Security and privacy are growing concerns for businesses, customers, and the general public alike. Implementing internal controls in your organization is an effective way of mitigating and monitoring potential security risks. As you decide what controls would work best for your business, consider these five main elements of internal controls.

Control Environment

The control environment, according to Deloitte, is the “set of standards, processes, and structures that provide the basis for carrying out internal control across the organization.” These controls are set at the top of the management hierarchy and dictate how information, tasks, and software is engaged with on a daily basis. The control environment sets the tone for how business is expected to be conducted from boards, senior management, and executives, down to administrators.

Essentially the control environment comes down to the attitude upper management has towards internal controls. A strong sense of privacy and security gives way to a better control environment.

Risk Assessment

Risk assessment is the identification of possible risks, understanding their probability of actualizing, and their adverse effects on business objectives. Risk assessment can give insight into potential risks and vulnerabilities and help in determining how to mitigate and combat those uncertainties. The ability to anticipate risks and successfully get ahead of them enhance security efforts.

Control Activities

As per Deloitte, the third element of internal control is “control activities.” Control activities are the actual strategies implemented to enhance security. This can be technology, procedures, and mechanisms that are used to control data internally. Control activities are used to ensure that the rules and policies are always being met. Control activities like security clearances are used to reduce risk by limiting access.

Information and Communication

This element of internal control refers to the process in which information is shared, stored, and obtained when necessary. Control regarding information and communication refers to systems and technology that are used to monitor, file, and reference information. Protecting information is important because data that is compromised can create faulty insights and lead to ineffective decision making. At a higher-level compromised information can be costly and hurt business.

Monitoring Activities

The final element to successful internal controls has to do with how activities are monitored and reviewed. Management is expected to periodically evaluate how controls are working – the effectiveness and whether anything has evaded the system. This process is used to improve the design of internal controls by reviewing execution and success to highlight where potential changes to the system can be made. A UCLA study says management doesn’t need to analyze every piece of information that comes through the system. Instead, they should spot check the controls and focus their attention on high risk areas for more frequent evaluations.

Maximizing internal control systematically enables businesses to safeguard their assets. It also creates a level of accountability and conveys a company’s commitment to ethical procedures. Clear and functional controls reduces employee stress and keeps customers happy knowing that their information is safe.