Table of Contents
In today’s complex financial landscape, organizations face significant risks that threaten their stability and integrity. One of the most effective strategies to mitigate these risks is implementing Segregation of Duties (SoD). This practice enhances accountability while safeguarding against fraud and errors. In this blog, we explore the importance of SoD in risk management, drawing insights from industry expert Sinan Guven, who has firsthand experience addressing these challenges and solutions.
Understanding the Risks
Sinan Guven explains, “We hear a lot about systems being compromised by malicious actors outside of the organizations, but what about systems being compromised by internal actors? These may have severe consequences for organizations.” Compromised financial systems present serious threats to an organization’s stability. One of the most important defenses against these risks is SoD, which defines team members’ roles and ensures their system privileges align with these roles. Guven notes, “On the opposite end of the spectrum, there are teams where anyone can do everything. This may have worked when a team was bootstrapping, getting things done super fast with a handful of employees and also had very little to lose.”
In mature organizations, a lack of SoD exposes them to heightened risks, such as fraud, especially in critical areas like accounts payable. For instance, if a single employee can create, approve, and process payments, it creates an environment ripe for exploitation.
The Challenge of Implementation
Implementing and monitoring SoD is complex, particularly in organizations with intricate workflows and processes. SoD is essential to mitigating risks, as it divides responsibilities so no one person controls every aspect of a transaction. This promotes accountability and oversight, both of which are critical to reducing fraud and errors.
Despite this, “compliance” can sometimes be viewed negatively, associated with bureaucracy and inefficiency. However, compliance is key to financial integrity and is much more than a “box-ticking” exercise. It establishes a framework that upholds sound business practices and fosters trust.
Guven, an expert in SoD automation, has witnessed the challenges organizations face when implementing effective controls: “Financial systems always have very fine-grained data security options. This is what makes them robust and popular. Let’s take NetSuite. It has more than 600 permissions governing almost five thousand distinct tasks. As soon as we grant an employee more than one of these 600 permissions, the question of SoD risks begins. Typically, an AP or Revenue accountant’s NetSuite access includes around a hundred of these permissions. Asking administrators and finance leaders to oversee and ensure SoD without proper tools can only be summed up as setting unrealistic goals.”
Addressing Challenges with an Integrated Solution
To help organizations navigate SoD complexities, Guven and AudITech developed an integrated tool tailored for NetSuite. This tool tackles common SoD management challenges:
Identifying Conflicts: The tool highlights where SoD violations may exist within workflows, enabling timely intervention.
Ensuring Compliance: Especially in larger organizations, maintaining compliance can be challenging. This integrated solution streamlines compliance efforts, reducing the administrative load on finance teams.
Enhancing Transparency: Without visibility into financial processes, oversight is difficult, which increases risk. The tool provides enhanced transparency, helping organizations monitor their financial activities effectively.
By addressing these critical issues, the tool empowers organizations to strengthen financial controls and minimize risk.
Building a Culture of Continuous Risk Management
Creating a culture of continuous risk management is essential. The solution from Guven Partners and AudITech enables a proactive approach, shifting focus from reactive measures to ongoing oversight. With real-time insights, finance teams can monitor transactions and processes, allowing them to address issues before they escalate.
“Compliance and audit processes were designed in a world where today’s technology and tools didn’t exist. The lack of appropriate tools forced us to think of audit as something that takes place at discrete times. This is what we’re set out to change. We can now define the controls and criteria for robust corporate governance and let automation keep everyone honest in real time,” Guven adds.
Moving Forward with Confidence
Segregation of Duties isn’t just a compliance requirement; it’s vital for effective risk management. Through the integrated tools developed by Guven Partners and AudITech, organizations can enhance SoD practices within NetSuite, addressing common challenges and reducing risk.
As organizations evolve, embracing SoD principles and investing in technology that promotes accountability and transparency will be essential. By doing so, they’ll be better equipped to navigate the complexities of risk management while fostering a culture of integrity and trust.
