Many management reports we review rely heavily on lagging indicators, data that looks backward to explain what already happened.
While useful, lagging indicators alone don’t equip leadership with what they need most: foresight.
The updated Global Internal Audit Standards emphasize our role in delivering just that – forward-looking insight that helps boards and executives anticipate risk, not just react to it.
One way to do that is by shifting our focus toward leading indicators in our risk assessments.
Why Leading Indicators Matter
Unlike lagging indicators, which reflect outcomes, leading indicators signal conditions that precede those outcomes.
They allow internal auditors to identify potential issues early, enabling proactive risk mitigation rather than post-incident response. Yet in practice, they’re often absent or underutilized in organizational reporting.
When we introduce leading indicators into audit planning and risk assessments, we uncover insights that drive action before problems escalate.
Practical Examples Across Functions
Here’s how the shift from lagging to leading might look in key areas:
Health, Safety, and Environment (HSE)
- Lagging: Number of incidents or fatalities
- Leading: Safety training hours, near misses reported, proactive safety audits
Procurement
- Lagging: Past cost savings, supplier contract breaches
- Leading: Number of supplier risk assessments, lead time variability, purchase order lead times
Human Resources
- Lagging: Turnover rate, time-to-fill roles
- Leading: Engagement scores, skill gap identification, training completion rates
IT Security
- Lagging: Breaches, system downtime
- Leading: Phishing test failures, patch management stats, cybersecurity training rates
These leading metrics don’t just tell you what happened, they tell you what’s likely to happen next.
Moving From Insight to Action
Auditors can elevate their value by asking:
- What leading indicators should exist for this risk?
- Are we tracking them?
- If not, why and what are we missing?
Establishing and tracking the right leading indicators may seem simple, but it often requires cross-functional collaboration and a cultural shift toward predictive insight.
Strengthening the Future with Foresight
Lagging indicators help us explain.
Leading indicators help us prepare.
As internal auditors, we’re expected to do both. But the future belongs to those who prioritize foresight and help their organizations act in time.
So, what leading indicators are you using in your work today, and what stories are they telling?