Internal control frameworks have many positive side effects that challenge traditional thinking about internal controls apart from meeting deadlines and compliance.
1. Engaging employees
Having a formalized internal control framework can boost employee engagement levels in the following ways:
Communicating expectations- The employees realize the importance of integrity and ethical values, management’s philosophy and operating style. Also, the organizational structure and authority becomes clear. There is segregation of responsibilities as a part of an internal controls. Unexpected things will happen. Thus, this will give the employees a heads on before anything drastic happens. When employees know what is expected of them, and are empowered to make the decisions necessary to do their jobs, they are more exponentially more engaged with the company.
Good internal control frameworks align internal control with the business’s key objectives. Every company has their own mission and vision statement. The next important thing is to define objectives. They can develop from multiple perspectives. Robert Kaplan and David Norton are known for their Balanced Scorecard strategic planning methodology (1990) Balanced Scorecard methodology which suggests viewing success from 4 primary perspectives: employees, business processes, customers, and financial. The control objectives and activities in the internal control framework align with the business’s key objectives. They move in tandem as strategies evolve. This means that employees have a clear understanding of how the work they are doing contributes to the company’s success, which has been proven to increase employees’ commitment to the company.
2. Overall Cost Savings:
By building an internal control framework, companies are also streamlining processes and saving money because things are running more efficiently. Not only that, but savings exist because one does things correctly the first time, thus avoiding costly corrections. Tools like VComply helps every company streamline their framework in such a way that risk mapping is easier and less complex. Thus, it helps them increase the RoI to a large extent.
3. Customer Loyalty
Every business should be able to respond to customer needs quickly, completely, and correctly in the first time. We have learnt about CRM Governance in a previous article. When companies have good processes with strong internal controls, they have the foundation to give customers the exceptional experiences that they demand.
4. Customer Confidence
When user organizations outsource business functions to a service provider, the risks of the service organization become risks of the user entities. Organizations that use service providers want to ensure the integrity and security of the system and company to which they are entrusting their data. Hence, having a sound internal control framework on which a service auditor has an opinion is a competitive necessity for many service providers.
With the right perspective, internal controls can be enablers of a company’s business strategy. When a company defines their key business objectives, internal controls can be right there by their side. Thus, this underpins the objectives of the business at one place.
The key to a successful relationship between internal controls and business strategy is to formalize a comprehensive internal control framework. Next is to complete with articulation of the control environment. Last but not the least, one should manage risk assessment and control objectives. Automatically it will lead to control activities, robust information and communication mechanisms, and a decent monitoring plan.Add to favorites