In the rapidly evolving landscape of 2025, internal auditors face a complex array of challenges that require a nuanced understanding of emerging risks and the agility to adapt to new paradigms. The “Risk in Focus 2025” report, a collaborative effort by 19 European Institutes of Internal Auditors, offers invaluable insights into these pressing concerns. Drawing from the perspectives of 985 Chief Audit Executives (CAEs) across 20 countries, the report delineates the top risks that organizations must navigate.
1. Cybersecurity and Data Security
Cybersecurity continues to dominate the risk landscape, with 83% of CAEs identifying it as a top concern.
The proliferation of sophisticated cyber threats necessitates that internal auditors remain vigilant in assessing and enhancing their organizations’ cyber defenses. The rise of artificial intelligence (AI) has introduced new dimensions to cyber risks, enabling more complex and harder-to-detect attacks. Internal audit functions must therefore focus on evaluating the effectiveness of cybersecurity frameworks, incident response plans, and employee training programs to mitigate these evolving threats.
2. Digital Disruption, New Technologies, and Artificial Intelligence
The rapid advancement of digital technologies and AI presents both opportunities and challenges. This area has surged in prominence, moving from sixth place in 2024 to a projected second place by 2028.
Organizations are under pressure to adopt AI and digital tools, yet many lack robust strategies and governance processes to manage the associated risks effectively. Internal auditors must assess the adequacy of digital transformation strategies, data governance policies, and the ethical implications of AI deployment to ensure alignment with organizational objectives and regulatory requirements.
3. Human Capital, Diversity, Talent Management, and Retention
Human capital risks remain a significant concern, with 52% of CAEs highlighting them as a top priority.
The challenges of attracting, retaining, and developing talent are exacerbated by the evolving nature of work and employee expectations. Internal audit functions should evaluate the effectiveness of talent management strategies, diversity and inclusion initiatives, and employee engagement programs to ensure that organizations can adapt to changing workforce dynamics and maintain a competitive edge.
4. Macroeconomic and Geopolitical Uncertainty
While this risk has dropped in ranking, with 39% of CAEs identifying it as a top concern, it remains pertinent due to factors such as geopolitical tensions and economic instability. Internal auditors must incorporate strategic risk assessments into their governance frameworks to navigate complex scenarios effectively. This includes evaluating the organization’s resilience to economic shocks, supply chain vulnerabilities, and geopolitical developments that could impact operations.
5. Climate Change, Biodiversity, and Environmental Sustainability
Environmental risks are gaining traction and are expected to climb in importance due to increasing regulatory pressures. Internal auditors are urged to enhance their understanding and capability to audit sustainability efforts effectively. This involves assessing the robustness of environmental policies, the accuracy of sustainability reporting, and the organization’s preparedness to comply with evolving environmental regulations.
6. Compliance and Regulatory Risk
Organizations must remain agile to adapt to evolving regulatory requirements. Recent high-impact regulatory changes underscore the necessity for robust compliance frameworks. Internal auditors play a key role in confirming that these frameworks are adaptable and equipped to handle the risks associated with regulatory changes. This includes evaluating processes in place to manage compliance with relevant obligations and identifying and implementing regulatory changes.
7. Financial Crime
Financial crime remains an area of significant attention, with expansions in legislation impacting various industries. Internal auditors are crucial in assessing compliance with anti-money laundering and counter-terrorism financing requirements and ensuring that fraud risks have been appropriately addressed. This involves reviewing key processes, evaluating fraud risk assessments, and assessing the effectiveness of training programs on recognizing and reporting financial crime.
8. Data Governance and Privacy
With the increasing frequency of data breaches and expanding privacy-related compliance obligations, robust data governance frameworks are essential. Internal auditors must confirm the design and implementation effectiveness of controls related to data management, access control, and accountability in data handling practices. This includes assessing data governance policies, performing independent scans for personally identifiable information, and reviewing due diligence processes for third-party data processors.
9. Artificial Intelligence Governance
The oversight and ethical use of AI technologies in organizational decision-making processes is a pressing concern. Internal auditors play a key role in assessing the establishment of robust governance frameworks that ensure compliance with ethical standards and regulatory requirements. This involves evaluating processes for developing, testing, and validating AI models and assessing the governance of AI and machine learning dictionaries and language models.
10. Strategic Projects and Change
Assurance over major transformation projects has become increasingly important as organizations deliver strategic technology and operating model changes. Internal auditors verify that these projects align with long-term business objectives and effectively manage associated risks. This includes providing an independent view on the delivery status of major initiatives and assessing the effectiveness of enterprise portfolio management.
11. Environmental, Social, and Governance (ESG) Reporting
Government and regulatory bodies are introducing ESG disclosure requirements in response to growing focus on sustainability. Internal auditors play a key role in assessing the completeness and accuracy of processes and data used for ESG reporting. This involves evaluating the effectiveness of ESG reporting frameworks and assessing the extent to which the organization has adequately considered and captured ESG risks and opportunities.
12. Risk Culture
A strong risk culture is crucial for proactive risk management and organizational resilience. Regulators expect boards to understand and enhance their risk culture.
