The 7-step process to master the implementation of controls

Kezia Farnham

Internal controls are an essential security measure for any business. They help employees follow critical security practices, which, in turn, keeps businesses compliant with relevant laws and regulations — assuming the implementation of controls is effective. 

Implementing internal controls can be complex, but doing so is mission-critical for audit, cybersecurity and compliance; in 2020, 32% of all workplace fraud resulted from a lack of effective internal controls. 

This article will demystify the implementation of controls by helping you understand: 

  • What it means to implement internal controls

  • Benefits of implementing internal controls

  • The control types and components most businesses should consider

  • A seven step approach to implementation of controls

  • Best practices for internal control implementation 

What does it mean to implement internal controls? 

Implementing internal controls means designing and executing the processes, procedures, and safeguards that protect company systems and data from breaches and bad actors. You must consider how the system is configured and the processes employees should follow. 

You can leverage established frameworks, like the COSO Internal Controls Framework, or you can develop your own processes for validating operations and compliance procedures. This means assessing the control environment, identifying present and emerging risks and setting up internal controls — like access credentials — that mitigate those risks. 

Who should internal controls be implemented by? 

Both the internal audit and the accounting teams are responsible for implementing internal controls. But this shouldn’t happen in a vacuum. Instead, the CEO should guide the controls framework the organization will use. The internal audit and accounting teams should also report to the board, ensuring the controls meet all organizational and regulatory requirements.

Even though these teams and individuals will handle the implementation of controls, it’s important to note that every single employee has a part to play in maintaining them. Internal controls can only be successful if all employees understand and enact them. 

Benefits of implementing internal controls

At their most basic, internal controls enforce a shared, organization-wide process that keeps company systems and data secure and compliant. But those aren’t the only benefits of implementing internal controls. 

Effective implementation of controls helps: 

  1. Create common processes: In our increasingly virtual world, employees across the company and worldwide need to access the same systems. Implementing controls ensures employees follow the same procedures, keeping data and systems secure and getting all employees on the same page. 

  2. Improve performance: Strategic business decisions require accurate data. When companies have controls, they have a consistent way to enact different activities — like purchases — which leads to better, more thorough data. 

  3. Increase efficiency: Different departments may interact with company systems and data differently. This may seem harmless, but it can lead to widespread duplication of efforts that ultimately wastes company time and resources. Controls streamline processes into only what’s truly necessary.  

  4. Reduce risk: Employee error or malintent contribute to 70% of all corporate breaches. In many cases, employees unintentionally leave systems and data vulnerable to breach, which can happen when clear controls are not in place. Controls help employees securely engage with company systems, which is a critical way to limit risk exposure. 

Common internal controls to implement

Controls are not a one size fits all. The controls an organization needs depends on its size, industry, systems and employees. That said, effective internal controls will have some characteristics in common. 

  1. Types: The design and implementation of controls should span all control types, ensuring each part of the system remains secure over time. This includes the three types of internal controls — preventative, detective and corrective — which encompass controls that prevent, detect and mitigate risk. 

  2. Components: There are also several components of internal controls to consider, including the organization’s attitude toward controls, the risks the organization faces, the processes that require controls and ongoing monitoring to verify that controls are performing as expected. 

A 7-step process for implementing internal controls

Implementation of controls can be a complex process. When broken into steps, though, it illustrates not only a pathway toward more secure systems but also a more positive environment for cybersecurity and compliance. 

To implement internal controls, you should: 

  1. Create a culture of compliance: Your organization is considered the control environment. In other words, it’s the arena in which internal controls need to thrive. Set a tone from the top down that controls will be taken seriously, then create a cross-departmental team of leaders to set a culture of compliance and help implement the controls across the organization. 

  2. Assess your risk landscape: You can’t mitigate risk until you know what risks you face. Start by listing all the possible risks your organization may encounter. This should include internal and external risks, as well as any risks attached to your systems and third parties. Then, organize the risks by type — like operational, financial and strategic. Finally, prioritize the risks within each category based on how likely they are to happen and how impactful they will be should they come to fruition. 

  3. Design and document your controls: You should directly tie your controls to your risks. If, for example, your third parties pose a significant risk, you can implement rigorous access controls to limit how much data they can reach. Keep in mind that many controls translate into a process or procedure. You need to design and document controls that protect your system without overburdening your employees with intensive and repetitive processes.

  4. Implement internal controls: At this stage, you’re ready to deploy your controls. This means activating any safeguards you’ve built into your infrastructure and mandating your employees follow the new processes and procedures. It’s important to note that your controls are iterative — you may repeat steps one through three multiple times as you fine-tune your controls. 

  5. Deploy an employee communication program: Controls only work when employees follow them. While some controls happen within your infrastructure, others — like logging out of your company email any time you leave your computer — require buy-in from every team member. Distribute initial messaging about what the controls are and why they matter, but also develop ongoing training so employees understand their role in cybersecurity and feel empowered to uphold it. 

  6. Establish continuous control monitoring: The risk landscape rapidly evolves, and your internal controls may need to change, too. Your board should take an active role in establishing evaluation criteria and considering relevant policies and regulations. Then, continuously evaluate your controls to ensure they still meet the company’s needs, whether that’s protection against emerging risks or compliance with new regulations. 

  7. Automate your controls: Internal control weaknesses are common, largely because managing all controls manually can eventually become challenging.

  8. Automating internal controls unlocks real-time insights, improves visibility into both risks and controls, enables more efficient controls testing and makes it easier to achieve good governance. 

Best practices for the implementation of controls

Implementing internal controls is a journey, not a destination. Following these best practices will help ensure your journey is clear and effective and results in better risk management. 

  • Build top-down support for internal controls: Getting buy-in from senior leadership significantly streamlines the implementation of controls. This ensures you’ll have the time and resources to dedicate to controls and sets the tone for how employees will engage with system security. 

  • Systematize your implementation: The simpler your roll-out, the easier it will be for employees to get on board. Create a program for introducing any new controls so that everything goes smoothly. You can even complete test runs with select users to verify that your implementation will work as planned. 

  • Thoroughly explain all internal controls: Your employees will want to know why they must follow certain controls. Clearly explain what the controls are, why they’re valuable and why employees have a part to play in safeguarding the company. Employees will more readily follow controls they understand and a compliance culture they believe in. 

  • Leverage technology: Internal audit, accounting and cybersecurity teams are the masterminds behind internal controls. But there’s a limit to how many controls you can effectively deploy manually. Technology can streamline the day-to-day realities of internal controls, from always-on monitoring to automating repetitive tasks to delivering real-time data senior management and the board can pull from. Internal controls management tools are the best way to stay on top of controls for the long term. 

Streamline implementation of controls 

Internal controls can have limitations that span hardware, software, people and even your security architecture. Automation is one of the best tools organizations have to resolve some of those limitations before they start. 

It’s automation that can seamlessly uphold internal controls processes, monitor controls activity, deliver instantaneous reporting, and so many more activities that modern governance requires. Learn more about how automation can pave the way for a more strategic audit function.

Is Your Organization Prepared for What’s Ahead?
Technology adoption is the main driver behind future-proofing the internal audit function. Learn what chief audit executives and internal audit teams should be considering.
Background image
Related Insights
Kezia Farnham Diligent
Kezia Farnham
Kezia Farnham, a Senior Manager at Diligent, has spent several years working in the B2B SaaS sector. Her expertise in equipping governance, risk, audit, compliance and ESG professionals with key insights into sustainability, cybersecurity and the regulatory landscape helps them stay ahead of an increasingly challenging business environment.