what are the options?
The fourth session focussed on the ECA's future institutional positioning. The guest
speaker, Professor Matthias Rossi from the University of Augsburg, presented his
reflections on this topic.
According to Professor Rossi the ECA has a broad mandate under the Treaty which should
allow it to play a more active role than in the past. His contribution on page 69 provides
further details.
Final session of the 2018 ECA seminar – all about drawing (preliminary)
conclusions…
During the final session, a clear consensus emerged amongst the participants: more
needed to be done in the areas discussed over the previous two days. In particular,
the ECA should embrace strategic foresight across the organisation, but in particular
in its strategic and work planning and audit work (methods, scope, reports and
recommendations).
Studies such as the ‘ECA trendwatch’ - which had been prepared for the first time for the
2018 ECA seminar - could be an important element of a future ECA foresight system (more
details in the article on page 27). However, such analysis would need to be broken down
to determine the specific implications for our audit work and our organisation and to
support decision-making in strategic and annual planning.
Moreover, the ECA could consider setting up advisory
bodies with internal and external experts to support
future-oriented decision-making. Participation in external
foresight community networks could also be envisaged,
as long as the ECA’s institutional independence was not
compromised.
As Leo Brincat, one of the members of the Task Force,
put it: ‘In a world of rapid change and uncertainty, doing
nothing would represent the highest risk. Foresight is a
collective responsibility; it has to be lived and understood
by everybody.’
The ECA seminar is not a forum for taking decisions.
President Klaus-Heiner Lehne therefore invited ECA
Member Juhan Parts and the other members of the Task
Force to submit their proposals, by the end of the year, on
how to best introduce foresight at the ECA.
Klaus-Heiner Lehne, ECA President
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Work on Long-term Trends and Uncertainties
at the IMF
By Alberto Behar and Kristina Kostial, both with the International Monetary Fund, and Professor
Rafael Ramirez , University of Oxford, and with Normann Partners*
35
As is the case with many other organizations, the International Monetary Fund (IMF) has been
using scenario planning (SP) as part of its foresight work, known inside the building as ‘Long-
term Trends and Uncertainties’ (LTU). Within the IMF Alberto Behar and Kristina Kostial, working
as respectively Senior Economist on the Scenarios Team and Deputy Director in the Strategy,
Policy and Review Deparment, work on a daily basis with these issues. In this article, they explain,
together with Rafael Ramirez, Professor of Practice and Director of the Oxford Scenarios Programm,
Saïd Business School and Green Templeton College, University of Oxford, and with Normann
Partners, and who advised the IMF in this work, explain why and how this is done and provide
some insights on how this type of foresight work has helped the IMF in doing its work.
Engaging with long-term challenges and being agile in the face of
uncertainty enhances the IMF’s effectiveness
The IMF’s primary
mission
is to ensure the stability of the international
monetary system. It does so in three ways:
surveillance
of the global economy
and the economies of member countries;
lending
to countries with balance of
payments difficulties; and giving practical help to members through
capacity
development.
IMF surveillance and lending programs involve rigorous analysis of
developments with horizons of up to five years. Yet the global economy is
undergoing longer-term transformations that subject the future to considerable
uncertainty and complexity. So, the question arose of how to incorporate these
aspects in our analysis.
By their nature, long-term transformations are subject to Knightian Uncertainty.
Such “unknowable unknowns” contrast with quantifiable risks, which have
implicit or modelled distributions derived from past relationships or data.
Scenario planning (SP) engages such uncertainty, thus complementing the
IMF’s more established methods for discussing and quantifying economic risks.
SP helps us surface and challenge assumptions and explicitly map our different
mental models through which to interpret events
1
. Notably, SP recognizes
diverging views as an indispensable asset because the Knightian future is
unknowable.
IMF in its second round of building and using scenarios
With strong support from and engagement with our top-level management,
we are experimenting in the IMF with establishing SP in the institution while
not overly formalizing it. As a learning institution, the IMF emphasizes SP as a
learning process – documents are inputs, not final products. So far, we have
done two rounds of SP.
* The views expressed in this paper are those of the author(s) and do not necessarily represent the views of the IMF,
its Executive Board, or IMF management.
1 In particular, we have used the Oxford Scenario Planning Approach (Ramirez
& Wilkinson, 2016;
Ramirez, Churchhouse, Palermo, and Hoffman, 2017).
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Work on Long-term Trends and Uncertainties at the IMF
continued
36
-
The first round, which started in 2012, commenced with the
preparation of LTUs, on which we sought feedback from senior
officials and the IMF’s Executive Board. Based on these LTUs, senior
managers - in a dedicated two-day workshop - developed a set of
scenarios.
The second scenario round started in 2016 and is in progress at
the time of this writing. Here we asked junior staff and guests
from outside the Fund to build new scenarios structured along
axes representing two key uncertainties (the deductive method).
This approach differed from the one we used in first round, which
did not have pre-imposed structures (the inductive method).
Implications of the scenarios were then discussed by management
and the Executive Board and also used by various departments
to think about specific problem sets that are relevant to our 189
member countries.
-
The current scenario set considered possible future contexts the Fund
may face over 25 years and is structured by two key uncertainties. First,
how much might
technological change
enhancing humans (or not) have
mattered for the economy directly (e.g., the future of work and global
income distribution), and indirectly through how policymakers and
regulatory frameworks act? Second, to what extent might societies have
come to
trust
the ability of established institutions to deliver services amid
such changes? How such uncertainties might play out is depicted using
three scenarios (Figure 1).
Circle of Trust:
Technology raises productivity
and well-being. Political systems deliver stability
amid pressures on wages and demand for social
services. Distributed Ledger Technologies make
transactions more efficient but add systemic
risks and challenge traditional regulators.
Twin Peaks:
Automation has progressed,
winners take all, and trust in political systems
is eroded. Activity concentrates in powerful
centers. Wage compression causes a global
recession prompted by a crisis in a large
economy. Shockwaves split the global economy
into two blocs.
Tech Race:
Technology is well integrated, but
information mismanagement creates distrust in
data and institutions. Corporations, individuals,
and governments are in a competitive
struggle amid political, economic, and social
fragmentation.
Figure 1: 2042 Scenarios (produced in 2017)
Source: IMF
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Work on Long-term Trends and Uncertainties at the IMF
continued
37
How LTU has influenced our work
According to Jeremy Bentham, Shell’s Vice President who heads their
scenario team, effective SP leaves ‘fingerprints’ on the insights it
generates. We have found several marks of our SP on IMF work. Examples
are presented in Box 1.
Box 1: LTU Fingerprints on the IMF’s Work
Surveillance:
Thanks to recognizing their importance for global financial stability,
formerly ‘emerging’ trends like inequality are now part of our surveillance. LTU helped
us gear up to advise how countries can assist those left behind by technological
change and global economic integration. Scenarios inform Early Warning Exercises,
which aid surveillance through discussions of vulnerabilities to plausible though low
probability and high-impact risks.
Lending:
In response to the Ebola outbreak, we established the Catastrophe
Containment and Relief Trust to provide grants for debt relief for the poorest and
most vulnerable countries hit by catastrophic natural disasters or public health
disasters within a very short time frame. SP sensitized us to how the Fund can help
stop a non-economic trigger from causing a global snowball effect on economic
growth and stability.
Capacity Development:
The scenarios
helped assess how technological
changes affect members’ needs and
the modes for assistance.
Source: Pixabay
IMF experimenting in incorporating LTU more in operational work
Attempts to tie scenario planning to our work program continue to show
promise. For instance, the IMF is working on identifying new surveillance
priorities and reviewing how it might better conduct surveillance. We
want this review to look at the future surveillance landscape through the
lens of uncertainties concerning long-term economic prospects, while
exploring challenges and opportunities for our member countries and
the global economy. Also, the sub-Saharan Africa Fall 2018 Regional
Economic Outlook
2
features new purpose-built scenarios in a chapter
on the future of work. The scenarios, which describe potential paths for
technology, global economic integration, and climate change, call for
openness to adapt development strategies. The scenario set, which will
feature at a special event in sub-Saharan Africa in December, will inform
our dialogue with sub-Saharan African countries.
2 The semi-annual outlook is available at
https://www.imf.org/en/Publications/REO/SSA/.
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The European Political Strategy Centre’s
Experience with Strategic Foresight: safe-spaces,
networks and walking-the-talk
By Ricardo Borges de Castro, European Political Strategy Centre, European Commission
38
The European Political Strategy
Centre (EPSC) is the European
Commission’s in-house think
tank tasked with providing the
President of the Commission and
the College of Commissioners
with strategic, evidence-based
analysis and forward-looking
policy advice. To fulfil this mission,
Ricardo Borges de Castro, advisor
on Strategic Foresight to the EPSC,
explains how the EPSC brings
foresight to the frontline of EU
decision-makers.
Source: European Commission
Mainstreaming foresight
With regard to the future, policy- and decision-makers start from a level playing field. Unless
one has extra-sensorial abilities, no one knows what it holds in store. In fact, the future
should always be expressed in plural terms: there are several plausible futures, not a single
one. To use
Stuart Candy’s
clever expression, the future is a ‘landscape of possibilities,’ even if
in most settings (maybe with the exception of the private sector) it is more frequently seen
as a landscape of challenges.
Yet, strategic foresight and anticipatory governance techniques can help policy- and
decision-makers better prepare for the future. And, in today’s more volatile, uncertain
and complex world, these approaches and tools are rapidly growing in importance. Once
misunderstood or scorned (‘Ah! So you’re the guy with the crystal ball?’) foresight is today
being mainstreamed across policy areas. Indeed, many, including in the European Union, are
now following in the footsteps of Finland and Singapore – perhaps two of the world’s best
examples in the field of governmental foresight.
This was in fact part of the reason for setting up the
European Political Strategy Centre
(EPSC) – the European Commission’s in-house think tank: to provide President Juncker
and the College of Commissioners with strategic analysis and long-term policy advice. As
an on-demand, service-oriented policy ‘start-up,’ the EPSC has sought, from the outset, to
reconcile the usual constraints of day-to-day priorities and politics with long-term strategic
thinking and planning. This implies a degree of agility and flexibility that is not necessarily
a given in many large public administrations, and that also leads us to innovate in the way
strategic foresight methodologies are used – especially with regard to its resource and time-
consuming nature.
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The European Political Strategy Centre’s Experience with Strategic Foresight: safe-spaces,
networks and walking-the-talk
continued
39
Key elements in the EPSC’s foresight journey
The EPSC’s strategic foresight journey has been – and continues to be – one of creating
safe
spaces
for open debate, building internal and external
networks
and
walking the talk.
Safe spaces
are particularly important because conformity, groupthink and risk-aversion do not
mix well with preparing for the future. Creating a safe-space within the Commission, where
colleagues from across the institution (and elsewhere) can break the usual silos and hierarchical
barriers, and openly brainstorm about policy issues and their potential future implications,
has greatly contributed to our mission. Like holding a blank sheet of paper waiting to be
filled, not knowing about the future is an ideal starting place to challenge assumptions, push
beyond traditional intellectual barriers, and reach uncomfortable no-go areas. The EPSC’s lunch
seminars are now a cherished tradition that have helped nurture creativity and out-of-the-box
thinking among Commission staff.
Networks
are also central to our work. By both reaching in and reaching out, the EPSC is
building a network of internal and external experts that are key to exchanging ideas and
contributing to the Centre’s intellectual muscle. Whenever possible, rather than only reading
a report or a book, we seek to engage with its authors. This gives us a chance to ask questions,
to challenge or be challenged by those who know most about a given topic and to see the
issues through the lenses of others. The EPSC also regularly takes the extra step to go directly
to where the knowledge and experience is and learn from those who lead in their respective
fields. The Centre’s study visits to
IMEC
– which stands for
Interuniversitair Micro-Electronica
Centrum
- in Leuven (to learn about state-of-the-art research and innovation) or to the City of
Mechelen (to understand how counter-radicalisation strategies can be successful) are just two
examples.
By spearheading the Commission’s involvement in the European Strategy and Policy Analysis
System (ESPAS) – a unique EU inter-institutional
1
collaboration that aims to build preparedness
for upcoming challenges and opportunities, the EPSC also contributes to building a global
community of foresight practitioners, strategists and planners, from the US, Canada or Brazil
to Singapore and Pakistan. The
ESPAS Annual Conferences
held in Brussels (the next one
will be on 28-29 November 2018) act as an incubator and springboard for emerging ideas
on the future(s), as well as an advocacy platform towards a ‘culture of preparedness,’ across
governments, institutions and societies.
Of course, more than creating a niche within the Commission, the EPSC is dedicated to making
strategic foresight more of a mind-set within the institution. And our work starts in-house:
we
walk the talk.
Strategic foresight is mainstreamed across the EPSC’s interdisciplinary team.
Trends, horizon scanning, scenarios, visioning, backcasting or even the ‘zoology’ of foresight
(i.e. Black Elephants, Grey Swans, Black Swans, etc.) are now part of the group’s vocabulary and
work.
EPSC helping others towards strategic foresight
Either through learning by doing or with the help of expert training, the EPSC team has been
fully introduced to the methodologies and techniques of foresight. To support and expand this
effort beyond EPSC walls, and with the help of Angela Wilkinson – a world-renowned foresight
expert – the Centre has published a
Strategic Foresight Primer.
This readily accessible and easy-
to-use guide on strategic foresight — a ‘foresight for dummies’ — explaining the nuts and bolts
of the process, can be used by anyone, from the public to the private sector.
As the ECA makes its own inroads into foresight, it can count on the EPSC’s intellectual safe
space, be part of its growing network, and ‘walk this walk’ together as the European Union
continues to shape its future.
1 European Commission, European Parliament, Council of the EU, and European External Action Service, with the
Committee of the Regions, European Economic and Social Committee and European Investment Bank as observers
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40
From left to right: Leopold Schmertzing, Freya Windle-Wehrle, Danièle Réchard, Eamonn Noonan.
Source: European Parliament
How foresight helps parliamentary work:
the European Parliament’s experience
By Danièle Réchard-Spence, European Parliamentary Research Service
Governing is all about anticipation and making well-informed choices. As a key player in the
Union’s political process, the European Parliament is developing a foresight capacity. Danièle
Réchard-Spence is Head of the Global Trends Unit embedded in the European Parliamentary
Research Service. She explains what her unit does and how it reaches out both internally and
externally to ensure that foresight information gets to policy decision-makers.
Developing foresight capacity
Foresight is a proactive approach to help us conceive alternative futures, using established
techniques such as horizon-scanning, trend analysis and scenario development. This work
begins with factual evidence, but it is not about ‘forecasting’ or ‘predicting,’ it is about
understanding what might happen in the future and how we could or should anticipate
adapting.
The European Parliament (EP) has long been active in this area. In the 1980s it created the
Science and Technology Options Assessment
(STOA) panel. Legislators and policy-makers
needed independent, impartial and accessible information about developments in science
and technology (S&T), and scientific foresight projects were conducted to this end.
After several crises hit the European Union, a further step came in 2015. The Global Trends Unit
was set up within the European Parliamentary Research Service (EPRS) to mainstream strategic
foresight. This unit is tasked with systematically studying changes in the global economic,
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How foresight helps parliamentary work: the European Parliament’s experience
continued
41
social, and geopolitical environment. It seeks to identify the challenges and choices that
these may pose for policy-makers over time. The Global Trends Unit focuses on medium- and
long-term trends that may not be high on the agenda right now, but have far-reaching and
potentially disruptive implications.
Plugging foresight into parliamentary work
How does this work feed into parliamentary work? The annual 'Global Trendometer' aims to
provide foresight for decision-makers in the EU, by analysing changes in these medium- and
long-term trends. The publication does not offer answers or make recommendations; rather,
it presents summarised information derived from a range of carefully selected sources
(such as OECD, US National Intelligence Council, NATO or World Bank reports). The latest
issue of the Global Trendometer (September 2018) analyses long-term trends on India, the
labour-share of income, and democracy and artificial intelligence. It also features two-page
contributions on geoengineering, remittances, food security in China, economic waves,
the US after Trump, public procurement and deep fakes. The Global Trends Unit may also
monitor external studies, such as on the ‘Global trends 2030: geopolitics and international
power’ or ‘Global trends 2030: impact and implications for economy and society in the EU.’
Publishing insightful written material is only one part of foresight. Another is mobilising
collective intelligence and imagination to engage in longer-term thinking about the
challenges and choices. To this end, the Global Trends Unit is experimenting with a particular
tool, that of the ‘Key Assumptions Check.’ This is a structural analytical technique which
allows for a rapid interactive check of a small number of initial assumptions on a specific
subject. The goal is to ensure that its work serves its primary ‘client,’ the Member of the
European Parliament. The unit also maintains a continuous worldwide dialogue with other
organisations, working on foresight or maintaining data sets that can fuel into its work. In
terms of being in-reach, the Global Trends Unit for example set up the ‘EPRS Foresight Club,’
which meets on the Friday following a Strasbourg EP plenary session. The setting of this
meeting is informal, playful even: a theme is set, most often by a participant outside the
unit. After a short introduction to get the ball rolling, participants have the opportunity to
comment on the topic from their own perspective. A recent Foresight Club session, in July,
explored the topic of space data; a forthcoming session will consider ‘remittances.’
ESPAS: teaming up EU institutions on foresight
The Global Trends Unit’s work serves as a direct contribution to what is known as the ‘ESPAS’
process. The European Strategy and Policy Analysis System (ESPAS) was established in 2010
at the initiative of the European Parliament. It has developed into a permanent process of
administrative cooperation at high official level to share analysis of long-term trends facing
the Union. The four partner bodies are the European Parliament, the Council, the European
Commission and the European External Action Service. The Committee of the Regions, the
Economic and Social Committee and the European Investment Bank take part as observers.
The upcoming ESPAS Conference (28-29 November), jointly organised by the European
Parliament and the European Commission will wind up the 2015-2019 cycle with a view to
publication of the 2019 ESPAS report on Global Trends.
Foresight strengthening democratic capabilities
In today’s world of ‘uncertainties’ and ‘risks,’ democracies need to demonstrate their capacity
to set long-term goals, to anticipate what is coming, to mitigate risks and to develop
resilience. It is commonly assumed that authoritarian regimes have a kind of comparative
advantage in this. This assumption needs to be challenged: there is no better place than
a democratic representative institution to put together collective intelligence, find the
necessary compromises, and to give a sounding board to dissenting voices. This is where
foresight can help.
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What does the future hold for the
EU? How will the EU hold on to the
values which are fundamental to the
European project? On 17 October
2018 Klaus Welle, Secretary-General
of the European Parliament, gave a
presentation with the title The Future
of Europe, focusing on longer-term
thinking, and on the political and
societal challenges the European
Union (EU) will have to face in the
near future. With the EP elections
coming up in 2019 he pointed out
the numerous external pressures and
influences that concern EU citizens,
such as globalisation, migration, or
economic stagnation. Below you
will find the key issues he presented.
Subsequently you will find the
interview he gave Derek Meijers
and Gaston Moonen about the links
between the global race, institutional
quality, and ambitions and their
fulfilment.
The future of Europe:
a collection of opportunities
Presentation by and interview with Klaus Welle,
Secretary-General of the European Parliament
42
Vítor Caldeira
Klaus Welle
By Derek Meijers and Gaston Moonen,
Directorate of the Presidency
Historical perspective: putting the EU of today in perspective
Attendance by ECA colleagues was high for Klaus Welle’s presentation, who
was introduced by Eduardo Ruiz Garcia, ECA Secretary-General. Klaus Welle
opened his introduction by looking at two words often heard nowadays:
Europe
and
crisis.
He suggested starting with a historical overview, presenting
the achievements of the EU. Such a historical view could help to put
things into perspective. He referred to the late eighties of the last century,
highlighting that the existence of the EU overcame totalitarianism, not only
in some Member States in Southern Europe, but also for Eastern Europe.
The
West
- standing for human rights, a liberal democracy where the rule of
law prevails - managed to move over 1000 km to the east, and in a peaceful
way. He also referred to some figures that tell a story, such as, due to an
increasingly global economy, life expectancy in Africa going up by 20 years -
in approximately half a century.
He continued along these lines. Klaus Welle recalled that in the nineties
Eurobarometer expectations were not very optimistic about the introduction
of the euro or the ratification of the Maastricht Treaty. Nowadays, the euro
is the second currency in the world. And from a historical perspective there
has been, since the nineties, almost an avalanche of treaties: Maastricht,
Amsterdam, Nice, Lisbon - with huge consequences for the mandate and
activities of the EU as a whole and the EP in particular. In 1991, the EP’s
mandate related mainly to budgetary provisions. In 2018 the EP is on an equal
par with the Council, having the last word on a number of issues.
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The future of Europe: a collection of opportunities
continued
43
Geographical perspective: outside and inside the EU
In analysing historical trends, Klaus Welle found that, for every generation,
once or twice sudden shifts occur and history seems to take a different
direction. This was clearly the case in 1991 with many changes happening
on the eastern borders of the EU. He referred to possible forces that might
lead to such change, for example the general feeling of solidarity in Germany,
allowing reunification in 1990. He has the feeling that now we are also living
through a turning point. This was more clearly the case, in his view, in 2016,
when the referendum for Brexit was held and Donald Trump got elected
as US President. And there is much less of a feeling of solidarity now, it
appears, with neighbouring countries of the EU. He pointed to tensions with
Russia, blocking countries such as Ukraine and Georgia from taking over
more ‘western’ based institutional reforms. And looking at the southern EU
borders, he referred to religious battles going on in the Arabic world, military
dictatorships and migrant burdens for some countries such as Libya, or
failing state structures (Lebanon). He observed that, overall, the global order,
established in1945, has been called into question, not least for the World
Trade Organisation, handicapped by actions of one of the global players.
As a last geographical perspective, he referred to trouble on the northern
EU border, with Brexit looming. Insecurity seems to prevail on all of the EU’s
borders.
Klaus Welle pointed out the same conclusion could be drawn for
developments inside the EU: the 2008 financial crisis is not over yet since
there is no proof yet that the EU can go back to normal financial conditions.
He drew an analogy with a patient still used to the safety and comfort of
intensive care. In addition, the financial crisis left some systemic question
marks: is it a system where financial profits are privatised and losses are to
be borne by the community, by the public at large? And has globalisation
brought progress for all of us, also if you are less rich, less educated, less
succesful? Klaus Welle referred to the last US presidential election, where
industrial workers – apparently sharing a feeling that they did not benefit
from globalisation – tipped the scale towards Trump. Job security also looms
large for jobs formerly considered safe, like bankers and lawyers, where big
changes also seem to be coming for ‘white collar’ workers. Another example
he gave related to the media, where there used to be an intrinsic quality
control, a certain codex of staying close to facts, and being explicit about it
if you did not. Nowadays, in social media, this assurance of quality control
seems to have disappeared, with news provision aiming more and more to
be entertainment. Therefore, Klaus Welle concluded, insecurity also prevails
inside the EU.
Changes in political outlook: from an open to a closed perspective
The EP Secretary-General also identified some changes on the political
stage. While in the past a centre-left government would be succeeded
by a centre-right government, leaving the fundamentals of the system
unchanged, things have changed with the rise of populist parties. Klaus
Welle mentioned that ‘nationalist’ parties was a more appropriate name here,
since an important element in their programme was to provide protection to
citizens through closure. This goes together with a key question on what kind
of society political parties propagate: open – inside a country, towards the
EU, or at global level. Or closed , closing doors on trade, migration, climate
protection, multilateralism. For him this leads to the question of whether, if
the citizen is looking for protection, it can be offered in an open society? Or
is it necessary to close? He recalled the Bratislava Council meeting in 2016,
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The future of Europe: a collection of opportunities
continued
44
where an agenda of protection in an open system was developed: border
protection, immigration control, antiterrorism measures, or social protection,
to mention but a few.
With this in mind, when looking at the EU and EU action, Klaus Welle identified
a mismatch between what citizens asked for – protection – and what the EU
delivered. Or, as he subsequently phrased it: ‘People have been asking for
an elephant and we delivered a mouse.’ In his view, the EP is one of the most
sophisticated legislative machines, processing thousands of amendments
with no problem. But he argued that nowadays it is not good enough to be a
legislator. What is needed is complementary executive capacity. This means an
ability to deliver executive action, not only legislation. The EU needs to build
up complementary executive capacity so that when a request from Bulgaria
for border support arrives – as it did in 2015 - the EU can deliver.
Obstacles - and opportunities for the EU to deliver
LLooking at citizens’ expectations Klaus Welle raised the following core
question: is the EU able to deliver? He identified six obstacles to doing so.
A
first obstacle
is that the EU is not built on a
demos
present in one nation, but
in 28, soon likely to be 27. So the EU is based on pluralism. This makes it a lot
more difficult to provide solidarity. For the EU, however, the underlying motto
is cooperation. And the goal is to bake a bigger cake so that everybody can
get a bigger piece. The model is not: somebody else gets my piece of the cake.
As soon as an image of winners and losers occurs, the EU model has difficulties
coping. Redistribution policies at EU level are not popular and are often left
in the hands of the Member States – see for example social security issues
and taxation. Or, take the distribution of migrants - also more a zero sum
game. If problems of redistribution occur, then the policy answers shift. Klaus
Welle pointed to the shift in resolving banking problems – from bail-out to
bail-in. Or the shift in migration issues – from redistribution to border control
agreements with EU neighbour countries or solutions through development
aid.
Secondly,
solidarity is based on a common identity. Klaus Welle referred to
figures of 5% of Europeans calling themselves first European and then a
Member State nationality, while 40% would give the European identity as
second choice. So how to grow such a common identity? He concluded that
this needs time to be developed. After all, in the 19
th
century only 3% of what
are now called Italians spoke Italian. Over 200 years ago Germany counted
over 300 different entities.
As a
third obstacle
Klaus Welle referred to the EU budget, representing about
1% of overall EU Gross Domestic Income (GDP). Also here, history puts things
into perspective for us: in 1913 the US federal budget amounted to a similar
1%, which changed substantially with the introduction of a national income
tax and the challenges faced during the Depression. However, there are ways
out, as Klaus Welle pointed out, referring to the Juncker Plan, formally known
as the European Fund for Structural Investment (EFSI), which shows that
leveraging EU finances is a possibility.
Klaus Welle identified the Treaty on the Functioning of the EU as a
fourth
obstacle,
saying that, unlike in the past, a ‘wholesale’ Treaty change would
be very unlikely for the future: ‘We need to work with the Treaty we now
have.’ He suggested changing the perspective on the Treaty, looking not at
the Treaty as what we are not allowed to do, but seeing it as a collection of
unused opportunities. He pointed out that the real sovereignty transfer takes
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The future of Europe: a collection of opportunities
continued
45
place through political decicions. He gave the example of the concept
of
Spitzenkandidaten,
which was not speficied in the Treaty but worked
out for the EP, the Commission, and the Council. The clearest example
was Claude Juncker being
elected
as Commission President. He brought
forward another concept – with a German name - the EP is currently
working on: ‘Leistungsbilanz,’ identifiying at different levels, including
communities, what the EU does for you, bringing the EU closer to its
citizens.
Klaus Welle identified the executive capacity of the Commission as
the
fifth obstacle.
Clearly the Commission has a need to have more
executive capacity to assist where Member States cannot cope alone with
transnational issues, such as security.
The
sixth and last obstacle
he mentioned was strategic planning
capacity: to what extent is the EU capable of facing other blocs. China is
establishing itself as a global power, leading to clashes with the US on
trade. And with an annual growth rate of 7% India is moving up. For Klaus
Welle this raises the question: will Europe be an actor or an object for
others to toss around?
The future is soon, opportunities are now
Finally, he put time into perspective: 2030 seems like a long time away
but that time span - from now - contains only two legislative terms. Klaus
Welle pointed out that nobody knows what 2030 will look like. However,
the question is how we have to change now to remain in command of
our own fate. He concluded that the EU should be seen as a collection of
opportunities, expressing the hope that the plans for improving the EU
will turn out well.
Reflecting with Klaus Welle:
interviewing him about the future of Europe and foresight
Level playing field and EU institutions
TThe EU is continuously competing with
the rest of the world on economic issues, for
example the costs and conditions of labour.
Competitors may not always respect the
conditions and regulations the EU has put in
place to create a level playing field. How can
the EU address this issue, ensuring economic
activity within the EU?
Competing on salary levels or working
conditions has never worked, because if
that were the case, Africa would be the
global economic leader. Yet it is not. I think
you always have to see this ‘global race’ in
the context of productivity levels, as high
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The future of Europe: a collection of opportunities
continued
46
productivity levels give you the possibility to keep up an ambitious system of
environmental and social protection. Therefore, I think that our productivity is
a key factor in staying ahead and maintaining all the living conditions that we
are very much attached to. But it will also depend on our innovative capacity
and the quality of our institutions.
Speaking about the quality of institutions, there is some fear that, at the level of
EU institutions, this quality is negatively influenced by the institutional habits that
jeopardise good governance, the rule of law, human rights and social protection.
How should the EU and its institutions deal with that? How can we arm ourselves
against forces that seek to lower the hard-fought-for norms and values currently
in place?
This issue is one of the reasons why I insist that we have to think of the EU, not
only as the EU institutions, but as the sum of the EU institutions, the Members
States, the regions, cities, localities and villages. Why? Because 99% of what
is executed and administered, is executed and administered by the Member
States, by regions, or even at local level.
The quality of this multilevel EU is directly proportional to the quality of the
administrative structures of the individual Member States. This is also why the
European Parliament and the European Commission follow the issue of the
rule of law in certain Members States very, very closely. And it is not an issue of
sovereignty, because the moment you choose to join the EU, to integrate and
benefit from it, you also commit to uphold a certain institutional quality, and
you cannot deviate from that afterwards.
Looking at the quality and functioning of the EU institutions, and specifically the
EP: was this one of the reasons you set up the European Parliamentary Research
Service (EPRS)?
The idea behind the EPRS was to develop the EP’s secretariat general from a
more administrative body into a parliamentary support service that actively
enables the Members of the European Parliament (MEPs) to take best-
informed decisions, thus adding value to the overall quality of EU politics
and governance. To be able to do so, we first increased our productivity in
the technical support services, such as translation and interpretation, which
allowed us to innovate and to shift resources to political support for MEPs and
to build up a fully-fledged research service of 160 analysts.
An important aspect of the ERPS is that its publications are public, whereas
many national parliamentary research services do not share their documents
more widely. This was essential for us. The result has been an EPRS that
benefits the EP as a whole and contributes to a more informed public debate.
And not only at EU level, but also in the Member States, where we can see
that national parliamentarians are making use of our products to have a more
informed debate at national level as well.
This links back to my view of the European Union as a system of multilevel
governance. As the democratic quality of governance is not just decided
at EU level, but also by the democratic quality that exists at national or
regional levels. And if we believe in democratic scrutiny, it is our obligation to
strengthen those institutions and politicians in their role. Which in turn will
boost confidence in the EU institutions as well.
The ECA is very conscious of writing in an accessible way for its stakeholders, for
non-expert readers, and aims to be transparent and inclusive for the EU citizen.
... our productivity is a key
factor in staying ahead...
... the moment you choose
to join the EU, to integrate
and benefit from it, you also
commit to uphold a certain
institutional quality, and
you cannot deviate from
that afterwards.
... the democratic quality
of governance is not just
decided at EU level, but also
by the democratic quality
that exists at national or
regional levels.
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The future of Europe: a collection of opportunities
continued
47
These are some of the key moral values of the EU, and where citizens expect EU
institutions to lead by example. However, some people, like a former judge of the
ECJ, warn of the moral corruption of EU institutions, referring to criticism related to
the appointment of senior EU staff or discussions about the lack of transparency
on cost reimbursements. What do you think should be done about this for the
future?
The EU is a very complex organism and can only operate in a process of
permanent adaptation. Surely, we can always improve ourselves, and we
should! But when we compare our project, it becomes clear that the EU
institutions are far ahead of what is currently the standard at national level.
The main question is: do people still believe in the gains of cooperation,
or do they believe they are better off by just defending their own interests
without that culture of cooperation? The EU depends on people believing
that through cooperation we can grow the cake and improve our lives and
well-being. Which is contrary to nationalism, which basically says to the
whole population: your piece of cake would be much bigger if you wouldn’t
cooperate.
Facts, perceptions and ambitions
Taking up the issue of a well-informed and fact-based public debate, you
mentioned in your presentation that we have seen increasing friction between
facts and perception in recent years even to the extent that subjective perception
may have outweighed objective facts as the decisive factor in national elections.
What role should the EU institutions play, and this is especially relevant for the ECA
as an institution that is built on fact-finding and objectivity?
The EU can only be successful if it has the trust and the active support of its
citizens, and to earn and keep this, we need to be factual and show them
what we do. Of course, some national politicians try to take advantage of the
people’s perception for their own gains, and people are entitled to choose to
regard or disregard individual facts. Nevertheless, I am convinced that a clear
and factual message will last longer than one that plays on gut feelings and
fear.
However, it is also a question of language. As EU institutions, we should not
formulate from our own perspective, but from the citizens’ point of view. That
is a big difference. When we write in a way that is widely accessible and ensure
we are not excluding people just because of the way we are writing, or the
words we are using, we can reach our public and enable citizens to make their
decisions based on the facts.
In your presentation, you mentioned that one of the problems of the EU was that
in some areas people expected the EU to deliver an elephant, but what the EU
came up with was a mouse. In its most recent annual report, the ECA stressed that
the EU should not make promises it cannot deliver. Although these are slightly
different perspectives, both point out that the EU should be realistic in what can be
done. What is your perspective on that?
The trick is to combine realism and the question of
what can be done today,
with the knowledge that, in the long term, we have to be further ahead.
People see the world changing around them and look at the EU for – bold –
answers. They want to have a clear perspective and the EU should offer that.
This means that we have to be realistic today and at the same time ambitious
to be able to improve ourselves tomorrow.
The EU depends on people
believing that through
cooperation we can grow
the cake and improve
our lives [...] Which is
contrary to nationalism,
which basically says [...]
your piece of cake would
be much bigger if you
wouldn’t cooperate.
As EU institutions, we
should not formulate
from our own perspective,
but from the citizens’
point of view.
... we have to be realistic
today and at the same
time ambitious to be
able to improve ourselves
tomorrow.
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The future of Europe: a collection of opportunities
continued
48
What if …?
FForesight, the special theme of this ECA Journal, is an essential element of this
realistic and forward-looking attitude. How do you relate to foresight and the way
foresight is actually used in the political decision-making process?
Foresight is a very useful process in which the institutions and their
administrations can explore different perspectives on the future with the
help of scientists. Identifying different possible futures also means having the
chance to avoid certain futures, or some of their aspects.
Moreover, foresight helps us to create and promote a culture of cooperation
between the different institutions and other administrations, as we start to
understand that we are really working on the same issues. We might come
from different points of departure, but we are working towards the same goal.
Foresight includes thinking in ‘What if` scenarios, perhaps not unfamiliar for
economists such as yourself. What do you consider the most daunting ‘What if?`
question for the next ten years?
The key issue will undoubtedly be the rise of China and how the US will cope
with it. The question being whether the global order can find a balance in that
situation that is acceptable for everybody or not. China surely has the potential
and ambition to develop to number one status and that implies it will contend
with the US for that status. You can already see the US has been changing its
view on China very drastically in the most recent months and taking action,
and that will force everybody else to take a position.
In your presentation ‘The Future of Europe’, you opened by saying that the title
is very positive, implying that it actually has one. Then you raised the question of
whether the EU would manage to stay in charge of its own future, or be subject to
other actors’ future activities. Given all the challenges ahead: if we continue the
way we are working now, will it be a bright future?
I think that if you compare the EU with any other region in the world, we have
the best starting position. The EU has the best living conditions and offers
the best opportunities to its citizens. And although there is always room for
improvement, people, when they look around, often realise they would not be
better off anywhere else. However, in order to keep what we have achieved,
we will need to permanently adapt, modernise and innovate. We need to be
intelligent when making our strategic choices. That is the main point.
I see no reason to be gloomy. We have all the tools and opportunities, we
are the biggest economy of the world, bigger than the US, and we are
more populous. Sure, we need to continue to develop our institutions, our
mechanisms, our policies, and our ambition, but the potential is all there. The
only question is whether we have the political will to achieve it!
... Identifying different
possible futures also
means having the chance
to avoid certain futures...
The EU has the best living
conditions and offers the
best opportunities to its
citizens.
I see no reason to be
gloomy. [...] the potential
is all there.
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Designing a new audit manifesto – the ICAEW
AuditFutures programme
By Martin Martinoff, Institute of Chartered Accountants in England and Wales
49
The accountancy profession is mostly organised around
professional accountancy institutes, serving as an organisation to
train, regulate and represent the accountancy profession, often
since quite a long time. One of them is the Institute of Chartered
Accountants in England and Wales (ICAEW), in the business since
1880. Within the ICAEW Martin Martinoff leads the AuditFutures
programme, the ICAEW’s foresight and innovation initiative on the
future of the profession. He explains what it entails and what he
sees as the key elements in designing a modern audit profession.
How could we reach escape velocity?
In physics, escape velocity is the minimum speed needed for an object
to escape from the gravitational influence of a massive body. The audit
profession in the UK is certainly under massive pressure, with mounting
scrutiny and criticism. It intensified after the collapse of Carillion in January
2018. In response to the publication of the parliamentary select committees’
report in May, Michael Izza, the Chief Executive of the Institute of chartered
Accountants in England and Wales (ICAEW), said on the BBC Today
Programme that it represented ‘a watershed moment for our profession.’
This episode could turn out to be the defining moment for our future. Fresh
thinking is desperately needed not only to retain our position in society, but
to move to ‘a higher orbit.’
Six years ago, in the fallout of another crisis, ICAEW launched AuditFutures
with that very mission. As a foresight and innovation programme,
AuditFutures has the ambition to motivate and empower people by creating
a more positive and creative vision for audit and to catalyse innovation by
creating spaces for dialogue, collaboration and experimentation within the
profession. Over the past few years, we have developed innovative ‘thought-
leadership’ – a strategy for innovation and growth - and practical resources in
a number of areas. Our insights could offer fresh ideas at this pivotal moment
for the profession and to influence its course.
We need radical thinking and collaborative action
AuditFutures is an action-research programme that uses interdisciplinary
thinking, design-led processes and interactive workshops. We work in
collaboration with others. Our projects, events and activities are undertaken in
partnership with organisations and individuals that bring different perspectives
and thinking. We invite challenge and welcome diverse points of view. Our
programme is influenced by thought-leaders from civil society, business and
education to develop insights and to design practical steps to enable a more
systemic change that targets organisations, society and human capabilities.
We create safe spaces for dialogue and experimentation, and build platforms
to engage innovators from academia, policy and practice. Our public
events and bespoke sessions for organisations share the style and spirit of
entrepreneurship and progressive learning in an exciting, fun environment.
More than 2,000 people from 200 institutions have taken part in our activities
and over 24,000 people have visited our website.
Source: ICAEW
Source: ICAEW
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Designing a new audit manifesto – the ICAEW AuditFutures programme
continued
50
The crisis is an opportunity
It is encouraging that there are already several initiatives in the public arena on
the future of the profession. They all have the potential to address challenges such
as regulation, services and markets of the profession. Therefore, our support and
contribution are essential.
However, the insights from our AuditFutures work suggest that ‘people and
purpose’ are two essential areas that are not the focus of ongoing public
inquiries. Therefore, it is important that we take a more systemic and thoughtful
consideration of the following questions:
How do we attract, motivate and inspire
people to become auditors? We have the
opportunity to redefine what it means to
be an audit professional and to reimagine
how we educate and empower people.
How might we develop a positive vision
for the profession? By articulating and
upholding a greater purpose, we can
proactively lead the discussion, instead of
responding to challenges and accepting
decisions imposed on us.
These are the focal points of the AuditFutures
work, which argue that we should look at the
current crisis as a great opportunity to break
through the noise and reimagine the profession.
Reaching new heights
AuditFutures sprang up as an innovation and foresight programme within ICAEW,
seeking to reimagine the profession within 21st century society. By responding
dynamically to evolving social needs, technological disruptions and concerns about
the changing nature of professional work, we offer fresh alternatives.
From our portfolio of projects and initiatives, there are four distinctive messages
that are very relevant today. We want to propose these as the key elements in
designing a new audit manifesto for the modern audit profession:
Inspire people with a bold and ambitious vision for a higher purpose
What can truly motivate people to engage and excel in their work is the
understanding of a purpose behind their actions and work. When people get
personally involved, this builds intrinsic motivation and moral sensitivity. A vibrant
and socially relevant profession that inspires and attracts talented people who are
searching for meaning and purpose.
Revive professionalism through powerful education
We need new and powerful educational experiences that develop a sense of
liberation, curiosity and commitment in aspiring professionals. Education and
training should broaden the perspective of auditors beyond the required excellence
through technical knowledge and skills but proactively guides them to develop an
understanding of higher purpose, values, public good, and ethical leadership. The
concept of ‘professionalism’ should be taught intentionally and discussed critically
(through integrating narratives, experience and philosophy) with the objective of
humanising the technical content and helping shape perceptions, responsiveness,
emotions and intuitions as part of the professional identity.
Source: ICAEW
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Designing a new audit manifesto – the ICAEW AuditFutures programme
continued
51
Rethink how we learn and share in the profession and reimagine
collaboration
The traditional organisational strategy is to innovate and then build barriers to
entry. At times of renewed attention to improving audit quality and fostering
market competition, there are fresh leadership opportunities for firms to learn
from each other and to share knowledge and experience. We need to think
about the practice areas where all firms could perform better and should be
collaborating instead of competing.
Adopt a design-mindset and philosophy
We want to start with the premise that the profession is offered a design
opportunity and everything within its ecosystem should align with the
professional identity, values and purpose. A design-led approach will help
create the new norm for the marketplace by innovatively reimagining what the
profession does and how it does it.
We invite you to join us
In these times of unprecedented social, economic and technological
change, we are looking
at the society of tomorrow to design the profession
of the next generation.
We offer fresh perspectives and radical thinking to
help understand the key issues and create lasting solutions. To unlock social
and organisational innovation, we need inspiring collaborations with firms,
businesses, universities, professional and regulatory bodies at both individual
and organisational level.  
AuditFutures is an opportunity for you to share your ideas and passion and to
learn and contribute to shaping the future of the profession. We have mobilised
a movement and developed a comprehensive programme to reimagine the
future of the profession. Our collective ambition depends on collaboration
with others. We invite you to bring your passion, experience and commitment
to achieve something bigger together. Everyone and all perspectives are
welcome!
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Digital transformation – where private
audit firms stand
By Brice Lecoustey, Ernst & Young Business Advisory Services
52
Changes in data quantities and data handling methods will have numerous
consequences for audit - quite possibly they will be game changers for the
profession, and, certainly for some, they will also be mind-boggling, perhaps even
disruptive. Brice Lecoustey is Ernst & Young Partner in Advisory Services and is
leading the EU Luxembourg Digital Transformation Initiative. In this article Brice
gives meaning to a number of concepts related to digitalisation and provides
guidance on their impact.
Leveraging advanced technologies
Looking at digital impact from an audit perspective, it is not about dealing
with technologies that are disruptive in themselves, it is rather about pace,
agility, and handling the explosion of data all around us which is no longer
‘owned’ or ‘controlled’ by anyone. In audit, these massive amounts of data need
to be processed rapidly, efficiently and without error, in order to satisfy future
expectations concerning the creation of value in real time while keeping major
organisational risks at a minimum.
Major paradigm shifts are expected for many markets, as well as for
government and public services. Over the next few years the government will
operate much more by using citizen data to start and collaborate in continuous
two-way conversations based on “seamless user experiences”. Through the
Internet of Things (IoT) and big data, proactive monitoring will be supported
and services delivered by moving to smart assistants, Artificial Intelligence (AI)
and chatbots. The expectation is that data, knowledge and capabilities will be
shared in an open and collaborative approach across departments, as opposed
to the silo structures of the past. Cases for change seem to be endless.
With the right digital solution and strategic implementation, public
organisations can address some of their most pressing challenges and
transform every facet of their operations. For example, through the
introduction of AI, massive volumes of unstructured data can be processed in
a fraction of the time humans take. This will support workforce optimisation by
allocating the right resources to the right tasks. Instead of spending valuable
time on repetitive and routine tasks, human experts can now focus on more
complex, higher-value activities, such as risks and the appropriate response, in
a way not previously possible. Furthermore, AI and data analytics will support
complex problem solving by understanding context, revealing patterns and
providing insights from data to help predict future events and guide more
effective decision-making. Even business risks, such as noncompliance,
financial or reputational harm, can be reduced by leveraging advanced
technologies through the secure and centralised collection of management
information, audit records, and process logs.
Enabling a continuous and proactive audit
Given the opportunities of technology, the entire audit profession and its focus
will evolve and shift away from historic performance to a more stakeholder-
Source: Pixabay
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Digital transformation – where private audit firms stand
continued
53
protecting and future value-adding service, with a continuous proactive
approach to change, while remaining compliant with regulations and statutes.
But which technology is the right one and will provide benefits that will make a
positive difference? I prefer to break the field down into three high-level audit
types. First, data analytics can help to establish the scope of the audit and carry
out risk assessment in preparation for the actual audit itself, by drilling into the
accounts and related journals. Secondly, Robotic Process Automation (RPA)
and analytics have already achieved great track records for the audit of routine
transactions. And thirdly, for more complex and non-routine transactions that
require estimates and judgements, cognitive computing, AI, and predictive
analytics will provide great value.
However, simply choosing a certain technology will not be the most effective
approach. To deliver advanced and insightful audits to clients, there is a need to
deploy a combination of digital technologies and methodologies throughout
audit execution. Preferably, suggesting a data analytics solution needs to
be followed up by offering a scalable solution for capturing, processing and
analysing the available data. This goes all the way up to using visualisation in
reports, and will drive efficiencies by applying sophisticated software robotics .
Game change in auditing skills
This change in the audit process has a direct impact on the auditing skills
needed to provide future digital audit services that go beyond numbers.
The ideal auditor of tomorrow will act in multiple roles, combining a variety
of personal and functional skills, to bring a broader range of knowledge
and capabilities to the table. Audit teams will need to cover a diversity of
perspectives and backgrounds. Collecting and analysing more data than ever
and using advanced technology, such as AI and machine learning, means that
the auditor’s classical role will be transformed into a more strategic advisory
and analytical one providing more business insights and forward scenario
planning. The auditor will be capable of examining unusual and unexpected
items, revealing, addressing and resolving risks, thus improving the quality and
relevance of the audit.
But despite the technological advances, the auditors and their deep
institutional knowledge and judgement are key to assurance. The digital
transformation, even in a rapidly changing profession, is all about people and
properly handled change management.
Well-known management approaches can still be used
The general change management building blocks for a successful digital
transformation of the audit profession are not any different from those applied
in other fields, nor are they geared specifically to this profession. Besides the
critical human factor, appropriate processes and tools, as well as a proper
framework policy, governance and risk management will be needed. The
system architecture and technology provided should support the digital
change activities while the performance measurement framework is being set
up and integrated. Furthermore, it needs to be ensured that the digital function
resides and interacts meaningfully within the organisation and other teams.
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Digital transformation – where private audit firms stand
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54
Undertaking digital transformation will require proper roadmap planning,
followed by assessment of the current state of digital maturity and the
opportunities/threats. Such a transformation also requires a vision, formulated
as a digital journey based on the definition of a digital strategy, to name but a
few key elements . The implementation itself should be embedded in a proper
governance structure and implementation roadmap and transformation plan.
The entire roadmap ought to include regular reports and validation to ensure
consistency and corrective steering to keep the process on track.
Data revolution for the benefit of human capital
Just to be clear: the audit of the future is not about being paperless. It is rather
about changing and evolving the audit process by leveraging advanced
technologies and combining them with specialised and diversified talent to
provide greater insights and, ultimately, value and confidence to stakeholders.
The data deluge is changing the way organisations are run and thus the way they
are audited. Broad and far-reaching benefits can be achieved by a holistic digital
transformation that does not eliminate human capital but elevates it to value-
added activities.
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Assessing future readiness: how a private audit
contributes to addressing foresight
By Karl Braun, KPMG Germany, and Assoc. Professor Heiko von der Gracht, KPMG Germany
55
How to evaluate future readiness
Adapting to future market
developments has always
been an essential activity
for companies to remain in
business. Foresight activities
can help in this. But often there
seems to be a lack of knowledge
of what these activities actually
involve and what to expect. Karl
Braun, Partner at KPMG, and
futurist Heiko von der Gracht,
Senior Manager at KPMG,
help companies to address
the challenges and seize the
opportunities that await them.
At the German branch of KPMG
they have been involved in
the development of the Future
Readiness Index. Through this
index they assess the future
viability of companies. They
present the results below.
In globalised, increasingly interconnected value chains, companies are
confronted with much greater risks than in former times; even small
market shocks can be fatal in their consequences and even threaten
their existence. In addition, these dangers often cannot be predicted.
Due to the increasing complexity and rapid dynamics of international
economic development, they are likely to become even more virulent
in the coming years.
All this makes the future more uncertain than ever. The road from here
and now to tomorrow has become riskier and less predictable. How
well prepared are organisations? Do they have the necessary foresight,
flexibility and adaptability? And do they keep an eye on the relevant
trends?
At KPMG, we looked into the central question of how to measure
and evaluate organisational sustainability. Together with numerous
experts and researchers, we have developed the
Future Readiness
Index,
a globally unique initiative that ties in with current research on
future-proofing and return on foresight. We have developed the index
using the German economy as an example, but the methodology is
universally valid.
The Future Readiness Index provides a picture of the future viability of
the economy, analyses the dynamics of important developments and
shows opportunities for action and industry benchmarks (see Figure
1). The aim is to support companies in deriving suitable measures to
increase their own sustainability quickly, pragmatically and effectively.
Figure 1:
Structure of the Future Readiness Index
Source: KPMG Germany, accessible via website: www.kpmg.de
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Assessing future readiness: how a private audit contributes to addressing foresight
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56
Determining future readiness: the German case
The index is based on a survey at the beginning of 2018 of more than 600 top managers
from companies representing twelve key industries and about eleven percent of the German
Gross Domestic Product (GDP). We asked them to reflect on their current mood regarding
future optimism, to evaluate how they are positioned with regard to decisive business
factors, to state their current investment focuses, and to judge the importance of future
trends. By employing an extensive big data analysis, we derived which trends will really be
fundamental. We then compared them to the answers given by the top managers in their
self-assessment.
The overall result (see Figure 2): 6.3 on a scale of 0 to 10 with the upper end indicating
optimal future preparedness.
Figure 2:
Overall result of Index and single components
Source: KPMG Germany, 2018
Looking at the four subcategories gives a more detailed picture. Overall, 82 percent of the
German top managers surveyed look ahead at least somewhat optimistically. Only a mere 6
percent found reason for pessimism. The economy is strong, demand is high. Almost three
in four judge their product portfolio to be good or very good. Interestingly, we found that
companies overwhelmingly invest in those areas in which they are already strong. Capital is
put where the juice is flowing.
Missing some trends
Giving insights on precisely what will drive the future is the centerpiece of the study.
Analysing 24 million data points – scientific publications, patent registrations, and other
sources – the KPMG Research Cloud provided a trend map, which was matched with
the answers provided by the survey. Companies have realised how important customer
demands have become in a digital world with constant feedback loops. Meeting exactly the
customers’ needs is now possible and increasingly achieved.
The most urgent topics for us, however, are declining innovation cycles followed by
automation. That includes the mounting pressure for faster product release. The intelligent
factories of the future allow just that. Companies should therefore expand their efforts for
moving towards Industry 4.0. As the trend is just as important for the service sector, service
companies should advance on installing Robotic Process Automation and other process
optimising technologies so as not to fall back behind international competitors.
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Assessing future readiness: how a private audit contributes to addressing foresight
continued
57
Insufficiently prepared for geopolitical challenges
Managers point out some weaknesses themselves. In total, 62 percent feel insufficiently
prepared for potential substitutes. A similar proportion (63 percent) identify deficits in their
preparation for geopolitical changes.
Figure 3
:
Prioritisation of geopolitical challenges across
different industries
Source: KPMG Germany, 2018
German companies seem a bit fatalistic when confronted with the current geopolitical
risks (see Figure 3). Only 19 percent of the companies surveyed assigned a high investment
priority to adaptations to international crises and conflicts. At the same time, just about a
third of the manufacturing industry companies judged their adaptability to world economic
or geopolitical wobbles to be good.
Moving to ‘next level forecasting’
It is no surprise that companies which apply professional strategic planning tend to be more
successful than those stumbling into the future. Some disregard long-term planning as
looking into the crystal ball. Others claim it is too expensive, while a third group is convinced
they are already doing the right thing. All of them risk missing important innovations and
falling behind their competitors. Our Future Readiness Index shows that this risk is real.
Planning has to go beyond simple projections, as complexity and dynamics have increased,
extrapolation of historic data only goes so far, and sector limits become more and more
obsolete. We would advise developing next-level forecasting by employing comprehensive
foresight, scenario analyses and trend radars. The Future Readiness Index with its connected
self-assessments can be a substantial part of that. The value of the findings will even increase
with subsequent editions in coming years.
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Assessing future readiness: how a private audit contributes to addressing foresight
continued
58
Figure 4:
Digital Atlas Platform and connected assessment services providing an overview of more than 60 connected
business assessments including the Future Readiness Assessment and a wide range of issues such as robotics,
compliance, security, governance and transformation.
Source: KPMG Germany, 2018. Please see https://atlas.kpmg.de
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Moving from hindsight to insight and beyond:
how the Commission’s IAS embraces foresight
By Manfred Kraff, Internal Audit Service of the European Commission
59
That future developments have a bearing on the work of auditors and how they
execute this work is not only clear for external auditors but also an issue for
internal auditors. Manfred Kraff, Director-General of the European Commission’s
Internal Audit Service (IAS) explains below how insights obtained during assurance
work performed by the IAS are increasingly needed to provide foresight on future
challenges for the European Commission as a whole and the IAS in particular.
Value of internal audit for stakeholders
In 2017 the Institute of Internal Auditors (or IIA), the professional body and standard-
setter in which the auditors of the Commission's Internal Audit Service (IAS) are members,
presented a model to demonstrate the value of internal auditing for stakeholders (see
below).
Source: Institute of Internal Auditors
In essence, the IIA value proposition for stakeholders is that internal auditing is made up of
a combination of assurance, insight, and objectivity. Internal Auditing provides
assurance
on the organisation's governance, risk management and control processes to help the
organisation achieve its strategic, operational, financial, compliance and performance
objectives. Regarding
insight
one can say that internal auditing is a catalyst for improving
an organisation's effectiveness and efficiency by providing observations, conclusions and
recommendations based on analyses and assessments of data and business procedures.
Lastly,
objectivity
means that with commitment to integrity and accountability, internal
auditing provides value to governing bodies and senior management as an Independent
source of objective advice.
At the Commission's IAS we consider that whilst assurance is primordial - through its
function at the centre of the organisation and with its independence in reporting - it
brings an insightful view to its stakeholders in many situations. We are now analysing
how we can use foresight – defined by the Cambridge Dictionary as ‘the ability to judge
correctly what is going to happen in the future and plan your actions based on this
knowledge’ - to better prepare and execute its work programme, encapsulated in its
3-year Strategic Audit Plan (or SAP).
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Moving from hindsight to insight and beyond: how the Commission’s IAS embraces
foresight
continued
60
Role of IAS in identifying key cross-cutting themes
The current and future environment in the European Union and the major milestones
ahead (such as preparing for the withdrawal of the United Kingdom from the EU, launching
the new Multiannual Financial Framework (MFF), electing a new European Parliament
and a new Commission taking office in 2019) will bring specific risks and/or challenges
for us all. However, at the same time, improved management and control systems and
new instruments also provide opportunities for the Commission to deliver and maximise
the impact of the EU policies. The role of the IAS is to identify the most relevant risks and
develop a SAP that supports the Commission and the individual Directorates General (DGs),
Services and Executive Agencies in achieving their objectives and provides insight and
recommendations in those areas where improvement is necessary.
At this stage the IAS has identified the following
key cross-cutting themes
which may be
further adapted after the consultation process with the audited DGs:
- Delivering better on the ground: better regulation, implementation and enforcement;
- Strengthening the performance focus: completing the 2014-2020 MFF and preparing
the future MFF 2021-2027;
- Information technology (IT): securing the IT systems and supporting the Commission
activities and policies;
- Leveraging the impact of EU funding: innovative financial instruments;
- Addressing the challenges of externalisation (e.g. reliability of assurance provided by
third parties, adequate and effective supervision strategies and ensuring value-for-
money when third parties are implementing the EU budget);
- Protecting the EU budget: effectiveness of the corrective capacity.
The DGs have been polled for their views on the main risks related to these topics, as well as
identifying other key themes/risks at their own level, and those at the family/cluster of DGs/
Services.
IAS Annual Conferences providing a platform of exchange of ideas
The IAS Annual Conferences provide a platform of exchange of ideas where professional
auditors and financial managers can enhance their knowledge in various domains thus
helping them to provide better insights based on their work, which in turn is to the benefit
of the stakeholders. On opening the IAS 2017 Conference entitled ‘Innovation and creativity
in internal audit – Myth or reality?’ the Commission’s First Vice-President Timmermans
considered that it would be impossible to prepare the Commission for the future without
modernising its work methods and that this could not be done without creativity and
forward thinking. He called upon the IAS to assist the Commission in designing frameworks
to cope with these fast evolving changes – by offering the foresight as to how money can be
spent well and by ensuring the Commission continues to be accountable, in every possible
meaning of the word, to the citizen.
This transition to working on foresight will affect not only the speed and the quality of the
assurance that the IAS can provide to its stakeholders, but also the expectations of the
stakeholders themselves. Eventually, in order to survive, internal auditors need to stay ahead
of the game and thus need to take more innovative approaches in preparing their work.
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Moving from hindsight to insight and beyond: how the Commission’s IAS embraces
foresight
continued
61
Assurance based on past events (such as compliance with legal requirements, or adequate
functioning of control systems) is no longer in itself sufficient, as it is unable to provide
the foresight previously mentioned. Stakeholders and managers expect internal auditors
to be more forward-looking and –as trusted advisors- to help them navigate their
organisations through a fast moving environment. Obviously, this a major challenge for
the audit profession and will require some creativity.
The IAS's upcoming 2018 Conference on 6 November 2018, entitled
Internal Audit:
Embracing the challenges of the future,
will explore the global challenges affecting the
Internal Auditing profession and focus on the challenges in the future in order to outline
those strategies, tools and approaches deemed most effective for the delivery of value-
added results and assurance. In effect, the Fourth Industrial Revolution is challenging
governments and organisations to keep pace with the exponential growth in innovations
in technology and fast-evolving external framework. This urgently calls for an adaptation
of the Internal Auditing profession to the new upcoming needs. On the one hand, given
the ever-evolving pace of change it is more complicated for auditors to stay aligned to the
entity's top risks and smoothly execute their audit plans. On the other hand, innovation
may lead to new areas of focus for auditing, requiring a new, updated skill-set in terms of
both technical and soft skills.
Source: European Commission
Increasing insight and gaining foresight
The IAS intends to use its annual conference, in the company of fellow professionals, to
explore and discover new tools, to identify and evaluate those risks that are relevant to the
Commission in the future and to build these elements into its new 2019-21 SAP.
Moreover, through learning and exchange of ideas and the possibilities offered by the
new technological developments, it is expected that the IAS and other internal auditors
will increasingly provide the foresight that internal and external stakeholders expect in
order to manage well the risks linked to the Fourth Industrial Revolution.
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Strategic Foresight at the U.S. Government
Accountability Office
By Stephen J. Sanford, U. S. Government Accountability Office*
62
The GAO, the United States’
Government Accountability Office, has
long engaged in strategic foresight,
both in conducting its engagements
and managing its operations. By
systematically exploring what lies over
the horizon, GAO seeks to provide
the U.S. Congress and the public with
timely, relevant and forward-looking
analysis to assure the accountability
of the federal government and to help
policy makers make decisions that will
affect generations to come. Stephen
J. Sanford, Strategic Planning &
Innovation Manager in the Strategic
Planning and External Liaison
Department of the U.S. GAO, explains
how they do it.
For nearly 100 years, the United States Government
Accountability Office (GAO) has stood at the vanguard
of the U.S. government’s efforts to ensure government
accountability and effectiveness. To help support these
efforts, every four years we publish a strategic plan for
serving the U.S. Congress that considers emerging
trends that will likely affect the U.S. government and
society as a whole.
At a recent meeting of Members of the ECA, I
presented on GAO’s strategic planning process, which
emphasizes foresight, continuous environmental
scanning, and trend analysis as core activities. At
the meeting, I noted the approach GAO takes to link
foresight and trends about the future to help inform
business processes and decision-making processes in
the present in order to fulfill our mission.
An overview of GAO and why do we conduct foresight?
GAO is the U.S. government’s independent, nonpartisan supreme
audit institution. Since our founding in 1921, we have evolved into an
agency of dedicated and multidisciplinary staff, made up of experts in
conducting objective and fact-based financial and performance audits,
program evaluations, policy analysis, and technology assessments
covering virtually every federal program, activity, and function. By
investigating all matters related to the use of public funds, we help
the U.S. Congress meet its constitutional responsibilities and also
help improve the performance and ensure accountability of the U.S.
government. In fiscal year 2017, GAO’s work led to $73.9 billion in
financial benefits, a return of $128 for each dollar the U.S. Congress
invested in us that year. GAO also identified 1,280 other benefits,
which cannot be measured in dollars, but that led to program and
operational improvements across the U.S. government.
By exploring emerging trends, key uncertainties, and their
implications, GAO is able to highlight complex issues of greatest
concern to the U.S. Congress and the American people and respond
to them by adopting new audit and evaluation techniques as
necessary. We also believe that taking a longer view of various trends
helps us set strategic and operational priorities and better address
crosscutting and interconnected challenges that will require sustained
collaboration and innovation.
Source: GAO
*
David Chrisinger, Foresight and Strategic Planning Analyst at the GAO, contributed to this article.
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Strategic Foresight at the U.S. Government Accountability Office
continued
63
Source: GAO
How GAO conducts foresight
GAO has long engaged in strategic foresight, both in conducting our
engagements and managing our operations. Forward-looking GAO work
includes fiscal sustainability models showing the future of U.S. debt
and deficits and technology assessments on key areas of technological
innovation—including artificial intelligence, the Internet of Things, 3D printing,
nanomanufacturing, and the use of biometric screening for border security.
Such work provides evidence-based analysis to help give policymakers the
information they need to manage federal investments in technology and
science. In this sense, foresight is at the core of what GAO does.
GAO is one of the few organizations that places responsibility for foresight
and strategic planning within the same office. And this makes sense – my
team is able to seamlessly integrate the enterprise-wide foresight work we
conduct into GAO’s annual and quadrennial planning processes. Moreover,
we are well integrated into top management. My office operates under the
Managing Director of Strategic Planning and External Liaison, who reports
directly to the head of the agency, the Comptroller General of the United
States.
We recognize the importance of maintaining external networks with others
who use foresight to improve government, such as other supreme audit
institutions, international organizations, U.S. federal government foresight
communities, private sector entities, and academic programs in foresight. We
also manage and monitor GAO’s foresight ecosystem, which is a collection
of activities designed to continuously gather information and perspectives
on emerging issues, challenges, opportunities to serve as an early warning
system for new ideas and trends that might affect our work.
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Strategic Foresight at the U.S. Government Accountability Office
continued
64
Some of the efforts and programs in our foresight ecosystem include:
Advisory Boards, Working Groups, Forums, Programs, and Committees
The
Comptroller General’s Advisory Board
generally meets annually to advise
the Comptroller General—the head of GAO—on issues related to carrying
out GAO’s mission. The more than 30 members of the board have broad
expertise in areas related to GAO’s strategic objectives.
The
Domestic Working Group
meets regularly to exchange information and
pursue opportunities to collaborate on accountability issues that affect all
levels of government in the United States. The working group is composed
of the Comptroller General and the heads of 18 federal, state, and local audit
organizations.
Comptroller General Forums
are conducted periodically on topics affecting
the federal government's role in meeting national challenges. The forums
afford leaders and experts in various fields an opportunity to discuss
emerging challenges and identify actions to address them. Forum topics have
ranged from science and technology issues like artificial intelligence to health
care issues like the opioid crisis and financial issues like synthetic identity
fraud.
INTOSAI Emerging Issues Supervisory Committee, on which GAO sits as
vice-chair,
helps INTOSAI and supreme audit agencies around the world
identify important, long-term strategic issues.
GAO’s Environmental Scanning Platform
provides an area where GAO’s
foresight and strategic planning team can archive and monitor trends for the
use and inclusion in GAO’s strategic plan and other work across GAO. This
continuous scanning of trends helps ensure that GAO remains an agile and
responsive organization.
Foresight in Support of Audit Teams
The Priority Framework Program
provides an internal planning tool for GAO’s
engagement teams to discuss future audit work priorities.
The Foresight Speaker Series
aims to increase awareness among GAO staff
of emerging trends that are having transformative effects on government,
business, and society. In the last year as part of this program, GAO staff have
heard presentations from pioneer of the gene-editing tool known as CRISPR,
Jennifer Doudna, as well as an author and prominent expert on climate
change and rising sea levels, Jeff Goodell.
The government audit standards
(the
‘Yellow
Book’)
that GAO publishes
call attention to the use of prospective analysis as one approach in setting
performance audit objectives.
Over the years, GAO engagements have featured
foresight methods
to enhance our work. Some example include: modeling future levels of
government debt in GAO’s annual reports about the federal government’s
long-term fiscal condition; the use of scenarios in a report on climate
engineering; and Delphi methods and forums using subject matter experts to
provide a range of views on technical and complex emerging issues.
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Strategic Foresight at the U.S. Government Accountability Office
continued
65
GAO’s plans for the future
Earlier this year, GAO’s foresight and strategic planning team launched
The Center
for Strategic Foresight,
which is composed of prominent experts from the public,
private, and nonprofit sectors who specialize in matters related to strategic foresight
and planning. GAO believes that by leveraging the expertise of the Center’s
Fellows, we can enhance our efforts to analyze current and projected trends and
their potential impact on federal agencies and programs. GAO also believes that
the Center will further reinforce GAO’s position in the public sector and wider audit
community as a leader in foresight and strategic planning practices and will also help
GAO explore additional foresight methodologies and trends.
One area we believe foresight and its methodologies will be particularly well aligned
is science and technology (S&T). GAO plans to put additional focus on S&T issues
by expanding its longstanding work on technology assessments, oversight of federal
government science activities, and technical audit support in engineering, advanced
analytics, and cybersecurity.
Providing forward-looking analysis
The future is inherently unknowable, and foresight does not attempt to predict the
future. However, by linking foresight to our organization’s core business practices
and our audit mandate, GAO can help decision-makers successfully navigate
whatever challenges and opportunities the future does present. By being more
agile and systematically exploring what lies over the horizon, we believe that GAO
will continue to provide the U.S. Congress and the public with timely, relevant and
independent analysis to assure the accountability of the federal government and
help provide forward-looking analysis that policy makers can use to make decisions
that will affect generations to come.
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How foresight is used by
auditors: some first-hand
insights from the National
Audit Office of Finland
By Jenni Leppälahti, National Audit Office of Finland
66
The National Audit Office of Finland (NAOF)
aims to make better use of foresight
information and techniques in the planning
of its activities and in its performance audits.
Today’s rapidly changing environment is a
challenge for both information users and
information providers, such as Supreme Audit
Institutions. Jenni Leppälahti, Planning Director
at the NAOF, explains how the NAOF has taken
up the challenge by rethinking its own working
methods and developing techniques to serve
the Finnish Parliament and other stakeholders
better. She also touches upon the sources
used to develop the NAOF’s foresight capacity
and recent feedback received from European
counterparts through the EUROSAI network.
Source: NAO of Finland
Foresight plays an important role in the NAOF’s planning activities
The objective of the National Audit Office of Finland (NAOF) is to ensure that it can
provide timely and relevant audit information. This obviously requires efficient
planning and implementation. In addition, foresight plays an increasingly important
role in the NAOF’s analysis of its operating environment. This involves monitoring
various branches of public administration and carrying out a ‘whole-of-government’
risk analysis - representing a more integrated approach to public service delivery. And
last but not least the NAOF’s analysis also drives the selection of audit topics.
The Finnish economy is currently undergoing several major reforms, which will
also have an impact on social structures and the operating models of the public
administration. In such a rapidly changing environment, how do we make sure that our
audit planning process is generating topics which are still considered relevant even at
the time when the audit report is published?
In the planning of its audits, the NAOF makes use of a ‘whole-of-government’ risk
analysis of central government finances and the national economy to identify the
different risks involved and to assess coverage by its audit activities. The information
basis for the risk analysis is gathered utilising different methods and areas of expertise.
In addition to methods used in the fields of economics and the administrative sciences,
foresight competence and foresight information also help in achieving an accurate
analysis of the operating environment. As a part of the risk analysis, we use the
information provided in foresight publications and analysis, and different researchers
in the foresight field are interviewed for the purpose.
The NAOF has carried out the ‘whole-of-government’ risk analysis since 2008. The
purpose of the analysis is to identify the material risk areas, taking into account the
sustainability of general government finances and the risks to financial administration.
Through the NAOF’s fiscal policy audit function (since 2007) and fiscal policy
evaluation function (‘the IFI function’, since 2013) we also emphasise the sustainability
of general government finances in our work, as well as in our performance audit
recommendations.
NAOF stakeholders expect a foresight perspective
The NAOF carries out regular stakeholder surveys to monitor the expectations and
experiences of its stakeholder groups regarding its audit and advisory activities.
According to the responses, the stakeholders expect audit opinions to be drafted from
a foresight perspective. In addition, they expect the NAOF to follow a constructive
approach and consider that audited entities benefit most from recommendations that
support their future development work and decision-making.
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How foresight is used by auditors: some first-hand insights from the National Audit
Office of Finland
continued
67
In Finland, the central government drafts future reviews to support the implementation
of the Government Programme. Consequently, there is an abundance of foresight
information available. The challenge is to coordinate the timetables of the policy-making
carried out by different public officials, as well as their extensive data sets.
However, according to the NAOF’s observations, foresight information is not yet
systematically utilised in decision-making or in the data sets used in policy-making. At
the NAOF we aim, through our own actions, to promote better utilisation of the existing
expertise and information in the policy-making carried out by public officials.
Foresight techniques require development of performance auditors’ competences
The current development work aimed at making better use of foresight work in the
NAOF’s performance audits is based on extensive functional and information resources
and competences. In terms of performance audits, our focus is to identify efficient ways to
support and make use of the foresight approach in the NAOF’s audit activities.
In practice, better utilisation of foresight information and identification of effective
foresight techniques means a broader perspective for auditing, i.e. integrating new ways
of thinking and new approaches and methods as part of the audit work. A small team
of performance audit experts hold methodology workshops and are responsible for the
networking activities in this field.
The NAOF has already carried out some individual performance audit activities
targeting foresight work or utilising foresight information. The purpose of the foresight
development project currently underway at the NAOF is to raise awareness of the use
of foresight methodologies in performance audits, to carry out capacity building and to
further develop the use of foresight techniques in performance audits.
Networking to develop knowledge of foresight
The NAOF is engaged in active dialogue and networking with some of the key producers
of foresight information in order to ensure easy access to it. For capacity building,
methodology development and audit workshops, the NAOF collaborates with the
University of Turku’s Finland Futures Research Centre and with the Finnish Parliament's
Committee for the Future.
During spring 2018, the NAOF organised a joint information event on the foresight
activities carried out by the central government. The purpose of the event was to
exchange information between the different actors and to discuss how foresight
information can be used in audit work.
EUROSAI Dialogue on Emerging Issues
In September 2018, the NAOF organised a web-based ‘Dialogue on Emerging Issues’ for
the European Organisation of Supreme Audit Institution (EUROSAI). In total, 36 European
SAIs provided answers reflecting on and defining the most important emerging issues for
the SAIs’ work in the 2020s. On the basis of these responses, we identified a number issues
and topics related to cooperation, technological changes and the changing role of SAIs.
But respondents also suggested ways forward: for example, creating a specific EUROSAI
platform for on-line training material, encouraging joint audits, building structures and
forums for seamless exchanges of information and fostering staff secondments.
More details on the main survey results related to these three categories are summarised
in the box below.
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How foresight is used by auditors: some first-hand insights from the National Audit
Office of Finland
continued
68
Cooperation
Respondents consider that cooperation and collaboration between SAIs will
become increasingly important. This requires building more partnerships and networking efficiently. Cooperation also
enhances new kinds of communication with citizens and other stakeholders. SAIs need to find the right balance to
manage society-wide opportunities and threats. Global issues such as climate change and changes in the political and
media environment will require SAIs to adapt their way of working.
At the same time, the operational environment of public auditors is changing at a rapid pace. Strong inter-institutional
networks are needed to learn from each other. Exchange of best practices is considered particularly important in the
fields of new IT systems, data-analytics and possible use of Artificial Intelligence. Some respondents point out that
exclusive dependence on external expertise should be avoided and enhanced cooperation between SAIs is crucial in
this respect, as is training staff in a sustainable way and building capacity within the organisation itself. However, legal
restrictions on sharing information may hinder the establishment of efficient cooperation networks. Positive outcomes
of audit cooperation, such as examples of good practice, comparing outcomes and performance in audited areas, or
benchmarks in setting audit criteria are important. There are similar comments regarding knowledge transfer between
SAIs as an inspiration for identifying new audit topics.
Technological changes
Artificial Intelligence (AI), advanced data analytics, automation and robotisation get top priority in the discussion on
emerging issues. Use of big data and sophisticated analytics will change the nature of audits and allow for a lot of
automation. AI makes advanced predictive analytics possible and raises discussion about the nature of audits and the
new balance between auditing and development partnership (consultative approach). Respondents anticipate a major
transformation in the coming years through technological advances. This has in many ways already started – although,
as regards most SAIs, has not yet had that much impact in practice.
Respondents expect technological advances to place substantial demands on SAIs regarding finance, management,
change leadership, outsourcing and capacity building. SAIs must provide education for current employees and recruit
people with new types of expertise. In order to break down silos, organisations must build teams with the right bundle
of skills. Many participants face urgent questions relating to technological developments: where to start, which way
to go and how to get new skills and tools. In addition to educating staff or searching for new employees with IT skills
(cybersecurity and audit) and data analysis skills, auditors must develop an innovative and creative mindset. In order
to implement the changes efficiently, SAIs will need to make use of new ways of working (teamwork, networking,
customer-centricity, dialogue) and support good use of new technical skills.
Changing role of SAIs
Respondents consider that the use of foresight by SAIs could benefit society in many ways. Mainly, this is because
there is a perception that SAIs must focus their work on issues of major concern to the public and to their institutional
stakeholders. Moreover, SAIs need to enhance their ability to work more quickly and be prepared to discuss topical
issues ‘in real-time.’ However, a proactive and predictive role may also create challenges for SAIs as regards their role as
independent ‘watchdogs’. An SAI’s role is also affected by the growing need to develop partnerships regarding complex
problems, such as an ageing population, environmental issues, and respect for facts and evidence in decision-making.
An ageing population is seen as a disrupter of established societal systems, with consequences for SAI work.
At the same time, a change in political discourse and the media environment (not the least through social media) is
changing the way information and facts are treated. This also increases the need for SAIs to interact more directly with
citizens and stakeholders to be visible, credible and relevant institutions in a rapidly changing society. Respondents
see a need for cooperation between SAIs and interaction with experts in various fields as the operational environment
undergoes rapid change.
Future planning on foresight
In early 2019, the NAOF plans to arrange a foresight workshop for representatives of
Nordic SAIs to exchange information and views regarding the role of foresight work in
auditing. The aim of such active networking is to share good practices and learn from each
other. This way we will not be left to face this challenge alone.
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The ECA's future institutional positioning:
conditions and options
By Matthias Rossi, Professor at Augsburg University
69
Exploring future developments, possibilities and
risk can provide a whole list of opportunities for
an organisation like the ECA. But what are the
restraints and options the ECA actually faces
from an institutional perspective? Matthias
Rossi, Professor and holder of the Chair of
National and Administrative Law, European
Law and Legislation at Augsburg University ,
has extensive previous experience in advising
public bodies on their institutional positioning.
For example, he has delivered expert opinions
on constitutional, administrative and EU law
issues to the German Bundestag, various
parliaments of the German Länder and the
European Parliament. In his article he maps out
constraints and impediments but also options
and possibilities for the ECA to develop further
as an institution that matters for EU citizens, also
in the future.
Mapping the future as the EU’s external auditor
The Foresight Task Force of the ECA was set up to ‘future-proof’ the ECA. In this context I
have been asked to provide my view on the options for a possible institutional development
of the ECA in the current setting of the EU.
The following points summarize the main results of my considerations. In essence, I argue
that the ECA as the EU’s external auditor:
-
-
-
-
should show its ambition to play a stronger role among EU institutions;
enjoys a broad mandate to carry out its audit for the benefit of the EU and its
cititzens;
should build on its institutional independence as a key asset;
can also play a more prominent role in assessing the impact of forthcoming
legislation.
Stronger role among EU institutions
At present, the ECA is suffering from a lack of visibility. Its reports and other forms of
observation barely reach the public in the Member States, as important and well-founded
as they may be. The responsibility for that lies not with the ECA , but with the basic
structures of the EU public sphere – outside the ‘Brussels bubble’ a specific EU public sphere
hardly exists. This is to be regretted because the effectiveness of the ECA's audits and its
recommendations is essentially dependent on their impact in the media. Against this
background, the ECA can use the forthcoming discussions on the future of the European
Union to increase its importance. This discussion was launched by the Commission’s White
Paper on the Future of Europe, which does not present a single idea for the future of the EU
but offers five different scenarios for the Union’s evolution, which can also be combined with
one another. This White Paper has generated considerable debate within the Union and its
Member States without producing a preference for any one scenario.
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The ECA's future institutional positioning: conditions and options
continued
70
The ECA is hardly involved in this discussion. That implies at least that there are no plans
to curtail any of the ECA’s existing tasks and powers. However, being virtually absent
from this discussion is regrettable, because the ECA’s work is affected not only by formal
institutional proposals but also by proposals of substance. This is because they concern its
subject matter – the implementation of the budget and, ultimately, the implementation
of policies. It is therefore highly advisable for the ECA to take an active part in the
discussions on the future of the EU. Irrespective of any possible changes at EU level, the
ECA should also recapitulate and redefine its role in interinstitutional relations. In doing
so, it should consider an increase in its importance based on existing tasks and powers, as
well as an expansion of its activities.
European Parliament
?
European Council
Council of the European Union
Equipped with a broad audit mandate
In principle, such an extension of ECA activities is not precluded by any legal constraint.
Rather, the Treaties are already open to an extension of the ECA’s fields of action. Of
course, the rule of law not only binds the bodies and processes audited by the ECA, it
also binds the ECA itself. But the Treaties give the ECA a broad mandate relating to the
scope of its audit and also the way in which the audit is conducted. This broad mandate
also applies to the products the ECA chooses to present.
The Treaties are therefore more open than it may appear from the ECA’s day-to-day
audit work. The numerous and detailed manuals and guidelines that the ECA uses
may unnecessarily restrict the legal framework and deprive the ECA, as the Union’s
external auditor, of the leeway that is intended by the Treaties. Neither do international
standards - like those of the International Organisation of Supreme Audit Institutions
(INTOSAI) - limit the ECA’s work: they are meant to guarantee minimum standards, not to
exclude other activities. The Treaties cite two auditing standards – legality and regularity
and sound financial management. Both criteria – the legal one and the economic
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The ECA's future institutional positioning: conditions and options
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71
one – depend on each other. A measure that is incapable of bringing about the desired
objective not only makes no economic sense, it is also legally inappropriate and therefore
unlawful. Furthermore, the criterion of sound financial management is sufficiently open to
interpretation, giving the ECA considerable room for manoeuvre in this respect.
Moreover, the Treaties do not require the ECA to issue a given
type of products. Special reports and opinions are named by
the Treaties’ provisions only as examples of ‘observations.’ The
ECA is therefore free to invent other forms of publication for its
‘observations.’
At the same time, the decision by the ECA to undertake a new
activity must not hinder or even prevent the fulfilment of its
mandatory tasks as provided for in the Treaties. It will always have
to draw up an annual report and the statement of assurance, and
normally will respond to specific requests from other institutions.
For the rest, the general limits of the ECA's mandate arise
from the vertical separation of powers between the EU and its
Member States, the horizontal separation of powers between the
institutions of the EU, and fundamental rights. Since, however, the
ECA in principle has no teeth but mainly operates by publishing
information (having no legally binding instruments at its disposal),
it is unclear to what extent it would even be capable of crossing
these ‘red lines’.
Independent audit as the key element in a self-correcting system
The independence of the Members of the ECA is not ony an operational prerequisite, it is
its brand and its trump. But it must also be lived in the institution's day-to-day auditing
practice. It is central to the idea that any specific criticism of a particular measure should
not be seen as negative for the EU's image or for the image of one of its institutions. On
the contrary, it should be seen as positive in the sense that the EU has an efficient audit
institution and is therefore a self-correcting system. A functioning audit system is a central
element of the EU's institutional order. It is in the immediate interest not only of the
institutional balance, but above all of the EU’s citizens.
To get an idea of possible future tasks it may be useful to have a look at the Member State
audit institutions. They naturally perform the ‘classic’ tasks assigned to audit institutions
in a system of parliamentary government with separated powers; in addition, they often
perform other tasks. It is certainly rewarding to take a closer look at these powers.
Engaging in forward looking activities: a role in assessing legislative impact?
Particular emphasis could be placed on greater involvement of the ECA in legislation.
One way the ECA could proactively engage, in an advisory capacity, might be for it to
participate in a form of legislative impact assessment.
In particular, measures of this sort could rid the ECA of its foremost image as a ‘destructive’
force, since, as a rule, impact assessments would include proposals for alternatives.
This would give the ECA a contributory function, while also demonstrating that it is not
only concerned with finding past inefficiencies but interested in identifying how future
action can be more efficient. It would thereby earn respect without compromising its
independence, and it would be seen to be working on behalf of and for the EU citizen
rather than as just another administrative body of the EU.
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Technology will be
everything, also for
the ECA
Interview with
Interview with Magdalena Cordero,
Director Information, Workplace and
Innovation
DIRECTOR’S CUT
Vítor Caldeira
Speaking about foresight quickly brings out topics like digital
transformation and technology. For Magdalena Cordero this is no
surprise. For her, technology offers far-reaching possibilities for
innovation in audit which, as she sees it, will mean major changes
in how and what the ECA audits. She is keen to share her thoughts
about how to bring innovation closer to the ECA’s core business: its
audit work.
By Gaston Moonen,
Directorate of the Presidency
Technology at the centre of everything
Foresight is clearly a topic that lies close to the heart of Magdalena
Cordero. And not only because foresight is a key part of her professional
responsibilities. Foresight means being ready for any change that could
appear in the future. She points out that ‘technological change can be very
disruptive.’
For Magdalena the implications are very extensive. ‘Information technology,
today, is at the centre of everything we want to transform.’ She explains
a bit further: ‘In some cases, technology is at the origin of the changes,
but in most cases it’s impacted. Organisations take decisions that have a
technological impact.’ She gives an example. ‘Let’s say you decide to reduce
the carbon footprint. This means reducing travelling and optimising heating
and cooling. How can you do this? By implementing systems that allow
remote working or by analysing the information from temperature sensors.’
She continues, ‘The lack of immediate solutions should not limit the vision.
If you have an idea I am convinced that the technology will help with
implementation and, if this is not the case, it should not limit your ambition.
We need to be ambitious; after all, technology will evolve.’
We need to be
ambitious; after all,
technology will evolve.’
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Innovation in the job title
Ten years ago, Magdalena came to the ECA to work as director responsible
for information technology (IT). In recent years her job description has been
expanded to include ‘workplace’ and ‘innovation.’ She explains that the second
term means keeping a permanent watch on technology, identifying tendencies
and possibilities. ‘Artificial Intelligence (AI) is an area we already work on. We
want to be ready to work with big data, and text mining – as the data related
to audit can be unstructured. ’ She points out that auditing involves a lot of
reading and understanding, and developments in natural language processing
will make machines read for us. Systems can learn, summarise, classify, suggest
key words, and much more. We already have technology developed for us in
ECALab, with a dedicated group of people specialising in different techniques
and helping colleagues to apply them.’
Magdalena also touches upon a topic she has been promoting for some time
within the ECA: blockchain. ‘That is going to be the future. Our ambition is
to design business processes controlled by design to facilitate, and even
automate, audit.’ She realises that for many people blockchain technology is
still a mystery. ‘At the ECA we have implemented a pilot to show the potential
for blockchain in audit.’
Automation changing the scope of audit:
how
affecting the
what
For Magdalena, it is clear that some technologies, such as robots, will automate
part of the auditor’s work; this will allow auditors to focus more on strategic
issues. In her perspective,
how
we audit will have an impact on
what
we audit
and vice versa. ‘The world is now digital, and it is possible to use data analytics
to examine the full audit population instead of a limited one, and identify
risks.’ Smiling, she adds: ‘Then we can better identify not only
what
we’re going
to audit but also
how,
with different techniques available to do so. Having
the technology can be a stimulus and source for new questions, altering our
approach to what we audit.’ She gives the example of an audit on VAT, in which
data analytics meant outliers could be easily identified. She is also convinced
that the use of satellite data could transform the way we audit agriculture.
Creating ECALab to introduce auditors to new techniques
The existence of technology is one thing, using and applying it is another.
Magdalena clearly realises this, pointing to ECALab as a means of address the
problem. The ECA decided in early 2017 to systematically move forward with
digital audit: data analytics, text mining, visualisation, etc. ‘We decided to assign
a physical space and tell people “You’re interested in data analytics, or if you
are an auditor with a data project, please come and share on Fridays with those
who want to analyse data.” And auditors that had, and have, questions come.’
This is a source of pride for her: ‘I have to say, one year later, we have a fully
consolidated ECALab, with resources working on text mining and blockchain,
for example, thanks to a small group of enthusiastic officials from different ECA
Directorates.’
Magdalena explains that her directorate has created a methodology to move
forward with innovation The first phase is ‘re-use’. ‘You have to find out what
knowledge and interest are already in house and show how far you can get
by using it.’ Then comes the second phase, experimentation, which requires
dedicated and experienced human resources. She continues: ‘Just re-using we
can’t go far. If the College of the ECA believes we need to move forward, and
personally I think we have no choice, we need to initiate the experimentation
Our ambition is to
design business
processes controlled by
design to facilitate, and
even automate, audit.
Having the technology
can be a stimulus
and source for new
questions, altering our
approach to what we
audit.
You have to find out
what knowledge and
interest are already
in house and show
how far you can get by
using it.
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74
phase.’ Then she explains the third phase. ‘This is industrialisation, where
the building blocks come together to form the building, the knowledge
and resources are available and data analysis will be offered to auditors as a
service. Our ambition is to achieve industrialisation.’
Using technology to realise the ECA strategy
For Magdalena is goes without doubt that using automation technology
will be essential for realising the objectives of its 2018-2020 strategy. They
relate to three goals: transforming the compliance audit work done for
the statement of assurance, increased focus on performance, and thirdly
regarding communication. Regarding compliance, Magdalena points out that
for reusing work done by others digitalisation can help tremendously. ‘Take
those controls that have data, already digital and by using the technology
of text analysis we can issue a certification based on a very deep, yet digital,
analysis. It will allow you to cover a lot more and find the outliers.’
As to performance she brings up the topic of using open data, adding
that Member States need to follow the EU directive on open data. ‘Just by
analysing open data, you can add a lot of information into our performance
audits.’ She refers to the summer school course in Pisa about data analytics she
attended some months ago. ‘We invited an expert from the UK National Audit
Office to talk about data analysis and when asked ‘what data are you using’
the reply was: ‘100% open data.’ Just open data, which was encouraging.’
As to the third objective regarding communication remarks that everyone
makes the link what technology represents today for the good and bad. This
includes the ECA’s presence in social media for which media monitoring tools
are used, which is about text mining. With a twinkle in her eye she explains:
‘We use these media monitoring tools for communication. But we should
also use them for programming to identify from the media where the focus
is, what are the things we should observe. Then it is not just what media says
about us, it is what we learn in a subject of interest from the media. If we
want to audit something in research, let’s use the tools we have what pops
up in media. And use this feeding into our audit work programming.’ She
gives a very concrete example: ‘Let’s say passenger rights. Imagine you go to
social networks and data mine what the attitude of people, where they feel
something goes wrong. That is useful additional information.
A cultural change towards an appetite for… change
TECALab is clearly an important tool for bringing new techniques to auditors.
But according to Magdalena something else is needed: an appetite for change
and trying new things. With some prudence she explains: ‘It is not easy to
create an appetite for change in an organisation that doesn’t want to take the
risk of failure. One thing here is that, in order to change, you need to promote
the experimentational spirit and allow for investment. And make failure part
of the learning curve.’
Another important element for the take-up of new technology is
understanding the possibilities. ‘Our staff needs to understand that, when
we talk about data, we are not only talking about figures or structured
information. We are talking about text, pictures, images. All that is data.’ She
underlines that text, if digitised, is data .
(on media monitoring
tools)... we should also
use [...] for programming
to identify from the
media where the focus
is...
It is not easy to create
an appetite for change
in an organisation that
doesn’t want to take the
risk of failure.
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75
Then she brings up another misconception. ‘Auditors don’t need to be experts
in all this technology, just come to us with their original questions!’ According
to Magdalena you need to think in a multidisciplinary way. ‘It is not about
training auditors to make them experts, that’s the past.’ For her the set-up
will be that the auditor will work together with experts to identify what is
happening in an analysis. ‘In an audit team, you need specialised staff to
prepare the data and to do the data analyses.’ In her view, this might also have
implications for new recruitment. ‘In the private audit sector some companies
declare they recruit up to 20% of engineers or mathematicians.’
Alerting senior management to be prepared
All these possible changes, including changes in the work of audit, also raise
the question about the role auditors may play in the future. According to
Magdalena, the nature of performance audit itself might not change that
rapidly, but the role of the auditor will. ‘Auditors have a lot of knowledge and
expertise. They may play more of a consultancy role, which could increase
their influence at strategic level. We are already doing opinions on legislative
proposals; this is the beginning of a process.’
Magdalena believes that the core focus for her department and its people
will continue to be the promotion of innovation at the ECA. ‘We aim to be
innovating. We signal evolutions that are happening, and we want to influence
the organisation to move forward. In many cases, these changes are strategic,
they represent a real transformation and decisions must be taken at senior
management level. Management decisions and sponsorship: this is where real
transformation happens.’
Looking back at the 2018 ECA seminar on foresight, Magdalena finds that
many of the relevant issues were covered. In this context she refers to the
presentation on the ECA trendwatch map (see pages 28-29). ‘This map
highlighted, by means of many dots and crossesin this ‘subway’ map , two
things I believe are happening with increasing impact for the future. One is
artificial intelligence, which will be at the origin of the automation of our jobs,
and the other is security and cyber attacks. Those are the most intensively
‘crossed’ features of the diagram. These two topics very much relate to what I
mentioned before, the importance of technology.’
On a personal note, Magdalena points out that she expects transformation of
cities and the way people live and travel. This also relates to two other topics
she highlights. The first is demographic changes: ‘Very important from the
perspective of an ageing society.’ The second is climate change. ‘If we want
to succeed in Europe we need to focus the campaign on what makes Europe
different – all the work on environmental issues. Look at our global competitors
– the USA, China. This is the area where Europe can excel in what we are doing
well, although certainly not yet perfectly, not enough.’
Looking back and forward
When asked about the biggest change at the ECA since her arrival ten years
ago, Magdalena gives a striking reply. ‘It is actually change itself. The big
change of the ECA is that it has become much more dynamic. Ten years
ago not that much was happening, you may call it stable, if you want. The
difference now is that we are constantly changing.’ She refers to the ECA’s new
Auditors don’t need to
be experts in all this
technology, just come
to us with their original
questions!
Management decisions
and sponsorship:
this is where real
transformation happens.
... two things I believe
are happening with
increasing impact for
the future. [...] artificial
intelligence, [...] and the
other is security and
cyber attacks
The big change of the
ECA is that it has become
much more dynamic.
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76
published products, new visuals, the organisational reform, more conferences.
‘What I like most about that change – particularly from the area of knowledge
management – is that the ECA has become a more open organisation, and
not only one focusing on audit. We work more together with external experts,
stakeholders, academics, other institutions.’ She now perceives the ECA as a
learning organisation. ‘We are moving much more, trying to improve. I love to
be a member of a learning organisation and not a static one.’
And she sees a big challenge when it comes to the ECA’s staff development in
the future, giving the example of millennials. ‘We see that they are different,
even in the physical space in which they work. This is something we have seen
happening, at least in IT organisations. For example, millennials need to receive
constant feedback, which poses new challenges for managers. We send alerts
about what we observe. Millennials are not here yet, but they will arrive. The
managerial skills, the technology we are providing, the way they want to work
is completely different. This is a scenario we have to be prepared for.’
Looking forward, Magdalena hopes to see an ECA that will lead in all areas
relating to and using digital transformation in audit. ‘The ECA is now held up
as an example for performance audit, it’s a leader, at least in my perception. I
would like the ECA also to be leading the digital transformation of public audit.
But to do so we need to move fast and with ambition.’
I love to be a member of
a learning organisation
and not a static one.
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77
Source: European Commission
From foresight to audit selection:
examples at the ECA
By Matteo Tartaggia, Sustainable Use of Natural Resources Directorate
Foresight and auditing standards
Reflecting on foresight is
one thing, but making it
a component for guiding
the selection of audit tasks
which add value is easier said
than done. How is foresight
information tapped by auditors
and used in current audit
programming at the ECA? As
assistant to the director of one
of the ECA’s audit directorates,
Matteo Tartaggia is closely
involved in the design of audit
tasks and gives some concrete
examples relating to climate
change and agriculture.
When developing ideas for potential audit topics, foresight is essential
to make sure that the proposed task is going to be relevant to citizens,
the parliament and other stakeholders, not only now but also when the
audit report is published. Foresight is also recognised by international
audit standards: ISSAI 12 – part of the standards used by Supreme
Audit Institutions (SAIs) – calls on SAIs to be responsive to changing
environments and emerging risks. One could therefore argue that foresight
is built into the various stages leading to the choice of audit tasks, from
policy scans to the adoption of the annual work programme at the ECA.
From policy scans to the selection of audit tasks
Policy scans are the first step in identifying the latest developments and
trends in a policy area. For instance, our policy scan on the environment
and climate change starts with an overview of the main climate and
environment trends expected in the next five to ten years, and a longer-
term outlook, as assessed by the European Environment Agency in its latest
‘state and outlook` report on the European environment (see
Figure 1).
In the area of agriculture, our policy scans list new technologies – such as
the use of satellite imagery and precision farming – as a key development
over the next few years, and a subject highly relevant to our future work.
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78
Figure 1
– An indicative summary of environmental trends
Source: EEA,
The European environment -
state and outlook 2015: synthesis report
On the basis of these policy scans we develop our audit ideas. In the Sustainable
Use of Natural Resources Directorate around a hundred auditors are involved every
year in the development of audit ideas. The sum of their experience, specialist
knowledge and particular interests means that we have extensive coverage of
topics – including ongoing and future developments across audit areas. They meet,
brainstorm, and present their ideas to our management, who, when it comes to
selecting which ideas should become audit tasks, are attentive to emerging risks
and their impact on the lives of EU citizens.
Climate change
Last year we included in our 2018 work programme a task on desertification in
the EU as a high priority. Our policy scan had identified an unfavourable trend in
soil degradation in recent decades, and the audit proposal had highlighted that,
according to the European Environment Agency, over 40 million hectares of land
in the EU were sensitive to desertification – an area bigger than Italy and Portugal
taken together. With no specific legislation or budget allocations on desertification
or land degradation, but several legal and policy documents – and EU funds –
potentially addressing these phenomena, we decided to examine whether the risk
of desertification in the EU was being addressed effectively and efficiently. As the
ECA had earmarked this as a high-priority task, the special report is expected as
early as the end of this year.
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79
In fact, the role of foresight is obvious in all our audit reports and other products
concerning climate change. In 2016 we looked at the arrangements put in place
to ensure achievement of the EU target of spending at least 20% of its budget for
2014-2020 — one euro in every five — on climate-related action. We concluded
that progress had been made towards reaching the target, but there was a serious
risk that it would not be met without more effort to tackle climate change. Building
on this and other reports, in 2017 we published a landscape review on EU action on
energy and climate change, identifying a number of challenges, in order to inform
both the legislative debate and future audit work.
New technologies
But foresight is not confined to the environment and climate change. Another
very different but obvious candidate for applying foresight is the area of new
technologies. A recent example in our directorate concerns the use of new
technologies in agriculture. As I mentioned earlier, our policy scans on agriculture
had identified new technologies as a potential game-changer in future years. Upon
further investigation, we found that monitoring agricultural activities by using new
technologies was likely to develop rapidly, and had the potential to simplify and
reduce the costs of checks, for public administrations and farmers, and allow better
targeting of EU funds.
In fact, we have experienced ourselves the potential of new technologies in the
course of our audits. For years we had been visiting on the spot all the farmers
sampled for our compliance audit work for the ECA’s Statement of Assurance.
In 2017, we decided to make increased use of satellite imagery and the digital
measurement systems available, which allowed us to audit remotely one third of
direct aid transactions. We expect this ratio to increase in 2018, and reduce even
further our trips to the fields.
In light of these developments, we decided that undertaking a task on new
technologies in agricultural monitoring would maximise our capacity to comment
effectively on the developments expected over the next two to three years, and
keep abreast of ongoing developments. This task will also represent an excellent
learning opportunity to increase the efficiency of our own audits. In a way, it
reminds me of the speech given by Kersti Kaljulaid – a former ECA Member and
now President of Estonia – during the celebrations of the ECA’s 40
th
anniversary.
A year ago, she was challenging us to ’use technology to make financial audit
almost unnoticeable,’ so that we would be able to ‘deal with more interesting audit
questions, while algorithms sneak through the digital trail of the bills relating to the
EU budget’. I doubt that we are completely there yet, but using techniques such as I
have described above proves that we are accepting the challenge.
Foresight never ends
The challenge that doesn’t end once we have selected an audit task. We have seen
how foresight precedes and accompanies the choice of audit tasks – from policy
scans to the adoption of the annual work programme – and I have listed several
examples where the ECA has taken up the challenge of being a catalyst for change.
But foresight hardly stops there. Throughout the audit – and virtually in any audit
task, even the more traditional ones – our auditors are required to be aware of
ongoing developments in the policy area, and need to be bold and forward-looking
if they are to make relevant recommendations for the future.
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Peer learning on foresight:
experts meet at the OECD
By Gaston Moonen, Directorate of the Presidency
80
Meeting people in person remains important, despite the modern means of
communication. This also applies to experts being, or aiming to be, at the forefront
of foresight, identifying trends and potential scenarios for the future. Several of
them, mostly from governments or international organisations, came together
in the annual meeting hosted by the Organisation for Economic Cooperation
and Development (OECD) on 8-9 October 2018. Gaston Moonen attended this
meeting to listen and learn. Below some impressions.
Stimulating set-up for discussing foresight issues
The public sector discovers foresight. This was literally visible during the 6th ‘Government
Foresight Community’ (GFC) Annual Meeting, which took place on 8 and 9 October 2018,
at the Organisation for Economic Cooperation and Development (OECD) in Paris. The
participants list showed that this meeting is really bringing together a global community,
with several participants coming for instance from Asia and the Americas. According
to the OECD hosts, Duncan Cass-Beggs, Counsellor for Strategic Foresight in the OECD,
and his colleagues Julia Staudt and Joshua Polchar, there was also a noticeable increase
in interest. For me, neither being a foresight specialist nor a regular participant in these
events, the meeting was an eye opener how much professional thought goes into foresight
and how governments and international organisations have set up foresight capacities
to envision future scenarios and possible impacts. Another pleasant experience was the
intercommunicative way the discussions were set up, starting with a lively approach of
introducing each other.
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Peer learning on foresight: foresight experts meeting at the OECD in Paris
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81
A key objective of the GFC Annual Meeting is to share new insights on foresight,
meaning exchange on what participants thought could become a signal for change or
an emerging trend, and with which potential implications. Clearly an effort was made to
be innovative towards interaction here. With almost 60 participants this was organised
in break-out groups of around eight persons, where people presented one or two topics
what in their view could be on the cutting edge of futures thinking. This informal set-up
did not only stimulate discussions but was also useful for networking. Each break-out
group selected one or two topics to be reported back to the plenary.
The meeting was organised around 9 presentations, three presentations running
simultaneously. Participants could pick three presentations to attend, rotating after 30
minutes from one to the next presentation. Each session included a short presentation,
followed by discussion and participants had to note the most insightful ideas on cards to
be shared on a blackboard later on. The last part of the day included a panel discussion
featuring presentations from foresight members from Canada, Finland, the EU and
Singapore, on their respective systems for embedding foresight in government policy
making.
Main takeaways
Since I was only able to attend the first day of the GLC meeting, I limit myself to some
personal impressions from the rich discussions that took place. I focus on topics that may
be of particular interest for us, at the European Court of Auditors:
-
-
-
the use of algorithms, often aggregated in the private sector, in criminal justice
proceedings;
shift in pollution perception: people start to be more conscious of the possibly
polluting effects of their daily life choices;
increasing risks for conflict of interest in use of data - from the internet,
aggregated from cameras, etc. - by private operators in view of privacy rules, if
available at all;
trend of social disorientation because of access to information leading to
anxiousness for changes and amount of choices.
-
Takeaways from the presentations of foresight studies and foresight capabilities are:
-
putting foresight into the parliamentary grain and engage with other layers
of governance: a case study from Estonia showed the promotion for foresight
studies can come from government but also parliament, driven by budget
constraints, remaining relevant and different visions on what kind of role
government should have in society;
foresight as an anticipating policy tool and as element in the toolbox for better
regulation;
potential of audit as an incentive for government to include foresight in policy
decision making;
-
-
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Peer learning on foresight: foresight experts meeting at the OECD in Paris
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-
the role an audit institution like the U.S. Government Accountability Office
takes in mapping trends and possible implications, for example on science and
technology;
the future basis for taxes: how to ensure tax income for governments, also in
view of corporations operating globally and taxation often happening on a
national basis;
the potential of foresight to depoliticise the policy process and the need for
politicians of foresight expertise… and vice versa, since what is the use of
foresight if it has no impact in policy decision making.
-
-
Global trends, global solutions…
Overall, it was clear that there are many ways foresight is and can be set up in public
sector organisations. And that foresight can go into different directions, from descriptive
foresight – on what could be – to aspiration foresight – on what you would like it to be.
The peer learning exercise also showed how global the trends and potential futures
are. And that often scenarios to address these challenges need to be global too and
foresight experts should aim to translate this into practical solutions for policy- and –
decision makers. The foresight community that gathered at the OECD this month clearly
shares a common interest and concern for the future and the ambition to make policy
decisions more future proof.
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Reaching out
2018 ECA Award for Research into Public Sector
Auditing 2018: a tribute to former ECA President
Jan O. Karlsson
By Roberto Gabella Carena, Directorate of the Presidency, and Gilberto
Moggia, information, Workplace and Innovation Directorate
Fifth edition of ECA AWARD
Academic institutions and researchers are important partners for the ECA,
both as a respected source of knowledge and expertise in the different
audit domains, and as valuable contributors in the process of developing
audit methodologies and approaches.
Chronology of ECA Awards
2010
Jesús Lázaro Cuenca (1954-2009),
former ECA director
2012
Juan Manuel Fabra Vallés (1950-2012),
former ECA Member and President
2014
Massimo Vari (1937-2013),
former ECA Member
2016
Henrik Otbo (1949-2015),
former ECA Member
2018
Jan O. Karlsson (1939-2016),
former ECA Member and President
The ECA Award is one of the ECA
initiatives tailored to academics
scholars and researchers into public
sector auditing. This year, this price of
5000 euro has been awarded for the
fifth time. The Award also gives the
ECA the opportunity to pay tribute
to a person who has significantly
contributed to the reputation of our
institution through his or her work
and example. The 2018 ECA Award
was named after Jan O. Karlsson, who
served as the first Swedish Member
of the ECA from 1 March 1995 to 31
December 2001, including a term as
President from 19 January 1999 until
he left the ECA in 2001.
Andreea Hancu Budui
and Professor Mita Marra
received the 2018 award on
18 September 2018 during a
ceremony organised at the
ECA in Luxembourg. This is
the fifth time, the ECA award
for research into public sector
auditing is given. The 2018
award is tributed to Jan O.
Karlsson, former ECA Member
and President. This year’s price
was awarded for two different
research projects, one related
to auditing the European
Development Fund, and the
other one on how making use
of evaluations. Roberto Gabella
Carena and Gilberto Moggia
were very much involved in
organising the 2018 ECA Award
and provide further details
below.
Award ceremony at the ECA,
Luxembourg,18 September 2018
From left to right: Eduardo Ruiz García,
ECA Secretary-general; Andreea Hancu
Budui and Mita Marra, 2018 ECA Award
winners; Bettina Jakobsen, ECA Member
and Chair of the selection panel;
Klaus-Heiner Lehne, ECA President; Eva
Lindström, ECA Member; Igors Ludboržs,
former ECA Member; Robert Harmsen,
Professor of Political Sciences, University
of Luxembourg
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ECA Member Bettina Jakobsen chaired the selection panel, which was furthermore
composed of Eva Lindström, ECA Member, Igors Ludboržs, former ECA Member, and Robert
Harmsen, Professor of Political Science at the University of Luxembourg.
The ECA traditionally seeks to reward outstanding academic research relevant to public
audit and its own work. Bettina Jakobsen explained that, for this fifth edition, the ECA
decided to enlarge the scope of the Award and invite researchers to present not only
masters’ or doctoral theses, but also peer-reviewed publications and books on the topic of
public auditing. This proved to be a good decision, as the number of submissions more than
doubled when compared to previous editions. The result of the deliberations of the selection
panel reflected this year’s change in approach. The two winning works were a Masters’ thesis
on auditing the European Development Fund, discussed by Andreea Hancu-Budui at the
University of Valencia (Spain) in 2018, and a book entitled ‘Evaluating evalutions,’ published
by Mita Marra, Professor at the University of Salerno (Italy) in 2017.
The Award-giving ceremony was organised around three parts: paying tribute to Jan O.
Karlsson, the presentation of the medals and certificates, and a keynote speech.
Paying tribute to Jan O. Karlsson
President Klaus-Heiner Lehne opened the ceremony in the presence of Jan O. Karlsson’s
family. He pointed out that the ECA Award is an important way by which our institution
demonstrates its commitment not only to being at the forefront of developments in our
profession, but also turning itself into a knowledge-based organisation.
Subsequently Eva Lindström, the ECA Member from Sweden, covered the various aspects of
Jan O. Karlsson’s rich personality, recalling the main steps of his public life. She recalled how
Jan O. Karlsson, being part of the tight circle around the former Swedish Prime Minister Olof
Palme, played an important role in the modernisation of the Swedish politics and society.
Eva Lindström met Jan O. Karlsson on a few occasions: ‘I remember a charming intellect,
his ease, sometimes a perhaps unorthodox attitude but always great commitment. At the
same time there was some insecurity, he could say the unexpected and surprising. Jan was
outspoken and direct. He called things by their name. This also contributed to making him
one of the more colourful Swedish politicians.’ As Eva Lindström recalled, ‘Mr Karlsson had
a brilliant ability to analyse and he could always pinpoint to the essentials in very complex
issues. He got right into discussions, contributing, exchanging views and pushing the
debate. He was not afraid of being heard or giving his opinion. Jan O. Karlsson's tenure was
not always smooth being a bit noisy and sometimes too open and outspoken. The former
Prime Minister Göran Persson referred to Mr. Karlsson as being very loyal and liked and also
happy, intelligent and always ‘on the move’, having a challenging and stimulating intellect.’
Jan Olov Karlsson (1 June 1939 – 19 September
2016)
1
was an eminent Swedish politician.
He studied economics, political science and history
at Stockholm University.
He served as a Member of the Court from 1 March
1995 to 31 December 2001, including a term as
President from 19 January 1999 until he left the
Court in 2001.
He was Minister for Development Cooperation,
Migration and Asylum Policy (2002-2003)
and acting Minister for Foreign Affairs (11
September-10 October 2003).
Jan O. Karlsson at the ECA (1995)
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ECA Secretary-General Eduardo Ruiz García then outlined Jan O. Karlsson’s extraordinary
contribution to the ECA’s institutional identity. When Jan O. Karlsson joined the ECA in 1995
as the first Swedish Member, Eduardo Ruiz García was one of his closest collaborators. He
remembers how his management style surprised all staff: ‘Jan was a pleasant surprise for
all of us: informal and warm. He demonstrated that a good top manager is not a distant
and grave person; but someone open to staff, with a kind word or a thoughtful question
for everyone. Someone full of enthusiasm and supportive to the work and to the people
next to him.’ Jan O. Karlsson put forward several proposals to reform the Court. At that time,
some of them failed, as it was probably too early. Nevertheless, as Eduardo Ruiz Garcia
recalled, these attempts were valuable as they prepared the playground for making progress
in the future. Today, the ECA is based upon the system of audit chambers, the pooling of
auditors, a broad-ranging annual work programme, and a proactive communication policy:
foundations of these improvements were already present in Jan O. Karlsson’s programme
as ECA President. Or, as Eduardo Ruiz García put it: ‘Jan had this particular charisma. He
made an extra-premium contribution to shape the European Court of Auditors, to form our
professional and personal character.’ Mr Karlsson belonged to the few ‘individuals who are a
kind of ‘premium-contributors.’ ‘They own something else: an acute vision, an inexhaustible
positive energy, a skill to bring people together, a capacity to shape all around them.’”
Finally, Peder Karlsson, the eldest son of Jan O. Karlsson, offered personal insights on his
father and family background. In his heartfelt, emotional speech Peder Karlsson described
his father’s origins and the family in which he grew up. ‘My grandparents were socialists.
Socialism meant for my grandparents freedom: freedom from fascism, freedom from the
Nazi horror, freedom from a world where we separate people between high and low. It
meant the right for your children to get an education no matter of your cultural and social
background. Those were the values that my father grew up with.’
A strong passion for a united Europe was part
of it: ‘My father grew up in a family that had a
European perspective. He got the passion for
a united Europe that came with his mother’s
milk.’ Values such as equality, justice, freedom,
and a united Europe were deeply rooted in Jan
Karlsson’s life experience, ‘not just as a note in a
political pamphlet.’
Jan O. Karlsson found bright examples of
dedication and altruism in his very family:
‘My father’s biggest hero was probably his
uncle, Arne Karlsson, who worked for the
organisation Rädda Barnen,’ the Save the
Children international organisation in Austria
after the Second World War. Arne Karlsson died
on 11 June 1947 when, on the way to Berg (at
the Austrian border with the current Slovak
Republic), mistakenly turned and drove to a
Russian occupation base. The Russian soldier
saw the car and thought that there was a spy
Peder Karlsson, son of Jan O. Karlsson, speaking at the 2018
ECA Award ceremony
in the car. He began to shoot and killed Karlsson. Jan
Karlsson was eight years old when his uncle died.
As Peder Karlsson put it, Arne’s example and tragic
end ‘shaped the personality of my father, his passion for justice: why did this happen?
Why do people come apart in conflicts? What can we do to bring people closer together?
Somewhere deep inside him was the little eight-year-old boy who wished that his uncle
would come back.’
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The two ECA Award winners
2018 ECA Award winners Professor Mita Marra
and Andreea Hancu Budui received the Award
certificates from ECA President Klaus-Heiner Lehne
The two ECA Award winners played the main role in the second part of the ceremony.
Igors Ludboržs, ECA Member from 2004 to 2016 and member of the selection panel,
explained on behalf of the selection panel the reasons of their choice.
Andreea Hancu-Budui has worked as Internal Auditor and Chief Financial Officer in
Valencia, and, at the same time, has pursued her academic research. She has recently
started a PhD in Public Finance and Audit of the Public Sector at the University of Valencia,
after discussing at the beginning of 2018 the Masters’ thesis
40 Years of auditing the
European Development Fund (1977-2017) - the European Court of Auditors’ methods and
results,
that allowed her to win the ECA Award.
Her thesis provides a global view on the evaluation and auditing of one of the most
representative financial instruments of the European Union. It elaborates on the shift
from financial and compliance audit to performance audit, and analyses the impact of
internationally accepted audit standards and practices and of enhanced methodologies
on the effectiveness and consistency of reporting. The author puts forward both practical
recommendations and methodologically interesting reflections on materiality, and
presents a well-argued case for a continued shift towards performance audit. She also
shows how the European Court of Auditors engages with other EU actors in the longer-
term development of this policy area .
It is worth noting that Andreea Hancu-Budui had benefitted from the European Court of
Auditors and European University Institute Postgraduate Research Grant on European
Public Finances, which allowed her to carry out her research at both the Court’s
headquarters and the EU Historical Archives in Florence.
Mita Marra is Professor of Public Policy and Public Administration at the University
of Salerno in Italy, and Visiting Professor of Comparative Public Policy at The George
Washington University. She is the author of the book
Evaluating evaluation
1
for which she
has received the 2018 ECA Award.
The publication provides a comprehensive and innovative analysis of the experience
of performance auditing and evaluation within Italy’s public sector over the past two
1 Mita Marra, Valutare la valutazione, Bologna, Il Mulino, 2017.
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decades. It empirically draws on the author’s first-hand experience to demonstrate
the difficulties of reform in a national context and theoretically engages with broader
relevant scholarly literatures to demonstrate that it is possible to draw wider lessons.
The work critically engages with more general reform debates and supports forms of
evaluation centred on dialogue, experimentation and learning, thus making the analysis
relevant for a wider EU context.
Andreea Hancu-Budui and Professor Mita Marra received from President Lehne and the
chair and members of the selection panel the medals and award certificates. Following
the traditional photo session, the two winners had the opportunity to present to the
public the highlights of their research.
The keynote speech: Accountability, Embeddedness and the Crises of European
Integration
Robert Harmsen, Professor of Political science at the University of Luxembourg, captured
the attention of the audience with a highly topical speech on the crisis that the European
Union is facing now. Is this only one of the multiple crises in the European integration to
be managed as the previous ones? Or are we confronted with an ‘existential’ crisis of the
integration process itself, pointing to foundational challenges for the European Union?
Professor Harmsen went on analysing the declining legitimacy of the existing model of
EU integration. Is this just a question of enhancing accountability at the European level?
Some reforms and improvements in the accountability mechanisms may help, but will
not solve the problem of the declining legitimacy. According to Robert Harmsen, the
causes of the crisis are to be found at the systemic level.
In fact, there is a growing contradiction between democracy and governance. Typically,
the European integration is a system of governance, now endangered by the rise of
various ‘populisms’ both across Europe and the wider world. ‘Populism has essentially
become an illiberal democratic response to an undemocratic liberalism:’ although
very apodictic in the formulation, this quote shows a contradiction to be addressed.
Jan Zielonka, another author quoted by Professor Harmsen during his speech, put the
question in the following terms: ‘In the EU, technocrats dominate policy-making while
populists dominate politics.’ In fact, at the European level and elsewhere, the whole liberal
order is now under attack. What could be possible solutions? With reference to the next
EP elections, Professor Harmsen sees a risk of unhelpful or unhealthy polarisation to be
avoided between ‘liberals’ and ‘populists.’ It is crucial that the pro-European narrative,
which has been pretty much the same over decades, adapts to the country-specific
context, in order to situate the national debates in a wider, European context. Finally
and yet importantly, to address declining public trust in liberal regimes, a
responsive
accountability
is needed, aiming at responding efficiently and effectively to people’s
needs.
The ceremony ended with a short video, based on audio-visual records of the EU
institutions, remembering important moments in Jan O. Karlsson’s life as a Member and
President of our institution.
(Footnotes)
1 Also see the article
In memory of Jan O. Karlsson,
by Eduardo Ruiz García, published in the
December 2016 issue of the
ECA Journal.
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Reaching out
Drawing attention to the ECA’s ‘flagship’ product: the annual report
By Vincent Bourgeais, Directorate of the Presidency
On 4 October 2018 the ECA
published its 2017 annual
report on the EU budget.
This report is seen by many
as the ECA’s ‘flagship’ report,
presenting the EU auditors
independent assessment
of the state of the EU’s
financial management.
The more reasons to
disseminate the findings
as widely as possible.
Vincent Bourgeais is
communications officer at
the ECA. In his contribution,
he gives some insights
into the multiple activities
undertaken this year to
reach out to press and
media .
ECA President Klaus-Heiner Lehne presenting the annual report to journalists in Brussels
on 3 October 2018
Going beyond publication
The annual report provides our independent assessment of the state of the EU’s financial
management. Every year, we check the EU accounts and provide an audit opinion on two
questions: whether the accounts are accurate and reliable, and whether the EU budget was
spent according to the rules. Our findings are presented in our annual report and form the
basis for our statement of assurance, which we provide to the European Parliament and the
EU Council. Moreover, the annual report contains information on performance, value for
money and results achieved by EU’s policies and programmes.
Box 1:
Annual Report 2017 – Key findings
2017 EU accounts present ‘true and fair view’ (clean opinion).
Qualified opinion on regularity of payments:
- a significant part of the expenditure was not affected by a material level of error (set at 2%).
- the level of error in payments from the EU budget continues to decrease, estimated at 2.4 %
for 2017.
The EU budget continues to face significant pressure:
- outstanding budgetary commitments increase to a new high of €267 billion, due to a
combination of high commitments and low payments.
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The annual report is seen by many as one of our ‘flagship’ products and, beyond any
doubt, its production is one of the key activities of the ECA during the year. But it is not
enough to just produce and publish. Once compiled, our annual report must be brought
to the attention of the other EU institutions, governments in Member States and regional
authorities. But also EU citizens have the right to know how their money is being spent
and what it achieves. That is where the ECA communications team comes into play.
Getting journalists interested
Media and press are indispensable partners to publicise our work as widely as possible.
They link us to the general public, but also to more targeted groups. That is, if we are able
to provide them a compelling and exclusive story. Dispatching a press release is clearly
not sufficient in this regard. They need to hear the information from us directly and they
want to get live answers to their questions on the key issues analysed in our reports.
This year we therefore piloted a new approach to our presentation to the press corps
in Brussels. In particular, we held several dedicated press briefings in Brussels on 3
October, about half a day before publication. In addition to a general press briefing by
ECA President Klaus-Heiner Lehne for journalists interested in financial affairs, we set
up a number of ‘country-specific’ briefings with a number of ECA Members speaking
to Brussels-based journalists from their countries. We also organised technical sector
briefings with ECA directors being available, geared for those that wanted to go deeper in
a particular area or topic.
ECA Member Alex Brenninkmeijer presenting the annual report to Dutch
journalists in Brussels
Change in publication approach
All these briefings were under embargo until the annual report was published on our
website. This year, and for the first time, we also decided to publish at 00.01 hour of 4
October (i.e. very early on the day of presenting the annual report to the EP), rather than
09.00 hour of that day (as in previous years). With this change in approach we wanted to
ensure our presence in the morning news at the very day of the first presentation of the
annual report to the European Parliament’s Budgetary Control Committee.
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Box 2:
Presentations of the 2017 annual report to the European Parliament and Council
4 October 2018: Budgetary Control Committee of the European Parliament
24 October 2018: Plenary of the European Parliament
6 November 2018: Economic and Financial Affairs Council
Early markings of success
This new approach has early markings of success. Despite competing events on the
‘Brussels news’ agenda, a record number of close to 50 journalists attended our different
briefings. This in turn generated substantial media coverage, right from the early morning
hours on 4 October. Both in terms of number of articles and geographical spread across
Member States, our media coverage improved significantly this year. In the first ten days
following publication, around 250 articles (+43% compared with 2016) and 350 social
media posts (four times more than previous year) were generated. And this is not over.
Members of the Court are presenting the annual report also in the days, weeks and
months following its publication in their respective countries, to national or regional
parliaments, governments and other stakeholders, including the national press. This
should also contribute to bring our messages literally at the doorsteps of some half a
billion EU citizens.
Forward looking message
For many journalists, our annual report is all about level of error and ‘money wasted,’
perhaps understandably. This triggers catchy titles and sensational, easy-to-sell headlines.
But this year, we noted that the message is slowly shifting. Almost all headlines in the
main media outlets moved away from referring to the error rate, and also do not use the
word ‘waste’. Why?
First, it may be that our communication efforts over the past few years to explain that
errors are not necessarily waste have paid off. EU funds may still have had some positive
impact and provided some benefit, even though they were not spent in a fully regular
way.
Secondly, for the second year in a row, there was no ‘bad news’. The error rate was below
the materiality threshold for about half of EU spending and continued to fall in almost
all policy areas, the reason why we gave a qualified opinion on payments (rather than a
negative) for the second year in a row.
Finally, in the 2017 annual report, we not only looked back at the spending of the past,
but also looked forward to the spending in the future. This forward looking element was
emphasised in the President’s foreword to the 2017 annual report, and also taken up
in his presentation to the European Parliament on the morning of the 4 October 2018.
He warned that ‘EU should not make promises if it cannot
deliver’. President Lehne highlighted the fact that the EU has
to be realistic about what it can do with the money entrusted
to it, all the more so as the EU elections and next seven-year
budget cycle are practically just around the corner. This was
also the main message in our press release. The media echo
showed that it helped to convey the idea that our audit
findings also have implications for the future.
Much to build upon to make next year’s media strategy an
even bigger success. We will work on it.
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Reaching out
ECA congratulates Kosovo’s National Audit Office
on its 15th anniversary
By Mindaugas Pakštys, Private Office of Rimantas Šadžius, ECA Member
From left to right: Mr Driton Selmanaj, Chair of the Kosovan Parliament Committee for the
Oversight of Public Finances, Besnik Osmani, Auditor General of Kosovo, Seyit Ahmet Baş
President of the Turkish Court of Accounts and Rimantas Šadžius, ECA Member
High attendance at the 15th anniversary celebration
For its 15 anniversary celebration, the Kosovo National Audit Office (KNAO) had organised
a conference on 'The role and impact of the Supreme Audit Institutions in restoring public
trust in the public sector’ on 4 October 2018. Besides the ECA, a large number of senior
representatives of supreme audit institutions from the EU and beyond participated in this
conference: Bulgaria, Croatia, the Czech Republic, Finland, Sweden, Poland, but also Albania,
Montenegro, and the former Yugoslav Republic of Macedonia, Turkey, Saudi Arabia, as well
as the Welsh audit office. Also, representatives of international organisations operating
in Kosovo (World Bank, International Monetary Fund, Organisation for Security and
Cooperation in Europe Mission in Kosovo and others) attended the conference. This unique
blend of institutions and professions guaranteed a fruitful and productive discussion on
the main topic of the conference – the role of auditors in restoring public trust in the public
sector.
The conference started with opening remarks made by Besnik Osmani, Auditor General
of Kosovo, Seyit Ahmet Bas, President of the Turkish Court of Accounts and chair of the
EUROSAI Governing Board, and Driton Selmanaj, Chairperson of Parliamentary Committee
for the Oversight of Public Finances in Kosovo.
1 This designation is without prejudice on
status and is in line with UNSCR 1244 and the
International Court of Justice opinion on the
Kosovo declaration of independence.
Source: Kosovo National Audit Office
On 4 October 2018, Rimantas
Šadžius, ECA Member for
Institutional Relations, attended,
on behalf of the ECA, the 15th
anniversary of the Kosovo
National Audit Office (KNAO).
1
For the occasion, the KNAO had
organised a conference on ‘The
role and impact of the Supreme
Audit Institutions in restoring
public trust in the public sector.’
Mindaugas Pakštys, Head of the
Private Office of Rimantas Šadžius,
gives a brief overview.
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Keynote speech by Rimantas Šadžius focussing on fostering trust
through independent audit
Rimantas Šadžius, ECA Member for Institutional Relations, started the first
part of the conference with a keynote speech on fostering trust through
independent audit. He referred to the ECA 2018-2020 Strategy in which the
ECA highlights its role in providing insight into what works and what does
not work in EU spending and other action. He remarked that by helping to
improve the way the EU functions and is understood, the ECA contributes to
fostering trust in the EU. One of the key challenges for the ECA, like any audit
institutions is to select the most relevant audit topics. He considered this to
be vital to ensure that the ECA’s strategic objectives are realised.
Rimantas Šadžius also pointed to a number of special reports the ECA has
published in the last few years in relation to EU spending in the Western
Balkans. He particularly highlighted the good cooperation that was
achieved in the parallel performance audit on Public Procurement in the
Western Balkans, which was facilitated by the Swedish National Audit Office
together with the ECA. This audit led to the publication of a synthesis report,
presenting key findings as well as the main conclusions of the national audit
reports from the six participating supreme audit institutions in the Western
Balkans.
Panel discussions
The second part of the conference was organised around two panel
discussions. The first discussion zoomed in on the topic ‘The impact of
Performance Auditing to better government’ and the second one focussed
on ‘SAI’s demonstrating ongoing relevance to the society, by conducting risk
based audits.’
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Reaching out
Reinforcing cooperation in the common interest: the European
Parliamentary Research Service visits the ECA
By Helena Piron Mäki-Korvela, Directorate of the Presidency
The European Parliamentary Research Service
(EPRS) provides Members of the European
Parliament, and where appropriate parliamentary
committees, with analysis of, and research on,
policy issues relating to the European Union’s
activities, in order to assist them in their work.
Their expertise is also increasingly used by other
interested audiences working on EU matters. On
9 October 2018, the Director-General of the EPRS,
Anthony Teasdale, and his management team
visited the ECA. Helena Piron, who deals with
institutional relations at the ECA, summarises the
main points discussed.
Anthony Teasdale
Regular exchange of views on matters of common interest between the ECA and the
EPRS take place since a couple of years. This year, the EPRS delegation led by its Director-
General Anthony Teasdale was welcomed by the ECA President Klaus-Heiner Lehne.
Martin Weber, Gerhard Ross and Philippe Froidure, ECA Directors, and representatives of
Audit Chambers informed the EPRS of the latest developments related to the ECA strategy
2018-20, the main messages from the recently published 2017 Annual Report (including
the pilot towards attestation engagement in Cohesion) and the planning of forthcoming
ECA reports and opinions for the next Multiannual Financial Framework in particular.
Anthony Teasdale underlined the strong interest of EPRS in intensifying the cooperation
with ECA, through the periodic exchanges such as this meeting, but also at the level
of specific subjects where teams on both sides could benefit from an exchange of
information. He noted that the work of the ECA is increasingly noted in the European
Parliament and that there is a pronounced awareness of the ECA reports published. He
also welcomed the choice of more topical audit subjects and better communication
around the audit reports published. The EPRS updates regularly its rolling checklist on the
ECA's special reports, cross-linking them on relevant work at the European Parliament, as
the ECA performance audit findings and recommendations are of specific interest to the
Parliament. These and other ECA products provide the EPRS useful material for briefing
the MEPs on specific issues related to EU spending or implementation of EU policies in the
EU or outside. Publication of an ECA report also regularly triggers questions related to the
audit by MEPs at the Parliament during the question time at the plenary.
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Reinforcing cooperation in the common interest: the European Parliamentary Research
Service visits the ECA
continued
94
EPRS colleagues also note with interest that the ECA is nowadays auditing a
wide variety of topics of public debate, such as the ECA special report 6/2017
on migration hotspots or special report 17/2017 on the Commission’s handling
of the Financial crisis in Greece, in addition to more traditional financial or
compliance audits.
Anthony Teasdale and his team informed the ECA management also of its
preparatory work related to the approaching elections and the arrangements
undertaken in view of briefing the next European Parliament, also in close
cooperation with the ECA. Finally, the meeting provided for an opportunity to
discuss the EU’s approach to ‘Better Regulation,’ using the recent special report
16/2018 on ex-post review of EU legislation, and the landscape review on
putting EU law into practice as examples.
This year’s meeting showed again the mutual interest of the EPRS and the ECA
in further intensifying cooperation on matters of common interest.
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Reaching out
Austrian presidency of the Council:
Federal Minister Josef Moser visits the ECA
By Arjen Lok, Private Office of Lazaros S. Lazarou, ECA Member
During the second half of 2018,
Austria holds the Presidency
of the Council. On 10 October
2018 Austrian Federal Minister
Josef Moser visited the ECA.
Arjen Lok, Head of the Private
Office of Lazaros Lazarou, ECA
Member, reports.
From left to right: Rimantas Šadžius, ECA Member; Josef Moser, Austrian Minister for Justice;
Lazaros Lazarou, ECA Member
On Wednesday 10 October 2018, Austrian Federal Minister for
Constitutional Affairs, Reforms, Deregulation and Justice, Dr Josef Moser,
visited the ECA in Luxembourg, also in the framework of Austria holding
the Presidency of the Council of the European Union during the second
half of 2018. He was welcomed by Lazaros Lazarou, ECA Member for
the Annual Report, and Rimantas Šadžius, ECA Member for Institutional
Relations.
Josef Moser is no stranger to the audit profession and to the ECA as the
EU’s external auditor. In fact, in his previous function he was the President
of the Austrian Supreme Audit Institution. In this position, he also acted
as Secretary-General of the International Organisation of Supreme Audit
Institutions (INTOSAI).
This professional background also became evident during the exchange
of views with ECA Members and Directors. The meeting dealt with a
broad variety of subjects relating to the ongoing Austrian Presidency,
but also to the role of Supreme Audit Institutions in general and the ECA
in particular. Josef Moser notably underlined the role the ECA plays in
ensuring that the EU’s financial resources are used to the best effect.
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96
E
FOCUS
A
ECA publications in October 2018
Opinion No 3/2018
Opinion No 3/2018 concerning the proposal for a Council
Regulation on the financial regulation applicable to the 11th
European Development Fund
The objective of this proposal is to align the financial rules of the EDF with those
applicable to the Union budget. The current Council Regulation on the financial
regulation applicable to the 11th European Development fund is structured as a set of
references to the Financial Regulation applicable to the general budget of the Union
(general financial regulation, GFR) excluding or supplementing provisions to cater for
EDF specificities.
Published on 1 October 2018
Click here for our report
2017 Annual Report
EU should not make promises if it cannot deliver
The EU should not generate expectations which cannot be achieved, the European Court
of Auditors (ECA) has warned in its annual report on the EU budget, published today.
In the Foreword to the report, the President of the ECA, Klaus-Heiner Lehne, points out
that the total EU budget is no more than about 1% of the gross national income of the
entire EU. For this reason, the EU has to be realistic about what it can do with the money
entrusted to it, particularly as the Union approaches its next seven-year Budget cycle.
“The conclusion is straightforward,” says Mr Lehne, “the EU should not make promises if it
cannot deliver”.
Click here for our report
Published on 4 October 2018
Audit in brief
2017 EU audit in brief
The ‘2017 EU audit in brief’ provides an overview of our 2017 annual reports, in which
we present our statement of assurance as to the reliability of the accounts and the
legality and regularity of the transactions underlying them. It also outlines our key
findings regarding revenue and the main areas of spending under the EU budget and
the European Development Fund, as well as findings relating to budgetary and financial
management, the use of performance information and follow-up of our previous
recommendations.
Published on 4 October 2018
Click here for our report
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97
E
FOCUS
A
ECA publications in October 2018
Opinion No 2/2018
The audit and accountability considerations concerning
the proposal of 6 December 2017 for the establishment of a
European Monetary Fund within the Union legal framework
The ESM was established in 2012. Its mission is to provide financial assistance to euro-
area countries experiencing or threatened by severe financing problems. This assistance
is granted only if it is proven necessary to safeguard the financial stability of the euro
area as a whole and of ESM Members10. The ESM was set up as an intergovernmental
organisation by means of a treaty between euro-area Member States.
Published on 8 October 2018
Click here for our report
Audit in brief
Audit of EU agencies in brief: Introducing the European Court of
Auditors’ 2017 annual report on EU agencies
This document summarises our audit results for the financial year 2017 for the 41EU
agencies and other Union bodies (agencies) under our mandate. A comprehensive
overview on the agencies set up by the European Union and the detailed results of our
annual agency audits can be found in our new Annual Report on the EU agencies for
the 2017 financial year.
Published on 9 October 2018
Click here for our report
Special Report
N° 26/2018
A series of delays in Customs IT systems: what went wrong?
In this audit we looked at whether the Customs 2020 programme, together with the
related customs legislation, are likely to deliver the IT systems necessary for improving
customs operations in the EU. We found that the implementation of these systems
suffered a series of delays so that some of them will not be available at the 2020
deadline set in the Union Customs Code. The delays were due to several factors, in
particular: changing project scope, insufficient resources allocated by the EU and
Member States, and a lengthy decision-making process due to the multi-layered
governance structure.
Click here for our report
Published on 10 October 2018
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98
E
FOCUS
A
ECA publications in October 2018
Opinion No 5/2018
The Commission´s proposal on the new system of Own Resources
of the European Union
A proposed reform of the way money is raised to fund the EU remains complex,
according to an Opinion published today by the European Court of Auditors. The
auditors identify a number of issues with the proposed reform and call for changes to
improve how it would operate.
Published on 11 October 2018
Click here for our report
Opinion No 4/2018
The proposal for a Directive of the European Parliament and of
the Council on the protection of persons reporting on breaches of
Union law
A proposed system to protect persons reporting breaches of EU law – known as
whistleblowers – could increase their legal rights in all Member States and give citizens
a central role in ensuring EU rules are applied in the context of their work, according to
a new Opinion from the European Court of Auditors. The auditors give the proposal a
warm welcome, although they note that in some cases it may be too complex to be fully
effective.
Click here for our report
Published on 15 October 2018
Work Programme
2019 Work Programme
Our 2019 Work Programme covers a broad range of issues that reflect the challenges the
EU currently faces. It addresses the key concerns of sustainable use of natural resources,
growth and inclusion, migration, security and global development, the single market,
and an accountable and efficient EU. We will continue to examine all these areas to
establish whether the EU is delivering what it has promised.
Click here for our report
Published on 16 October 2018
Special Report
N° 24/2018
Demonstrating carbon capture and storage and innovative
renewables at commercial scale in the EU: intended progress not
achieved in the past decade
EU action to support carbon capture and storage and innovative renewables has not
succeeded, according to a new report from the European Court of Auditors. Between
2008 and 2017, ambitious targets were set, but EU support for demonstration projects
achieved little in terms of projects delivered and results achieved, say the auditors. The
EU needs to adapt its new Innovation Fund to reach its objectives, they add.
Click here for our report
Published on 23 October 2018
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99
NEXT EDITION
For the next edition, the ECA Journal is going global!
Pack your suitcase and dive into the world of international cooperation
between public audit bodies, both at the European and the international
level. This international expedition will explore the variety of audit species
present in Europe and beyond and uncover their natural habitats through
contributions on how they reach out to cooperate.
Source: Pixabay
Gain insight in the numerous projects and platforms that bring
together auditors from all corners of the globe and find out how
Supreme Audit Institutions (SAIs) look beyond their borders to
promote accountability and good governance.
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100
ISSN 1831-449X
08
22
Strategic foresight: inspiring our thinking about the (un)
known (un) knowns
Engaging in foresight: a must for the ECA to be a global
leader in public auditing
The future of Europe: a collection of opportunities
Strategic Foresight at the U.S. Government
Accountability Office
The ECA's future institutional positioning: conditions
and options
EDITION
HIGHLIGHTS
42
62
69
COVER:
Is this Rodin's new thinker?
Source: Copyright: Sarah Holmlund ©123RF.com
QJ-AD-18-008-2A-N