The areas of greatest challenge for South African organisations were the alignment of information and communications technology (ICT) and the management of ICT risks, a study launched on Tuesday by the Institute of Internal Auditors of South Africa (IIA SA) found.

The IIA SA 2013 Corporate Governance and Risk Management Index incorporated the views of 217 chief audit executives (CAEs) in various spheres of business such as publicly and privately held companies, State-owned companies, small and medium-sized enterprises, municipalities, provincial and national government and nonprofit organisations.

Speaking at the launch of the report, IIA SA CEO Dr Claudelle von Eck pointed out that only 31.8% of the CAEs that participated in the survey stated that their organisation’s ICT was aligned with its performance and sustainability objectives.

ICT management also ranked second on the report’s list of the top five risks facing local organisations, below human resources challenges and above compliance and regulatory issues, fraud and corruption, and supply chain management.

Further, the index also found that the majority of South African organisations were underperforming with regard to general risk management.

Only 41% of participants stated that they were strongly confident that their organisation’s risk management was adequate, Von Eck said.

“Given the importance of risk management, it is a concern that almost 60% of respondents either do not believe that their risk-management practices are adequate or cannot say with certainty that their risk management is adequate,” she said.

Meanwhile, the study also found that the most positive aspect of corporate governance and risk management in South Africa was that 74.56% of respondents across all sectors reported that their internal audit functions were sufficiently independent.

“This implies strongly that, in most organisations, there is no undue influence or interference exerted that could impair the ability of an internal audit to provide independent assurance over corporate governance, risk and control,” the IIA SA report said.

Further, 65.9% of respondents said ethics and integrity was important to their organisations; however, the study also found that adherence to the King III code of good governance was not as strong as might have been expected, with less than half of the respondents stating that their organisation had a strong level of understanding and implementation of the King III principles.

“Therefore, a lot more needs to be done, [because although] organisations advocate ethics and integrity, it is not always implemented,” Von Eck said.

The lowest King III compliance was recorded in State-owned companies, with 25%, followed by provincial and national government at 31%. Publicly held companies were found to be the most compliant, scoring 71%.

Further, the study found that the aspect of King III recommendations that many organisations found most challenging was the full implementation of combined assurance, with a lower-than-expected 35% of respondents strongly agreeing that they were competent in using this framework.

However, despite the weaknesses identified by CAEs, it was nevertheless encouraging that internal auditors were able to work with a high degree of independence and that oversight bodies did set the right tone of zero tolerance with regard to unethical behaviour, the IIA SA said.

“These positive indicators could be used to build upon over the coming years, especially if organisations take cognisance of the weak factors raised by the survey and invest in strengthening capacity in those areas,” Von Eck added.

Meanwhile, the report also highlighted the top five focus areas for organisations, according to CAEs, over the next three years.

These, in order of priority, were ICT, regulatory and compliance issues, human resources, ethics and leadership, as well as fraud and corruption.

The 2013 Corporate Governance and Risk Management Index was the first of its kind undertaken by the IIA SA; however, the organisation would repeat it yearly to track the trends highlighted by the report, Von Eck stated.