Transforming Financial Controls: 5 Things to Consider Now

All businesses, large and small, will encounter challenges when designing and deploying robust financial controls frameworks. Many organisations are now realising they have a lot of work to get through with the impending introduction of “UK SOX” and, unsurprisingly, some businesses are far behind where they need to be in preparation for such changes.

Often with larger organisations, it is essential to have a Minimum Controls Framework to stand a chance of getting through an audit. Soon, businesses will need a whole lot more than that. 

Whilst the specifics of the “UK SOX” framework have not been finalised there is already strong SOX literature and control procedures in the wider market to base these impending methodologies and draw logical assumptions.

Listed or not, preparations to implement a strong control environment can and should start now.

Over the last few months, we have been discussing the future controls frameworks with our network of controls experts, transformation directors and GRC professionals. Here are the 5 key areas that require attention to successfully prepare your business for UK SOX and similar future requirements.

1.     Business Review

A simple first step; gain a high-level understanding of the business and the key risk areas. The most obvious risks are the areas that will require the more detailed controls as they will have a larger impact. Carefully making your way down the list to fully assess risks, the current controls environment and what may need to be improved, redeveloped, or conceptualised if there is an absence of suitable frameworks.

It is important consider the future operating model in projects like this, the sponsorship of which should come right from the board to make sure the function is fully empowered to implement something that is not only compliant, but value adding.

2.     Control Culture

This part is ultimately behavioural. Only instilling an ethos of risk aversion, control and transparency will you supplement all current and future agendas of control transformation and compliance requirements.

Providing training and raising awareness to the entire finance team and business about audit expectations and methodologies. Only once employees know why they are doing things and understand their impacts, will they effectively adhere to and perpetuate compliant procedures.

3.     Ecomonies of Scale

Rather than isolating controls reviews and implementation as a sperate project, it can quite often be integrated into current/upcoming transformation projects; think new ERP/Systems programmes or broader Finance Operating Model.  It would be recommended to include financial controls review/implementation within a project where processes are subject to change, for obvious reasons – design and deploy, once.  

4.     Specialists & Subject Matter Experts

You need to ensure in-depth understanding of processes and controls so formalising a cohort of Subject Matter Experts across key workstreams will be vital for both implementation of new policies, monitoring and maintenance.  When assessments and testing begin you will already have accurate and detailed understanding of the process and current controls mechanisms, so you can accelerate to the adoption phases of any new requirements.

5.     Simplify and Automate

Now and even more in the future, technology will be the best way of embedding process and procedure to achieve efficiency and simplicity. When it comes to controls, more manual means more risks (~99.9% of time!). The more technology and systems are leveraged means controls are more easily implemented, tested, maintained, and amended.

There is of course a risk that “over-controlling” makes things too restrictive and removes intuition. By ensuring that the business is properly engaged from the outset, taking it on a full transformation journey to implement controls, process, and technology properly, should alleviate that concern.

Read the Governments whitepaper on changing governance frameworks here.

WHAT NEXT?

By following these key steps, you can prepare your business for the requirements of UK Sox and get ahead of the curve. Regardless of the final impact of UK SOX, or for those business not bound by the listed company rules, with shifting working patterns and practices, alongside a significant drive towards automation and systems dependency, now has never been a better time to review your controls and be prepared for whatever the future holds.

We are supporting a wide range of organisations with broad transformation projects and financial control framework implementation and work closely with an extensive network of experts. Get in touch for an informal conversation about your plans for SOX (UK & US), Financial Controls Framework Development or Transformation. (Get in touch)