The Committee of Sponsoring Organizations has established a framework for assessing internal controls for ethics and better business management. The five components consist of analyzing the control environment and activities, performing a risk assessment, controlling information and monitoring progress.
Soft Controls
Ethics and integrity help to define a corporate culture. While measures such as audits are helpful, they are not as user friendly as soft controls. Soft controls involve matters such as management philosophy, integrity and business ethics. Soft controls exist in awarded actions and common language. The lack of soft controls might increase the likelihood that a hard control, such as failure to obtain signature authority, will occur.
Formalize Soft Controls
The best way to reinforce soft controls is to formalize them. This can be done with a system of rating. Survey key staff on what their views are. Use structured interviews, self-assessment workshops, and self-assessment questionnaires to ask hypothetical questions and gauge awareness of business ethics. Try to understand how employees perceive internal controls. Create business polices around business ethics and include in employee reviews as a leadership attribute.
Automation
The best ethics and internal control techniques are automated and seamless to the process. Automatic reminders, direct connections to business partners, and electronic signatures are all ways to automate a function. Using these automation tools to formalize soft ethical controls into business processes will help to reinforce an ethical work environment without increasing costs.
