ISQM1 is a challenging standard, yet it has the potential to offer terrific rewards for firms that embrace its principles and recognise them as a platform for value creation.
ISQM1 – The story so far
The International Standard on Quality Management (ISQM1) is now a year into its implementation journey.
For firms that perform services within the scope of ISQM1, it has required a significant change in governance which will inevitably need to mature over time.
Some firms will already be benefitting from greater insights and efficiencies but others may still be coming to terms with the concepts and unsure how to turn their investment in compliance into tangible commercial value.
Where are we now?
All firms that undertake work within the scope of ISQM1 should now have completed the first evaluation of their system of quality management (SQM). Firms should have concluded (and communicated) the level of assurance they have in achieving their stated quality objectives given the design, implementation, and operation of their system of quality management (SQM).
Some firms will have evolved what was already in place. Others will have taken the opportunity to redesign elements of their SQM that were not fit for purpose or were inefficient or ineffective. Either way, to have arrived at this significant juncture, a step change involving many components required coordination and rigorous assessment.
This is against a backdrop of rising regulatory expectations (e.g. around increased competition) and a recent set of FRC inspection results (specifically for tier 2 and 3 firms) which indicate that there is still more to do in ensuring audit quality.
The benefits of ISQM1
- It enables a transparent and digestible approach for firms to:
- state their quality objectives
- identify and dynamically assess the risks to achieving those objectives
- It establishes a mechanism to design, implement and assess the ‘responses’ (i.e. controls and non-control responses) that mitigate quality risks
- This structured approach allows firms to
- be highly targeted in managing risks
- to drive efficiency and simplification across the business
- Visualising ‘objectives at risk’, and being decisive in shifting investment and priorities, when tackled well provides the opportunity to generate real competitive advantages for firms as well as driving down administrative costs
What happens next?
Over the course of the last year, PiC has helped several Tier 1 firms prepare for ISQM1 implementation and work through their first-year evaluation. We have seen what has worked well and where learnings can be leveraged more widely. Through the depth of understanding generated via this experience, we believe we are perfectly positioned to support firms on the next stages of their journey and to maximise the value of their compliance.
Unlocking the benefits
Maximising the value from the efforts invested in achieving ISQM1 compliance will require access to good quality data and mechanisms to translate this into information and, ultimately, insights. It may also require some ‘re-engineering’ of processes and reframing of concepts.
In particular, the risk assessment process, which is central to ISQM1, needs to become forward-looking, dynamic, and data led. New skills and supporting systems may be required. Root Cause Analysis practices may need to be enhanced as firms see increased value in understanding ‘findings’ and ‘deficiencies’ relating to the SQM to remediate them efficiently and effectively.
Once the ball starts to roll, boards (involving Independent Non-Executives) will ask for more information and the firm’s culture should enrich as audit quality is further recognised and prioritised. Improved SQMs will make firms more resilient and, in the longer term, support a universally admired and competitive industry.
Investment in ISQM1 can provide a strong foundation to drive consistent quality and value
We recommend firms should assess likely regulator pressure in the years ahead to further build on the investment in compliance, and to look for ways to integrate SQMs with related systems, planning the work required to bring forward the business benefits this can deliver.
How PiC can help
Our experience supporting the implementation and first-year evaluation of ISQM1-compliant SQMs at Tier 1 firms has provided us with deep insight into opportunities and considerations.
- We have strong relationships with technology partners (including those providing data management and visualisation solutions) that can support in the shift from compliance to real added value.
- Our capability in delivering people-centric change is a foundation stone; the delivery of high-quality audit output is predicated on employees being given the best chance of success. This is a key area of expertise for PiC. We are proud of our track record of landing complex change quickly and effectively, with minimum disruption to the client organisation.
No matter where you are on your change journey, Partners in Change can help. Please don’t hesitate to get in touch to talk with us about how you can drive value from your ISQM1 investment.
Tel: 0161 913 2213