When you've spent more than 30 years working in internal audit, you develop a unique perspective on organisations, leadership and how businesses respond when faced with challenge.
Those were some of the themes explored by Stephen Licence, Group Chief Internal Auditor at Legal & General, during his keynote address at the #RISK BFSI Executive Forum, where he reflected on the lessons he has learned throughout a career spent observing organisations from the inside.
Having worked across both the public and private sectors, Stephen explained that internal audit offers a vantage point few other professions enjoy. Auditors are expected to look beneath the surface, beyond what organisations say they do, to understand how decisions are really made, how culture operates in practice and how leadership influences outcomes.
His reflections offer valuable insights not only for internal auditors, but for anyone working across risk, assurance, governance and compliance.
Leadership Reveals Itself in the Small Things
One theme that emerged consistently throughout Stephen's career is the importance of leadership.
"The effectiveness of any organisation ultimately comes down to the quality, values, culture and intelligence of its leadership," he explained.
From an auditor's perspective, the difference between effective and ineffective leadership often becomes visible long before major issues emerge.
Strong leaders create clarity around purpose and priorities. They encourage openness and ensure people feel able to raise concerns. They foster accountability and create environments where challenge is welcomed rather than avoided.
Stephen also emphasised that good governance is not simply ceremony or people playing their role. It requires real challenge, encouragement and accountability.
Just as importantly, he believes the best leaders understand that intelligence extends beyond technical expertise.
Throughout his career, he has observed that leaders who combine strong analytical capability with emotional intelligence are often far more effective than those who rely on intellect alone.
For Stephen, emotional intelligence means more than empathy. It is the ability to read the room, listen as well as speak, exercise judgement, understand how people are responding and adapt leadership style without losing clarity or conviction.
These qualities become particularly important in governance environments, where there can sometimes be a risk of process overtaking purpose.
Good leaders, he argues, are able to recognise when governance is becoming more about ceremony than substance. They create cultures where people engage genuinely rather than simply performing expected roles.
Perhaps most importantly, they seek truth rather than reassurance.
As Stephen observed, leadership quality often reveals itself through the way people respond to difficult conversations, uncomfortable facts and early warning signs. The strongest leaders do not confuse confidence with certainty. Instead, they are willing to hear what they may not want to hear and recognise that realism is not negativity – it is the starting point for sound judgement.
He also believes effective leadership is as much about control as it is about risk. While identifying risks is important, leaders must ensure practical controls are in place, that they work in reality rather than simply on paper, and that organisations act before hindsight makes everything appear obvious.
Importantly, the same discipline applies to opportunities. Good leadership is not only about preventing failure; it is about creating the control, clarity and confidence that allow organisations to move quickly and take well-judged risks.
The Evolution of Internal Audit
Stephen has witnessed significant change within the audit profession over the course of his career.
While assurance remains a core responsibility, he believes modern internal audit has evolved far beyond its traditional role of testing controls and reporting findings.
Today's organisations face increasingly interconnected risks. Cyber threats, artificial intelligence, economic uncertainty, regulatory change and geopolitical developments are creating challenges that rarely fit neatly into traditional frameworks.
As a result, audit functions are being asked to do more than simply provide assurance.
"The role of audit has shifted from looking backwards to also helping organisations look forward," Stephen explained.
Rather than focusing solely on what has gone wrong, internal audit is increasingly expected to help organisations anticipate what could happen next.
That means providing insight as well as assurance.
It means helping leadership teams understand risk in context, challenging assumptions and identifying patterns that may not be immediately obvious.
For Chief Audit Executives, this often involves joining the dots across multiple reviews, identifying common themes and questioning whether organisational narratives genuinely reflect reality.
Stephen believes one of audit's most valuable contributions is helping organisations overcome optimism bias through evidence, judgement and constructive challenge.
Increasingly, the questions auditors are asking have become broader.
Not simply: "Is this compliant?"
But: "Is this resilient for the future?"
Not simply: "Does this process work?"
But: "Will it stand up under market or economic stress?"
In an increasingly complex environment, the most effective audit functions are those that combine independence with relevance – remaining objective while helping organisations navigate uncertainty.
As Stephen noted, modern audit functions are increasingly judged not simply on whether they complete the audit plan, but on whether they help organisations see the bigger picture sooner, ask better questions and make better decisions.
"In that sense," he observed, "modern audit is not just a control function; it is an insight function."
Becoming Comfortable with Uncertainty
If there was one message that resonated strongly throughout Stephen's reflections, it was that uncertainty is unavoidable.
From the Global Financial Crisis in 2008 and the Covid-19 pandemic in 2020 to the LDI disruption in 2022 and today's increasingly complex geopolitical landscape, he has observed that successful organisations are rarely those that attempt to eliminate uncertainty altogether.
Instead, they focus on building resilience.
The leaders who navigate uncertainty most effectively tend to share common characteristics. They build adaptive organisations, encourage diverse perspectives and create cultures where challenge is viewed as a strength rather than a threat.
They understand that not everything can be controlled and focus instead on what matters most.
This philosophy extends to governance itself.
Stephen is a strong advocate for governance that creates accountability, discipline and trust, while still enabling organisations to innovate, invest and grow.
Good governance, he argues, should help organisations make better decisions and grow more sustainably, rather than becoming a brake on progress.
In his view, leaders must avoid two equally dangerous traps.
The first is complacency – assuming that because something has not happened before, it probably will not happen.
The second is paralysis – analysing situations so extensively that opportunities for action are missed.
The most effective leaders strike a balance between the two.
As Stephen put it, they focus on "getting the boat to go faster, but without sinking it."
It is a phrase that neatly captures the balance between ambition and control, urgency and judgement, confidence and humility.
Ultimately, leading through uncertainty is not about eliminating risk. It is about making better, more informed choices in the face of it.
Looking Ahead
Reflecting on the future of the profession, Stephen believes internal audit has an increasingly important role to play.
At its best, audit is no longer simply about hindsight. It provides foresight.
It helps organisations understand not only where weaknesses exist, but how they can become more resilient, make better decisions and build stronger cultures.
Frameworks, controls and processes all matter, but as Stephen reminded the audience, it is effective leadership that brings them to life.
The organisations that thrive will be those whose leaders combine high IQ with high EQ, realism with ambition, challenge with accountability, and who instil the right culture and organisational values.
They will be led by people who join the dots, confront uncomfortable truths early and create cultures where insight and continuous learning are valued.
For audit, risk and governance professionals navigating a rapidly changing world, that may be one of the most important lessons of all.