Overcome Your Roadblocks to an Effective Internal Controls System

Vocabulary.com defines a roadblock, literally speaking, as a barricade or obstruction that's meant to block traffic. Webster defines a roadblock, figuratively speaking, as something that blocks progress or prevents accomplishment of an objective. Just like physical roadblocks in the road, there are roadblocks within the internal controls space that prevent companies from operating at an optimal state.

Many companies are challenged when it comes to implementing an effective internal control framework. Internal control roadblocks include, but are not limited to human factors, resource limitations, and technological barriers. When you encounter a roadblock in the street, you must acknowledge that it’s there, so you are able to determine your next steps. Do you want to choose another route, or practice patience until the traffic resumes to normal flow? In the internal control space, you must acknowledge the roadblocks by assessing your organization to identify the appropriate measures to combat the deterrence.

Here are a few examples:

Roadblock: Limited resources; time-consuming documentation; reliance on seasoned staff knowledge

Navigating the roadblock: Set dedicated time blocks to formalize knowledge through documentation. Use "lunch and learns" or targeted methods for training. Cross train to retain knowledge and reduce reliance on key individuals (knowledge leakage).

Seasoned employees can always leave the organization along with their knowledge. Memorializing policies and procedures ensure knowledge is captured and retained for employees to adhere to. Cross training is also an effective solution as it increases knowledge within the organization by allowing multiple employees to perform the same role, decreasing key dependencies. Infrequent standardized training with a heavy reliance upon disseminated emailed communication assumes consistent comprehension amongst employees. When employees interpret messages differently, there is inconsistent application which increases exposure. Structured training standardizes the message and provides clarifying points to decrease confusion.

When time is an issue, many organizations utilize ideas like lunch and learns to facilitate training. This allots time for instruction while simultaneously giving employees time for lunch. Ultimately, time is a warranted investment to ensure employees understand the processes, internal controls, risks, regulations, etc. As a result, employees are better equipped to execute their responsibilities.

 Leadership’s Competing Initiatives and Reports

Roadblock: Leadership is overwhelmed by too many competing initiatives and excessive reporting

Navigating the roadblock: Regularly assess and prioritize oversight tasks. Use a reporting matrix to identify and focus leadership review on key, high-risk reports.

Independent oversight is necessary to eliminate the pitfall of self-assessment. As leaders, there are always competing initiatives. Leaders should continually assess all initiatives against strategic goals and regulatory requirements to identify priorities and allocate necessary resources. For report reviews, the reporting matrix streamlines reporting by identifying all reports, the frequency of each report, the objective of each report, and impacts such as strategic objectives or compliance. The utilization of this matrix helps to prioritize reviews and decrease the weight of feeling overwhelmed.

Roadblock: Incentive pay is tied to the completion of tasks

Navigating the roadblock: Tie Pay to Control Effectiveness. Link bonuses to Key Performance Indicators (KPIs) or Key Risk Indicators (KRIs) (e.g., zero material audit findings, high Internal Control Self-Assessment scores)

Bonuses tied to the completion of tasks encourage leadership to focus on executing the task to check the box versus completing the task adequately. When bonuses are tied to overall outcomes, there is a level of assurance that oversight activities are prioritized, shortcuts are not encouraged, and quality is prioritized. In addition, leadership should regularly monitor KPIs/KRIs to ensure they adequately cover current regulations, risks, and controls to ensure oversight is completed with comprehensive metrics.

Roadblock: GRC platforms are too expensive and complex; difficulty linking with existing technology.

Navigating the roadblock: Secure Buy-in with a Return on Investment Focus. Collaborate with leadership to promote the value of a GRC platform as a centralized, cost-saving, and efficiency-enhancing system. Secure a project champion and involve stakeholders early in the procurement cycle to reduce resistance.

Although there are costs and implementation tasks associated with a GRC platform, it is a centralized platform to ensure cohesiveness between governance, risk management, and compliance that ultimately saves money and time while providing job efficiency. It allows companies to have a more holistic view of the organization promoting improved decisions to meet strategic objectives, so it is worth the investment of time and money.

When leadership understands the benefits of the platform and can conclude they outweigh the costs, it is more apt to align with the decision to proceed with a GRC platform. To ease the fear associated with adapting a new platform, companies should ensure designated leaders are included in ongoing sessions of the procurement cycle. Companies should ensure a solid working relationship is maintained with the vendor for ease of use and troubleshooting assistance. In addition to leadership buy-in, it is important to collaborate with the line of business pre-implementation and post implementation to ensure proper data is utilized and not compromised. Leadership buy-in ultimately aids in promoting the idea that jobs are enhanced with the adaptation of GRC platforms to decrease the level of resistance.

Roadblocks can be a headache, but similar to navigation apps that help us navigate street detours, internal control roadblocks can be navigated as well to ultimately achieve the goal of an effective internal control framework. It is important to navigate internal control roadblocks by properly identifying the barriers, determining the appropriate solution, communicating the importance of internal controls and creating a culture that is receptive and adaptable to the work needed to support controls in an ever-changing business environment.

Why Partner With Spinnaker

We’re a boutique team of seasoned banking professionals, each with over a decade of hands-on experience in regulatory compliance, risk management, and analytics. As former operators, risk leaders, and strategists, we’ve led through recessions, regulatory shifts, and digital transformations. We know what works because we've done the work. Our approach is FAST, FLEXIBLE, and TAILORED TO YOUR NEEDS.

We partner with banks across the U.S. to:

• Assess and enhance internal control structures
• Map controls to Risk, Processes, Regulatory Requirements, and Testing
• Conduct independent control reviews and risk- based walkthroughs
• Identify automation opportunities
• Facilitate training in internal controls
• Support internal audit and exam preparation
• Provide fractional risk and compliance leadership
• Provide staff augmentation to perform control activities

Whether you’re looking for a one-time assessment or a long-term partner. We help you take control of what matters most. Let’s shore up your internal controls together -> Learn More about Spinnaker's Approach to Shoring Up Internal Controls