The Vonya Global Blog Has Moved

We are delighted to announce that our Blog has moved and is now hosted on the Vonya Global corporate website (http://www.vonyaglobal.com). We would like to thank all of our loyal Blog followers, we appreciate your continued interest and support.

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Executive Compensation: Set a Clear Course

Executive compensation has been filling the news media and creating a tremendous amount of public debate lately. One major question centers on pay for performance strategies versus pay practices in reality. In other words, at the end of the year did the executive pay strategy result in the desired performance and did it meet budgeted expectations. If not, what were the unintended consequences and what adjustments get made going forward.

Many say executive compensation is more art than science. A formula that works for one company will not work for another. And, a compensation formula based solely on a company’s income statement may not work at all.

At a high level there are three main principles that must be met in order for the compensation strategy to work.

• The program must be achievable.
• The program must be believable.
• The program must create alignment within the management ranks.

If any of these fail, the compensation program will fail.

With the founding principles in place, the starting point has to be the company’s strategic plan. The primary assumption is that the Board and Executive Management fully support the strategic plan. A failure to support the plan will not only derail the compensation strategy, it will derail the entire business. Obviously a strategic plan can include a tremendous amount of initiatives. It is important to narrow the strategic plan down to the 3-5 most critical and measurable activities. These have to be things that the company and executive have control over. The instinct might be to want to include many metrics in the compensation program, but in reality if there are too many measures, nothing gets measured. So instead, narrow the focus and use compensation to drive towards the desired performance.

The last three important elements to consider before finalizing a plan is to make sure there is agreement on the appropriateness of the measures/metrics chosen, make sure the amount of pay is appropriate, and make sure the compensation plan is driving towards the desired performance.

Is there a need to include Internal Audit in something as strategic as executive compensation? Many readers are probably responding, No Way! Before committing to an answer I suggest you consider it this way. Internal Audit’s job is to help the Board and Executive Management identify and assess risk and then help them establish and evaluate a system of internal control to mitigate the risk. I’d submit there is no better independent sounding board than the Internal Audit Department. So, before publishing the compensation program bring in your risk and control expert, and maybe a few of those unintended consequences can be avoided.

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This blog post was written by Steven Randall. Steve is a Managing Partner with Vonya Global, a premier provider of internal audit consulting services, and a Director of the Adler-Caris Foundation, a not-for-profit dedicated to raising funds for Alzheimer’s Disease research. If you would like more information about Vonya Global or if you have a questions for Steve, you may contact him through this blog, the company website, twitter, or his LinkedIn Profile.

Digital Knowledge - Is Your Board of Directors Keeping Up?

[This article was contributed by Fay Feeney, CEO of Risk for Good]

Social media accounts for 22.5 percent of the time that Americans spend online, according to "State of the Media: The Social Media Report." This is compared with 9.8 percent for online games and 7.6 percent for e-mail. You can read more in the NY Times.

This is a voluntary opportunity for you to keep your board current and relevant. If you’re waiting for a regulatory push to get your boardroom thinking digitally, you may not be ready to take action and learn what is happening 24/7 on computers and mobile devices around the world.

Here are some statistics about digital connectivity to help you consider moving this up as a priority. Digital knowledge leads to opportunities for companies to grow, reach and help their customers, employees, investors and stakeholders. Are your business revenues connected to connectivity in Asia? Has digital connectivity impacted new patterns in:

• Consumer and supply chain behavior?
• Operating model innovations?
• Security and transparency issues?

Connectivity in Asia
The growth in mobile Internet usage is outpacing the rest of the world:

• 45% of metro Chinese are online via a mobile device at least monthly, up 21% from 2010
• 11% of metro Indians access the mobile net monthly, up from just 1% in 2010.
• Japan saw the biggest jump in mobile Internet usage: 57% of adults now have access, up 24% from last year.

So what now?
Are you challenging yourself to look beyond the status quo, to understand how changes are disrupting your business? Is your board doing the same or are they operating in the old twentieth-century mode? Your business is being challenged to expand communications, challenged to attend to shareholder concerns, challenged address issues of trust, challenged take on new technologies (cloud, social media) and much more. You should take the opportunity to push your board to think digitally. Doing so will allow you to succeed in, and meet the needs of, the twenty-first century.

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This article is the second in a series contributed by Fay Feeney, CEO of Risk for Good. Risk for Good helps board chairs and lead directors navigate the disruption to their business from a social, mobile and global world.

Today’s minefields can cost your company: time, money and goodwill. Risk for Good works with your board to evaluate your exposure and leverage the opportunity from: social media, corporate social responsibility, sustainability, board composition, succession and the multitude of other areas where your board needs to manage emerging risk.

Modern boardrooms address these questions before others demand a “comply or explain” response. We use the quiet in our client’s boardroom to prepare thoughtful answers to today’s tough business questions.

If you are interested in contacting Ms. Feeney, you may do so through this blog or the Risk for Good website.

Boardroom Digital Literacy - R U Talking to Me?

[This article was contributed by Fay Feeney, CEO of Risk for Good]

Boardroom protocol is being exposed every day on the internet. Does Rupert Murdoch really think we can't see beyond his prepared remarks to determine for ourselves the "tone at the top" coming from his boardroom?

No need for board activists to add to the conversation from the outside about boardroom happenings. Now we hear directly from the CEO. When Yahoo fired their CEO Carol Bartz, she shared the inside scoop using her iPad. We learned of her accusing Chairman Roy Bostock, of board mistreatment. In the same Fortune interview, she called her fellow directors “doofuses” and said they “f---ed me over.”

It may be surprising to see the boardroom portrayed like this in mainstream media, but imagine what happens when 100 million people on Twitter can now get involved in the conversation.

I know that many people in the boardroom are still on the sidelines about social media. What will it take to get your board ready to tackle their willingness to learn what is happening on the internet? Will it take seeing your company’s name in the news before you add digital literacy to your director’s education? I can see the incredulous look on the directors’ faces when the board is called on for their oversight of digital issues.

I can only imagine a board being characterized as:

“illiterate”: showing or marked by a lack of personal knowledge with the fundamentals of a particular field of knowledge.

Or maybe a board will be portrayed as:

“ignorant”: Lacking knowledge, information, or awareness about something in particular: "ignorant of social media".

Worse yet is as a board leader to know that it is true. So I ask, when are you planning to get digital and social media on your agenda? Who is going to be responsible for taking action to get it on your fall board agenda? Whatever title you have in the boardroom (board chair or lead directors), you are setting the boardroom agenda. Are you waiting for your CEO, Corporate Secretary, Corporate Counsel, Audit Committee Chair to bring resources and spend budget to get this to happen for you and your board?

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This article is the first in a series contributed by Fay Feeney, CEO of Risk for Good. Risk for Good helps board chairs and lead directors navigate the disruption to their business from a social, mobile and global world.

Today’s minefields can cost your company: time, money and goodwill. Risk for Good works with your board to evaluate your exposure and leverage the opportunity from: social media, corporate social responsibility, sustainability, board composition, succession and the multitude of other areas where your board needs to manage emerging risk.

Modern boardrooms address these questions before others demand a “comply or explain” response. We use the quiet in our client’s boardroom to prepare thoughtful answers to today’s tough business questions.

If you are interested in contacting Ms. Feeney, you may do so through this blog or the Risk for Good website.

Fraud Risk Management: Fraud Risk Has Been Rising And It's Likely to Continue

We have released the final report on the effectiveness of corporate fraud risk management. The report is the result of a study which compiled opinions on the risk of fraud and the effectiveness of corporate fraud risk management. While the study participants almost universally agreed that the risk of fraud has increased during the economic downturn over the past 24 months, many believe that the risk will continue to rise over the next 24 months.

Some of the results include:
- Fraud risk will continue to rise over the next 24 months
- Highest fraud risk lies with suppliers
- Executives say highest fraud risk is in Asset Misappropriation (false billing schemes)
- Internal Auditors say highest fraud risk is in Asset Misappropriation (Expense Reports)
- Employee tip is the #1 way fraud is uncovered
- Code of Ethics is #1 Fraud Prevention strategy

It is well known that the risk of fraud is present in almost every business regardless of size, shape, and complexity. The risk could materialize itself in an employee, a vendor, a client, or in the boardroom. It could be “detrimental” by bleeding company assets or “beneficial” by artificially inflating company financial statements. These frauds could play out in scenarios that are quite varied, and be concealed by strategies that are sophisticated and complex. The report reveals some of the strategies corporations use to combat the risk of fraud.

The study compiled opinions of Executives and Internal Auditors from private, public, and not-for-profit organizations, spanning many industries on strategic planning for fraud prevention, detection, and deterrence. One of the goals of the study was to provide information that would allow companies to evaluate the investment in fraud risk management. This is the second study Vonya Global has conducted on this topic; the first was released in 2009. The study compiles opinions about risk management strategies employed to combat fraud.

To download a copy of the report please visit Vonya Global’s home page: www.vonyaglobal.com.

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This blog post was written by Steven Randall. Steve is a Managing Partner with Vonya Global, a premier provider of internal audit consulting services. If you would like more information about Vonya Global or if you have a questions for Steve, you may him through this blog, the company website, twitter, or his LinkedIn Profile.

A Walk to the Pub... An Internal Auditor's Commitment to find a Cure

The following article was written and contributed by a dear friend and Internal Audit Colleague. As he is nearing a milestone birthday, he is making a personal commitment to help those who suffer from ovarian cancer. Here is his story, please help him if you can:


September 2nd will be my forty-tenth birthday, so I've decided to take a walk to the pub for a pint of beer. Let me tell you why.....

Amanda heard the silent killer but didn't understand what it was saying. Trouble was, nor did some of her doctors.

My wife learnt that she had ovarian cancer in the spring of 2002. Abdominal pains; swollen stomach; unexplained infertility; this was what Amanda had heard from her body. "Gluten intolerence...irritable bowel syndrome...take these drugs" was what she heard in response from the medical community, until an investigative operation revealed the killer. But "silent"?

After a recurrence of the disease in 2004, an appearance on BBC TV's Breakfast Time show - bloated and bald from the effects of chemotherapy - to raise awareness of ovarian cancer, three major operations, twelve cycles of chemotherapy and countless hospital visits, appointments with specialists, scans, tests and other general disruptions to a normal way of life, Amanda's consultant declared her "cured" last summer, eight years after she was first diagnosed.

Her cure wasn't just about conventional medicine though. Complementary therapies, nutritional and dietary change, and a lifestyle re-evaluation all played a role in her recovery alongside the clinical care overseen by her enlightened oncologist. (Thank you, Dr. Harper!)

Amanda was lucky to be diagnosed early. The UK has one of the worst ovarian cancer survival rates in the developed world.

So I've decided to raise money for Ovarian Cancer Action (and celebrate my 50th birthday!) by going for a pint of beer.....in Britain's most remote pub!

The Old Forge at Inverie on the Knoydart peninsula is accessible by boat from Mallaig, at the end of the road and railway line west from Fort William. But I’m not going by boat. On September 1st, my last-ever day as a forty-something, I will set out alone on foot from Glenfinnan to trek across 28 miles of some of the wildest and most remote terrain in the Western Highlands of Scotland. By the end of the day I aim to reach a remote bothy (a basic stone shelter), 12 miles to the north, where I shall spend the night. The following morning, as a 50-year old(!), I will head west to cover the remaining 16 miles to Inverie where I shall enjoy my birthday pint (or pints!) of beer in The Old Forge. And then collapse in the Bunkhouse!!!

Don't expect a running commentary from me en route though. There's no mobile phone coverage where I'm going. As one account of the route puts it: "If you break a leg, you crawl to a stream (for water), wrap up warm, and wait."

I'm doing this because of Amanda, not for her. I want to help Ovarian Cancer Action fund critical research and raise awareness that the "silent" killer can be heard. I'm doing this for your wife, mother, sister, daughter, grand-daughter.....so that hopefully they can choose to go on journeys that will have happy endings (like a pint of beer!), rather than be forced by the silent killer onto a journey that more often than not, won't.

I'm looking forward to my pint of beer in The Old Forge. And it's your round. Please spare the price of a pint (or several!) for Ovarian Cancer Action.

Thanks for taking the time to visit my JustGiving page.

Donating through JustGiving is simple, fast and totally secure. Your details are safe with JustGiving - they'll never sell them on or send unwanted emails. Once you donate, they'll send your money directly to the charity and make sure Gift Aid is reclaimed on every eligible donation by a UK taxpayer. (Non-UK taxpayers can also donate with JustGiving.) So it's the most efficient way to donate - I raise more, whilst saving time and cutting costs for the charity.

So please dig deep and donate now.

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This blog post was written by Peter Seyderhelm. Peter is an Internal Audit, Risk, Compliance and Corporate Governance professional in London, UK. If you would to contact Peter, you may reach him through this blog or his LinkedIn Profile.

In Business We Must "Jiggle the Gate" - Lessons From the Air and Water Show and the Home

Today, as the jets are flying over Chicago (and my office – how cool is that?) practicing their maneuvers for the annual Chicago Air and Water Show this weekend, I am reminded of two things:

1 – The importance of effective internal control systems

2 – The importance of monitoring those internal control systems

It doesn’t take an aerospace engineer to understand that while flying in tight formation a pilot must be constantly aware of his position relative to the other aircraft in the formation. One false move by any of the pilots would spell disaster for everyone. Fortunately they have computer systems in the cockpit that continuously calculate time, space, distance (i.e. internal control system) and a built in warning system alerting them when things are going wrong (i.e. monitoring). However, it is up to the pilot to react to these indicators to avoid disaster. It is pretty amazing to me that all of this works, considering they are flying at speeds over 500 mph and at a distance of 18 inches apart from each other. Heck, I find it difficult jogging next to someone who is only 18 inches away from me – I can almost guarantee we’d bump into each other – but not these pilots. Amazing!

Well, effective internal controls systems and monitoring the internal control systems is important in other places too. Parents of toddlers know all about internal control systems (gates around staircases, plastic covers over door knobs, protective covers over electric outlets…) and monitoring systems (you can’t leave a toddler alone, right? and when you do there is technology for to help - it is called a baby “monitor” after all!). How about pet owners? Do you think they know a little about internal control systems and monitoring? Absolutely.

My business is helping organizations evaluate their systems of internal controls and also the effectiveness of the internal control monitoring. It is as important in a corporation as it is in an airplane and as it is in the home. Can you think of an example of when there have been breakdowns in either the internal controls or the monitoring of those controls in business? You probably don’t have to think too hard. It has happened all too often and unfortunately it continues today. Sometimes it is a fundamental breakdown in internal control, sometimes it is someone circumventing internal control, and other times it is a failure to monitor the control. When done purposely or with malicious intent it is usually for a perceived short term gain (meeting quarterly earnings, making a bonus) at the expense of the long term.

The examples in the corporate world have been discussed and evaluated over and over and over. It cost many their jobs and many more their life savings. But business is not alone in this. If you happen to be a college sports fan, the recent examples of Ohio State (my alma mater) and this week the University of Miami (FL) are shining examples of failure to monitor internal controls systems, ignoring warning indicators, and/or circumventing internal controls systems… all for short term gain at the expense of long term success.

Why have internal controls and effective monitoring systems? Well, besides all the obvious reasons, it is simply the right thing to do. It is important to protect our pilots, protect our children, protect our pets, protect our investments, protect our reputations, and protect our chances at long-term success. However, it is not enough to simply design and implement a good system of internal control. You have to TEST it! Imagine installing a baby gate at the top of a staircase. When finished installing the natural instinct is to jiggle it to make sure it is stable, right? Who would install a baby gate and not test it? And, for good measure you would test it regularly. You could do a great job in creating the control (installing the gate), a great job in monitoring the control (checking regularly to make sure it is still there), but if you don’t test it (jiggle the gate) you could fail as a parent with catastrophic consequences.

When enacted in 2002, the Sarbanes-Oxley Act created the requirement for publicly traded companies to design, monitor, and test systems of internal controls. However, most private companies and private institutions are not held to such standards. While “it is the right thing to do” many private companies ignore the need for internal controls and many more fail to test. If you are reading this and work for a private organization (heck, any organization) think about how often your organization “jiggles the gate” when it comes to the financial reporting processes, information technology, security, privacy, policy and procedures, and operations. If you really think about it, you might not like the answer. A small investment each year to design controls, monitor controls, and “jiggle the gate” will go a long way to protect your opportunity for long-term success.

Effective systems of internal controls are critical to all of us in every walk of life. It is important in the cockpit, at home, in the classroom, and yes, in the workplace. So, do yourself a favor and go “jiggle the gate!”

For those of you in Chicago, I hope you enjoy the Air and Water Show this weekend!

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This blog post was written by Steven Randall. Steve is a Managing Partner with Vonya Global, a premier provider of internal audit consulting services. If you would like more information about Vonya Global or if you have a questions for Steve, you may him through this blog, the company website, twitter, or his LinkedIn Profile.