In a world dominated by complex, highly regulated organisations, internal controls are a must, according to RegTech firm Diligent.
According to the company, in the finance function, this safeguards your business against poor practice, financial losses and regulatory compliance breaches.
However, they are not infallible, and they are under growing scrutiny. There are increasing demands on the quality, speed and accuracy of information they provide. These pressures, Diligent claims, are driving a transformation in internal controls management, particularly a move towards automating them.
Diligent explained, “Simply put, manual controls rely on human intervention, while automated internal controls are control operations performed automatically via an information system or software.”
While manual can in some cases have benefits, they do have their limitations. “Any decision that relies on human intervention invites a degree of subjectivity and error. In a financial compliance context, the risk of fraud or collusion, added to the potential for human error, can make manual controls sub-optimal,” said Diligent.
Why do companies automate this area? Amongst a range of things, it can help to identify fraud risk.
Diligent remarked, “Automating internal controls gives you visibility across your entire operation, analysing large data sets instantly to quickly identify areas of your operations where fraud risk is exceptionally high. This enables you to focus your controls processes and risk management tactics on high-priority areas.”
In other areas, automating internal controls can spot financial risks between systems and applications not just within them and improves data analysis
Diligent highlighted that other benefits of include that real-time monitoring, easily translated into user-friendly dashboards, allows instant reporting and actionable insights.
In addition, task workflows can ensure no actions are missed, with clear accountability and deadlines. Meanwhile, security risks within and between applications are minimised.
Visibility can also be improved. “If you automate internal controls, you can easily identify bottlenecks or parts of the process that aren’t working and implement change,” explained Diligent. Prioritising and taking action on key risks can also be made more simple.
There is also, Diligent claims, better evidencing of controls. Controls data is automatically captured and stored, making it simpler to provide that the correct process was followed. Internal controls processes also continue uninterrupted regardless of personal changes or changes in roles and responsibilities.
Good governance and regulatory compliance are also more easily achieved, audits run more smoothly and finance, internal audit and control teams can save time, money and resource by managing all internal controls on a single platform.
Diligent said, “Automating internal controls is an excellent start if you want to future-proof your internal audit function. Doing so will enhance your productivity without requiring extra people or cost.”
Read the full post here.
Earlier this year, Diligent partnered with capital markets communications platform Q4 to provide pre-IPO and public companies with IR and board governance solutions.
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