Controls management is the way in which a company approaches their day-to-day business activities and protocols in order to reduce organizational risk, increase business resilience, and meet organizational goals. The procedures that a company follows and the actions that employees take in order to achieve the desired results of the business — including the guidelines and cultural norms that they follow as they do so — are established by a company’s internal controls management.
Today’s business uncertainties include risks from wartime hackers, global supply chain disruptions, and the security weaknesses inherent in an at-home workforce, to name just a few top concerns. In volatile times, it’s more important than ever to build a strong and effective controls management system for your business.
What Is Controls Management?
Controls management is the means by which the actions of individuals or groups within a company are directed — as well as which actions are avoided or advised against — in order for that organization to maintain organizational norms and reach their goals. Controls management is also a system of checks and balances that keeps team members adhering to a company’s rules and culture, and in doing so functions as the guardrails keeping employees in line with both external regulations and internal standards.
Controls management is important because these rules and requirements work to keep a business within regulatory compliance and also provide safety and security for a company regarding their reputation and brand image. If employees across the company are aware of the organizational controls and adhere to them — either explicitly or implicitly, due to management culture — that builds a solid foundation for the organization. In turn, that results in a consistent, quality output of the products and services that the company sells.
What Is the Role of Controls Management?
Controls management is put in place to guide team members in adhering to a company’s norms and rules in order to reach company goals. The role of controls management varies from explicitly outlining policies and procedures — sometimes involving external regulatory requirements — to more subtly displaying company expectations through an organization’s cultural norms and standards.
Unfortunately, not all team members are willing or able to act in the company’s best interest. Implementing controls helps to prevent material mistakes from going unnoticed and steers team members away from taking intentional actions that are bad for business. Internal controls management helps to validate controls in place are designed and operating effectively, and provide a mechanism for ensuring corrective actions are implemented for any issues identified. In other words, they minimize deviations with product output and effectively keep project management on track.
What Are the Different Types of Controls?
Controls management falls into two main categories, and there are several types of controls within those categories. The main areas of controls management are regulative controls and normative controls. Within regulative controls are bureaucratic controls, internal controls, and quality controls. Under normative controls are team norms and organizational cultural norms.
Regulative controls, which encompass bureaucratic, financial, and quality controls, emerge from a company’s existing policies and standard operating procedures.
- Bureaucratic controls stem from a company’s senior leadership and the policies and procedures that they outline for departments and team members to follow.
- Internal controls, such as Financial and Security controls, are aimed at ensuring the integrity of information to promote accountability and prevent fraud. They are the means by which an organization monitors and controls the direction, allocation, and usage of its resources.
- Quality controls are in place to define the variation that is considered acceptable regarding product output — the end result of whatever product or service is delivered to clients and customers.
Normative controls are team norms and organizational cultural norms. They govern manager and team member behavior through the company’s accepted patterns of action, rather than requiring written policies like regulative controls.
- The team norms are the informal rules that help employees understand what their responsibilities are to the company and to each other. Team norms tend to develop gradually, but once established can have a powerful influence on employee behavior.
- Organizational cultural norms are a company’s shared values, beliefs, and culture.
All of these controls work together to keep your employees aligned and on track to meet company goals with the level of integrity established by senior leadership.
Eight Key Strategies for Strengthening Controls Management in 2022
Strategies for strengthening controls management include staying on top of regulatory requirements, optimizing internal controls, and using smart controls management software solutions to improve processes and communications. Here are eight ways your business can improve controls management:
Strategy 1: Strictly Manage Regulatory Controls
It’s critical for companies to stay on top of all regulatory requirements specific to their lines of business. Different fields will need to comply with different regulations, depending on what industry the company is in. An organization that is in the medical field may need to know how to be HIPPA compliant, and a food service company could be subject to the Food and Drug Administration guidelines. One regulatory requirement that all public companies need to stay on top of is SOX compliance. As such, it’s important for companies to understand what requirements are applicable to their organization and implement appropriate controls to monitor compliance.
Strategy 2: Rigorously Follow Internal Controls
Internal controls, such as Financial controls, help safeguard an organization and further its objectives by tracking progress towards various goals and targets, such as increasing operational effectiveness and efficiency, providing reliable financial reporting, or ensuring compliance with laws and regulations. Strong internal controls help reduce risk at an organization by protecting the company’s resources and plays an important role in detecting and preventing fraud. That said, it’s important to remember that implementing controls is not the same as compliance — so it’s critical not just to identify and implement strong controls, but also to make sure that employees maintain compliance with control protocols, such as by performing internal reviews or audits.
Strategy 3: Maintain Solid Security Controls
Solid security controls management helps to ensure that a company’s data and information is safe from potential hacks or security breaches. Companies should implement advanced security controls, like two-factor authentication, in order to improve the company’s information security posture and avoid malware infections and brute force data attacks.
Strategy 4: Uphold Consistent Quality Controls
Quality controls ensure that a company’s product or services stay at the desired level. Some companies use software to analyze product output electronically, or they might enable a quality controls staff to analyze products prior to release. Quality standards will differ by company, and while some require zero defects before shipment, others are comfortable releasing items that have small flaws. Whatever your company’s quality control standards are, it’s important that they are consistently maintained and upheld across the entire organization.
Strategy 5: Oversee Thorough Team Training
One key aspect of maintaining proper controls management is ensuring that team members at all levels are aware of controls they need to follow and comply with. Employees need clear direction on controls management procedures so that they understand their role in the process, and can help the company maintain compliance with controls. For example, if a company institutes a security control of locking laptops when left in an open workspace, but haven’t ensured that employees are aware of the control, then laptops may be left unlocked, becoming an easy target for theft. The security control of locking a laptop is in place, but without employee awareness and commitment to consistently following the procedure, then the control itself is completely ineffective. It’s important that employees throughout the entire company are trained on proper procedures so that they are following the controls that are put in place.
Strategy 6: Optimize Data Measurement Systems
Companies can use measurement systems to find areas for improvement within their day-to-day operations. Managing key performance indicators means that those key performance data points need to first be determined, agreed upon, properly tracked, and then managed against.
In the era of big data, there’s a lot of facts and figures out there. Using data measurement systems to determine what information is important to your business is the beginning. Then, layering controls on top of data measurement is key to controls management. If a measurement system includes financial targets, for example, a controls management tool can be created to automatically flag areas that are performing below expectations. That controls management tool can then help leadership teams know where and when to step in and help departments reach their goals.
Strategy 7: Follow Data Retention Guidelines
Data retention is storing and managing a company’s data and records for a designated period of time. Having a solid data retention policy in place is important for ensuring that your company stays in regulatory compliance regarding data privacy and also keeps your business in line regarding your industry’s timeline-based data storage requirements. Data retention also helps companies maintain security controls, and prepares an organization for continuity with available backup data in the event of a catastrophic loss due to a natural disaster or malicious hacking. In addition, controls management is important for determining and adapting a company’s data retention policy, as the ability to access historical data records and points of access by team members are needed to uphold compliance with security requirements.
Strategy 8: Enable a Powerful Software Solution
Companies can use controls management software to help them run secure processes. Using software allows them to identify and report issues quickly, and keeps those with access to data dashboards current on the status of the controls, with real-time access to high priority data. It also creates open communication across the company, where staff can use workflow software to communicate issues across teams effectively and efficiently. Software programs also significantly reduce the risk of error.
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Having reliable controls management tools in place is more important than ever. Using an internal audit management software will help your business achieve more, with the ability to manage audit planning, fieldwork, and reporting all in one single platform. Take control today.