With the increased importance of internal controls in an organization, every business must have a plan to implement them. Implementing a COSO framework can provide benefits for any company in terms of streamlining operations and reducing costs. Below, you’ll find four simple steps to implement a COSO Framework in your business.
Identify the Organization’s Objectives
Assess the effectiveness of current controls by testing them through a combination of methods, including desk reviews, documents analysis, or on-site inspections.
The first step to implementing a COSO framework is identifying your objectives and potential risks. For example, suppose you have an investment firm with many employees that handle money regularly. In that case, there will be more opportunities for fraud than a business that has fewer people handling assets at any given time. The next step in implementation is identifying which internal control practices would work best based on these factors and what could go wrong from external sources such as natural disasters or competitor activity. Finally, it’s important to identify how exactly you will test those controls, how often you would test them, and what you will do to address any issues that arise. If your website is hacked, for example, then it’s important to have a plan for quickly identifying the problem and resolving it as soon as possible.
Identify Potential Risks
Conduct risk assessments by evaluating internal control practices against identified risks:
- Determine if there are significant deficiencies or material weaknesses (and which ones)
- Identify recommended actions resulting from these findings; prioritize those recommendations
- Develop an implementation approach including milestones; communicate this information throughout the organization
- Implement corrective actions on priority items first before addressing others.
The first step toward implementing a COSO framework includes identifying any external factors like natural disasters or competitor activity that could influence risk in your business. The next step is to identify which internal control practices would work best for you based on these factors so that you can address any issues before they arise. Finally, it’s important to communicate this information throughout the organization and prioritize implementing corrective actions to resolve risk as soon as possible.
Identify which Internal Control Practices would Work Best
It’s also important to identify how exactly you will test those controls, how often you would test them, and what you will do to address any issues that arise. Identifying potential risks before implementation allows employees at all levels within an organization (i.e., management, staff) to determine which methods they should use when implementing their internal controls; this includes conducting risk assessments by evaluating internal control practices against the identified risks. This information should be communicated throughout the organization, and management needs to prioritize those recommendations and create an implementation approach including milestones so that tasks are on track. At the same time, communication is constant about testing controls and addressing any issues they may encounter along the way in real-time.
Create an Implementation Plan
The last step when implementing a COSO framework is creating an implementation plan which includes milestones to keep tasks on track while also communicating with employees about testing controls and addressing any issues they may encounter along the way in real-time. Creating such a plan will ensure that both management and staff are informed during this process- communication needs to be constant! It’s important for every business, regardless of size or industry, to have a COSO framework in place. These frameworks are easier than ever to implement and can help address any issues before they arise- all it takes is the right combination of steps!
If you’ve been struggling with how to implement a COSO framework in your company, take heart. It doesn’t have to be difficult or expensive. Steps one and two are the most time-consuming but steps three and four will pay for themselves many times. Start by mapping out what needs protection, then identify who can access that information, and finally determine if there is any way they might get into trouble if their actions were discovered. You’ll find it’s much easier than you thought!
