Collaborating to establish a successful internal audit function at Codelco Case Study

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To increase the value of your internal audit function, you need to effectively keep up with the changing risks facing your business. Recognizing that their in-house internal audit function could not address the organization’s increasing demands on their own, Codelco (Corporación Nacional del Cobre de Chile), one of the biggest copper producers in the world, engaged PwC to complement their resources with specialist skills. The end result: a more effective mining organization that accomplishes business objectives and meets stakeholder expectations.

The challenge

In 2010, Codelco issued a Request for Proposal for internal audit co-sourcing services. The assignment was awarded to PwC, as Codelco was looking to partner with a firm that could bring consistent, top quality service and true subject matter specialists. PwC has a proven track record of helping large-scale mining companies improve their business operations and manage changes to business processes. They were also familiar with the unique challenges facing Codelco’s business from previous engagements.

As a large mining company, Codelco had already established an internal audit function with a risk-based working plan and engaged PwC to manage several parts of their internal audit scope of work. This would provide competencies that the client could not generate internally. The main challenge for PwC was to help Codelco identify projects that would deliver the most benefit to meet the growing and changing demands of their business and, in a cost effective manner, comply with the client’s cost reduction goals.

Our approach

Codelco’s strategy was to bring in the PwC team to assist on internal audit projects on an as request basis; the company’s Internal Audit team was given a set budget that only enabled PwC to provide a certain amount of hours every year. With this in mind, PwC initiated a highly collaborative and open process with Codelco to review their organization’s current situation and help identify potential projects that would meet their special interest needs. To facilitate the process, Codelco received frequent updates on the latest industry and operational trends and other thought leadership.

“It was extremely important for us to maintain a transparent relationship with Codelco by evaluating each proposed project and providing a cost and time estimate,” said Alejandro Joignant, leader of PwC Chile’s Internal Audit and Systems and Process Assurance services. “Our main goal was to ensure that PwC could deliver the best quality solutions on the most strategic projects within the given parameters.”

Once the target projects were identified, the PwC team developed an extensive work plan for each assignment. The internal audit focused on operational aspects including reviewing contracts with outside suppliers, legal contingencies, audits of mining projects, warehouse management and mine personnel management.

Depending on the needs of each project, the PwC team drew on a number of subject matter specialists from across the firm—a differentiating element that added more value to the various projects by providing relevant industry and technical expertise. PwC’s “one-stop shop” approach incorporated particular knowledge and skills to each project in areas such as systems and process assurance, sustainability and law.

Each project would then systematically go through an evaluation process to identify issues and ensure that the PwC team’s work effectively generated value to Codelco.

PwC’s focus on maintaining balance between producing specific deliverables, collaborating based on transparency and honesty and providing a prompt response to immediate concerns by the Codelco team ensured their ability to translate the relationship into actual value for the client.

The result

To date, each project that PwC has acted as co-sourcing internal auditors has led to benefits for Codelco, including:

  • Benchmarking
  • More flexibility to achieve the Internal Audit plan
  • Relying on PwC as a trusted business advisor to address situations as they come up
  • Access to PwC professionals with a range of skills and industry experience

Moving forward, a key focus for PwC is to work with Codelco to ensure that their internal audit approach is constantly evolving, and that new ideas and resources are continually brought in to the project as the organization’s needs change.