Assurance firms have been a popular target for mergers and acquisitions in recent years, as emerging risks have increased demand for objective standards and regulation, and digital transformation has opened new paths to growth. I spoke to Ian Spaulding, Chief Executive Officer (CEO) at leading global assurance partner and PE-backed LRQA, about the evolving risk landscape, the concept of ‘Assurance 4.0’, and why the devil is in the detail.
Before attracting PE investment in 2021, Ian Spaulding describes LRQA as a business that had a lot of untapped potential. Like much of the wider assurance sector, it had been “very technical”, primarily focused on auditing health and safety risks and delivering standard products to customers. But in a few short years, it has undergone a dramatic transformation.
Originally the business assurance and inspection services division of Lloyd's Register, LRQA was spun out and acquired by Goldman Sachs Asset Management in 2021, before acquiring Elevate, the ESG specialist Spaulding founded, the following year. Spaulding became CEO of the parent company 18 months later and under his stewardship, the business is innovating and growing fast.
A new era for risk
LRQA is in the business of managing risk, and the risk landscape has undergone a major evolution in recent years. The pandemic brought into sharp focus the need to prepare for the unexpected, and new global trends started to emerge across ESG, supply chain complexity, and cybersecurity. Combine those new trends with traditional risks across assets, people and systems, plus new legislation enforcing the above, and a host of new revenue streams opened for LRQA as they supported clients to navigate this new space. Risk has become about moving beyond compliance to a competitive edge.
“We call the new era of risk management, the era of Assurance 4.0. It’s the perfect way to encapsulate that, whilst certification and compliance remain important symbols of quality, there’s more out there in terms of good risk management,” says Spaulding. “In particular, most of our clients need support relating to ESG and cyber. Irrespective of sector, you still have cyber risks to manage, and ESG objectives to further. That’s where our focus is.”
Building for the future with private equity
Spaulding has been something of a trailblazer in the ESG space, spending the early years of his career at KPMG “…going to garment factories in Honduras, Mexico, and Guatemala to make sure that they met certain ESG standards - before they were called ESG standards.”
This background led him to found Elevate, where he developed an end-to-end ESG service ecosystem, and secured the backing of EQT, tripling the business size over nine years. Once acquired by LRQA, he spotted an opportunity to “diversify the sectors, services, and geographies,” while relishing another chance to work with private equity, following a “positive and rewarding experience” with EQT.
“What I like about private equity is the way targeted investments can unlock potential. With a clear and focused transformation strategy, the combined backing and support of private equity then allows us to invest in new ways of working, tools, and systems to unlock the future we see,” he says. “It really is building companies to last.”
Relentless people focus
As well as leveraging global trends around risk, LRQA is also on a transformation journey to make the company stronger with modern technology and solutions, for the benefit of both its clients and colleagues. This includes drawing on data to provide broader insights into the risk landscape and bring additional value to clients, taking an end-to-end, challenge-led approach to risk and opportunity.
“There's an opportunity to transform how we collect data, to plug in new data sets, to help our clients understand these risks differently,” he says.
LRQA does this through its industry-leading supply chain intelligence platform, EiQ, which draws on 25,000+ global supplier audits conducted annually, with 75+ million data points derived from those on-the-ground site visits. The company is also maximising the potential of technology to streamline operations and free up its auditors, inspectors and advisers who want more time to drive impact. That has meant optimising the leadership team to become more commercial and tech-focused, to ultimately improve the company for both its clients and people.
“In a previous worldview, we wouldn't be talking about the needs of the client, only the standard product, and it becomes a race to the bottom on price,” he explains. “This reorientation around the market, client needs, and innovation allows us to distinguish ourselves in a crowded marketplace. And leadership needs to model that out, ensuring everyone is having those conversations with clients.”
Leadership style: devil is in the detail
Spaulding has also been on a learning curve as CEO of LRQA, and says the investor team carefully assessed his background as a founder-CEO and suitability to lead an enterprise of greater scale: “Probably their biggest concern about me as a leader was: can I run a bigger enterprise? Am I willing to trust my leadership team to build systems and processes to multiply our efforts?”
However, he believes his background as a hands-on leader has worked in his favour, due to the nature of the organisation he inherited and the need for rapid cultural, operational, and commercial change.
“Until you are on the right path with the leadership team and the momentum of the strategy, you must be on top of every detail. We now have a strong leadership team who are truly united behind a singular vision and helps us spread the message, the style, and the accountability culture, and we’re seeing a greater impact as a result.”
If any of the themes in this article resonate with you and you would like to discuss them further please be in touch. You can email me here.
Adam Mahmood
