In today’s complex business environment, internal controls are essential for safeguarding assets, ensuring accurate financial reporting, preventing fraud, and staying compliant with laws and policies. But what are internal controls, and how can organizations strengthen them?
At its core, internal controls refer to the systems, policies, and procedures companies put in place to manage risk and guide operations. They’re not just about avoiding problems-they’re a strategic asset that can drive performance and trust.
With rising cybersecurity threats, the ongoing complexities of remote and hybrid work models, and high-profile cases of fraud shaking public trust, organizations are more focused than ever on strengthening their internal controls. These controls aren’t just check-the-box compliance tools, they’re essential to managing risk, maintaining operational integrity, and protecting both data and reputation in an increasingly volatile environment.
Here are four critical areas organizations should focus on to build or improve their internal controls:
1. Governance – Good governance lays the foundation. In leading organizations, business management is responsible for establishing controls in their area, while the audit committees monitor them. Clear accountability, employee training, and integrating controls into job descriptions and performance reviews help reinforce responsibilities.
2. Internal Controls Environment - The right environment ensures controls are effective and sustainable. Key practices include:
- Focus on preventive controls (those that stop problems before they occur)
- Review controls regularly-ideally quarterly or on demand
- Use a standard framework, such as COSO, to align with best practice
- Ensure controls cover critical business areas like finance, IT, and customer data
3. Automation and Technology - Historically, internal controls have been heavily manual and paper based, involving extensive documentation and record-keeping. Advanced technologies have rapidly changed the controls landscape over the past few decades, allowing organizations to move from hybrid systems (where humans use computers but still provide manual inputs) to fully automated controls. Tools like robotic process automation (RPA) and artificial intelligence (AI) can enhance accuracy and enable continuous controls monitoring (CCM)-the ability to detect and respond to risks in real time.
4. Metrics and KPIs – You can’t manage what you don’t measure. Top internal controls metrics include:
- Percentage of primary controls that are automated
- Percentage of primary controls that are preventive in nature
- Cycle time in days from reporting of a control violation until investigation is completed and remediation steps/control changes are developed
Internal controls aren’t just a compliance checkbox, they’re a proactive way to build trust, reduce risk, and support sustainable business growth. Whether you’re just getting started or looking to modernize your controls, focusing on governance, automation, and continuous improvement can help your organization stay one step ahead.