NEOM, an initiative led by Saudi Arabia’s Public Investment Fund (PIF), is an ambitious destination now under development in the northwest of the country, at the intersection of Asia, Europe and Africa. Its goal is to become the ‘future of liveability’, built from the ground up, focused on community, and using advanced technologies to redefine how humanity lives, works, and plays – with a commitment to environmental sustainability.
An initiative of NEOM’s scale, spanning sectors ranging from biotech to education to financial services, poses a complex governance challenge when it comes to the creation of the internal audit (IA) function. There is no model or blueprint and speed is of the essence as NEOM has a strong delivery culture. Protecting NEOM and enabling it to deliver on the ambitious vision is at the heart of the NEOM IA purpose.
In this article - part of PwC’s Perspectives in Risk series - we interview Jason Davies, NEOM’s Chief Internal Audit Officer, to learn about his experiences in founding and managing this critical function and vision for the future of IA at NEOM.
Getting the fundamentals right and building trust
Davies joined NEOM in July 2020, transitioning from British multinational retailer Tesco; prior to Tesco he was a partner at a Big Four professional services firm. His diverse career, spanning sectors including corporate finance, food retail, and energy, made Davies the ideal candidate in many ways for a ‘blank canvas’, multi-sector initiative like NEOM.
When Davies joined NEOM - an initiative that sits at the heart of the Kingdom’s economic transformation agenda - he was immediately struck by its ambition. “Pick an industry - any industry - and we were doing something with it,” he recalls. “It was a fascinating brief.”
Building trust across the organisation was his first priority. “Listening more than I talked in the early days was key; our purpose and mandate is to protect the business,” Davies says.
“Running a startup is very different from operating in a large corporate setup - you’ve got to keep an open mind because things have to be done differently,” Davies continues. “When you are doing audits and providing assurance to a business that is trying to be disruptive and innovative, you have got to come with the right attitude and calibrate transparency, risk and box-ticking - and box ticking is not always the right way to go.” Davies explains that working in an environment with a strong delivery culture and high expectations means that IA cannot present laundry lists of actions (to senior management) going ‘into the weeds’. “You've got to be able to distil your messaging and recommendations have to be material, crisp and relevant,” Davies says.
At the same time, he says, you need to ensure all stakeholders are aware of IA’s remit, especially when they have differing levels of past engagement and experience. While personnel with listed company backgrounds may be more familiar with the kinds of questions and requirements of IA, others coming from privately owned companies, especially in the Middle East, may initially be unused to such detailed scrutiny. “You have to work through that and calibrate how much time and energy you put in, so people understand where you are coming from and what the authority of your mandate is,” explains Davies.
To be effective, he felt that the focus should be on the fundamentals: building trust and communicating transparently. “My mantra was, ‘there will be no surprises [for leadership]. Nothing will go to the audit committee that you haven’t seen first’.”
A key decision Davies says he took in order to further build this direct trust between IA and the leadership was the decision to avoid hiring senior positions into the IA function early on. This means that Davies himself was able to spend considerable time guiding and supporting the broader business, including working on important issues that were tangential to IA. Davies says spending extensive time with senior leadership personally and drawing on external support where needed helped build the credibility of the IA function - enabling him to build trust and demonstrate its value to the company. “The important thing is to park your ego,” says Davies. “In the first 12 to 15 months, I helped in support and advisory work that were important to the organisation, alongside my key mandate of building an audit function.”
In an early-stage environment, the establishing of an IA function can help executive leadership focus. “We were able to gain an understanding of the challenges of the business and distil the noise into clear issues and opportunities from an IA perspective - and reasons why they needed to be addressed - creating perceived value for IA from the start,” says Davies. Though NEOM is a privately held, PIF-portfolio company, its startup ethos allows executives to experiment and take risks. “But part of IA’s role,” Davies adds, “Is to ensure that the senior management understands and can articulate those risks to the board”.
Davies likens NEOM to a ‘living organism in a petri dish’, continually growing and multiplying with several businesses, sectors and projects emerging. But says that there is a “golden thread of core risks” that he is continually trying to focus on. The most important thing according to Davies is not how every risk is handled but about creating a risk culture and ensuring leaders are thinking in the right way about risk. “We spend a lot of time helping to embed that in the business,” he says.
Another important element to be mindful of when it comes to managing risk is managing reputation. Reputation matters in areas like worker welfare, sustainability and investor confidence, as well as when it comes to encouraging people from around the world to come and live in NEOM. With a long-term vision for NEOM to enter an IPO, financial reporting and business hygiene in the early stages are also non-negotiable - and IA has a role to play in providing assurance and security across all of these diverse areas.
The future of NEOM: Why talent is everything
The ambitious scale of the NEOM initiative requires a strong skills and talent strategy - especially within IA - which is traditionally a less developed functional role in the Middle East. For Davies, attracting the right talent is a foundational pillar to NEOM’s success – and an important means for creating high quality jobs for Saudi nationals, a policy priority for the Kingdom.
While NEOM has ambitions in frontier fields like the metaverse and cognitive AI, Davies argues that success in areas such as these cannot be possible if you don’t have the core capabilities in HR to start with. Davies describes himself as an ‘inside out’ person and goes on to explain: “If you get the people right, everything else will follow and that’s been a big focus for us over the last year,” says Davies. “If you fail to get this right, especially when it comes to senior hires, you might build something to start with, but over an extended period will you be able to optimise what you’ve built?”
Human capital development is, Davies says, what gets him up in the morning and gives him fulfilment in his job.
Championing diversity and the role of women within IA is also important to Davies, and improving gender balance is one priority within this, despite the challenges at the senior IA level due to the historic inequity in training and experience for such roles, a deficit that should improve over time. “I am a son, a husband and a father – I want women to succeed in the workplace”, he states.
Davies explains that he has full support from the CEO and audit committee for the talent development agenda - and that the IA function has some of the best performance data according to recent benchmarking within NEOM and globally. The unit has made a commitment to provide professional training for staff at all levels over the next three years, and NEOM has pledged to have at least three audit subsidiaries run by Saudi men and women within this same time period. In addition, Davies also says he will replace himself with a Saudi national within the next three years. “One of the most exciting things about working in the Kingdom is that it’s a country with a young talent base with huge energy and an appetite for growth, development and success. We see that coming through in the men and women we bring in from within the Kingdom and also all over the world.”
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