Evaluation of internal audit activity effectiveness in risk assessment of anti-money laundering area: a case of “Latvian Bank N"

Due to recent AML violation cases occurred in financial institutions within Baltic States (Estonian Danske Bank, ABLV Bank AS and Versobank AS) and expressed concerns on Banks’ Internal Audit activity within AML area, the author sees the necessity for assessment of Internal Audit activity within AML area in order to determine the level of adequacy of AML regulatory changes within the risk assessment and potential gaps in risk assessment of AML area. The research focuses on AML compliance with the constantly evolving and increasingly more complicated regulatory requirements and evaluation of organizational part of IA activity using an example of a Latvian Bank N. The aim of this research is to investigate completeness of Internal Audit risk assessment in accordance with recent AML regulatory changes. This research also compares the IA organizational process that affects all banking areas between a Latvian Bank N and an Estonian practice. This research relies on qualitative methods. Qualitative methods include face-to-face interviews with Board Members of Latvian Bank N, AML Internal Auditor of Latvian Bank N and telephone interviews with Estonian IA Experts. Also, involves documentary analysis of Latvian Bank N internal audit risk assessment conducted in 2017 for the implementation in 2018. The conducted investigation showed that IA activity has certain deficiencies and shortcomings in relation to AML regulatory changes reflection in IA risk assessment for AML area, and for overall IA organizational process organization that is crucial for audits organization and conduction not only in AML area, but for all Latvian Bank N and other Latvian Banks’ activities areas. Elimination of these deficiencies will help to achieve full reflection of AML regulatory changes and thereby mitigate the risks that bank processes which are affected by these regulation changes are not sufficiently assessed within the Internal Audit Risk Assessment. In addition, elimination of the deficiencies identified in relation to IA organizational processes will lead to increase of conformance in accordance with International Standards for the Professional Practice of Internal Auditing (pub. the Institute of Internal Auditors, 2017) and, as a result, will strengthen and improve the IA activity effectiveness that is within Internal Audit department and Bank’s interest. Many of these results are likely to apply not only in the particular bank on which the research is focused, but also to other banks in Latvia. Thus, the research has practical implications in formulating common risk management tactics and methods that could be applied across the banking sector

Organizational Success During Institutional Transition : the S.N. Fyodorov "Eye Microsurgery" Complex

Qu’est-ce qui détermine la survie et le succès des organisations à travers les différents régimes institutionnels? La présente étude tente à répondre à la question en analysant l’évolution d'une institution médicale publique russe, c. à. d. l'Institution de l'Etat Fédéral « Le Complexe Intersectoriel de Recherche et Technologie « Microchirurgie de l'Œil » de Rosmedtechnologie. L’étude s’étend sur quatre périodes bien définies: 1960-1985 (la Russie Soviétique, la période de pré-perestroïka), 1986-1991 (la perestroïka de Gorbatchev), 1992-2000 (la transition), et 2001-2009 (la Russie actuelle, la période post-Fyodorov). L’analyse se centre sur une coévolution des institutions externes et de la structure organisationnelle de l'entreprise, le système de droits de propriété, les tendances d'innovation et les canaux de diffusion technologique. Les conclusions suggèrent que l'environnement institutionnel général exerce une influence sur la performance de l'entreprise en déterminant « les règles du jeu » pour les transactions économiques et en établissant un ensemble de possibilités de développement. C'est alors les processus internes à l'entreprise, ses compétences dynamiques et sa capacité à innover qui déterminent si l'organisation peut s'adapter aux changements externes, reconnaître les possibilités de développement et en profiter. Par ailleurs, la direction (le leadership), le type de technologie et le niveau de sa diffusion, l’initial soutien de l'Etat, de même que la demande jouent un rôle apparent pour soutenir la performance réussie. Une structure multi-niveaux des récompenses de performance en combinaison avec les méthodes de traitement innovatrices (c. à. d. l’usage d’un conveyor chirurgical et la production en brigades) ont amené à des volumes de procédures cliniques performées plus élevées, de même que la qualité, la complexité et la diversité de traitement plus élevées. D’autant plus, pendant les étapes plus anciennes du développement de l’entreprise, la présence des inventeurs prolifiques et la structure organisationnelle qui soutenait l’apprentissage, la production et l’accumulation des connaissances (le cycle « clinique – ingénierie – approbation – production – clinique ») étaient cruciaux pour la création d’une base d’innovation persistante. Pendant les périodes plus récentes, la combinaison d’accès aux ressources (matérielles, financières, capital humain), les collaborations externes, les méthodes innovatrices d’organisation de traitement, la diffusion extensive des technologies inter- et intra-firme ont aussi contribué à des hauts niveaux d’innovation. Au total, le travail soutient une approche interdisciplinaire à l’étude des organisations, c. à. d. une combinaison de l'analyse institutionnelle, l’économie évolutionnaire et l’économie dynamique d’organisations, le management stratégique, l’économie d'innovation, l’analyse des droits de propriété et le rôle de leadership.What determines organizational survival and success across different institutional regimes? The present historical case study attempts to answer the question by analyzing the evolution of a Russian state medical institution, i.e. the S.N. Fyodorov “Inter-Sectoral Research and Technology Complex “Eye Microsurgery””. The study spans over four clearly defined regimes: 1960 – 1985 (Soviet Russia, pre-perestroika period), 1986 – 1991 (Gorbachev’s perestroika), 1992 – 2000 (the transition years), and 2001 – 2009 (current Russia, post-Fyodorov period). The analysis focuses on the co-evolution of the external institutions and the firm’s organizational structure, the system of property rights, innovation patterns and the channels of technological diffusion. The findings suggest that the general institutional environment exerts influence on the firm’s performance through determining the “rules of the game” for economic transactions and through establishing a set of development possibilities. It is then the firm’s internal processes, dynamic competences and the ability to innovate that determine whether the organization can adapt to external changes, recognize the development possibilities and take advantage of them. In addition, the roles of leadership, the type of technology and its diffusion scope, initial State support, as well as the extent of demand are apparent in sustaining successful performance. Multi-level high performance rewards structure in combination with novel industrialized treatment methods (e.g. the use of a surgical conveyer and team production) resulted in greater volumes of clinical procedures performed, as well as higher quality, complexity and diversity of treatment. In addition, at the earlier stages of the firm’s development, the presence of prolific innovators and the organizational structure that supported learning, knowledge production and accumulation (the “clinic – engineering – approbation – production – clinic” cycle) were crucial for creating a basis for persistent innovation. In later periods, the combination of resource availability (material, financial, human capital), external collaborations, novel ways of organizing treatment, extensive inter and intra-firm diffusion of technologies also contributed to high levels of innovation. Overall, the work provides support for an interdisciplinary approach to the study of organizations, i.e. combining institutional analysis, evolutionary and dynamic organizational economics, strategic management, the economics of innovation, the analysis of property rights and the role of leadership