With 2024 fast approaching, it's that time of year again when we peer into the crystal ball and predict what direction the profession will take. And remember this - companies that fail to get on top of the changing face of internal controls may suffer the following:
So, with that said, let's now delve into the five trends for 2024 that your internal controls team needs to know about.
Early this year, BBC Future published a popular report about why the world feels so unstable right now. As we approach the end of 2023, global instability and geopolitical risk have heightened further.
Although this article is not here to dive into the politics, it's fundamental to understand that regulatory compliance and geopolitical and economic risk are intrinsically connected.
Following the 2008 global financial crisis, what happened? Increased financial regulation. After the 2022 Russian invasion of Ukraine, what followed? An avalanche of sanctions laws that must be complied with. The reality is that your business's compliance requirements will continue to grow as governments enact new regulations to combat global threats.
But what does all this mean for internal controls professionals?
It could mean an enhanced focus on compliance. After all, many regulatory compliance processes, such as screening business partners for sanctions, can effectively occur within a company's ERP system.
Recommended reading: Simplified Sanctions Screening Within SAP: Explained With Tangible Use Cases
Organizations are increasingly exposed to compliance requirements. Adopting innovative ways to assess and manage risk and enhance performance is critical. That’s where data analytics and continuous monitoring are helping to simplify and improve the internal control system, increase operational efficiencies, reduce costs, and detect fraud and errors earlier. Internal controls become a way for organizations to create value.
There is no escaping the fact that 2024 will be the year when all the following will grow tremendously:
But don't just take our word for it. That's what g2 research predicts will shape technology in the next 12 months. And guess what? All the above broader advancements will also impact internal controls.
Over the last few years, especially because of the technological leaps made with AI, internal systems are step-by-step shifting from mistake-prone manual processes to far more efficient automated ones.
In 2024, it's set to accelerate further.
According to the Federal Trade Commission in the US, from 2021 to 2022, financial fraud increased by over 30%.
The 2023 data isn't yet available, however, since crimes such as fraud and scams have all been increasing year-on-year for over a decade, betting your entire house that 2023 and 2024 will be record-breaking years for fraud wouldn't be reckless.
But again, what does that mean for internal controls teams reading this?
It means your department will continue to grow in importance - with its systems acting as a crucial line of defense against bad actors (both internal and external) targeting your organization in frauds and scams, such as:
Internal controls teams who can get a grip on managing increasing fraud risk, for example, by embracing internal controls automation, will be better equipped to deal with the growing issue in 2024.
Our White Paper explains how using robust controls and automation, organizations can better manage fraud risks, comply with regulations, improve operational efficiency, and save substantial costs.
Since COVID-19 restrictions hit in early 2020, remote working has become increasingly common. It's evident that remote work is no longer just a temporary response to a global crisis - it's now an integral part of the work landscape.
This shift has led to numerous operational changes within large companies, including within internal controls.
In 2023, although a return to the office headlines are ubiquitous (with some reports suggesting that 90% of companies say they'll return to the office by the end of 2024), internal controls teams cannot take their eye off the ball.
Why? Experts also say that five days a week in the office is dead. Even hybrid work models, where employees split time in the office with working remotely, still create problems for internal controls teams.
In 2024, all companies will continue to face the following:
Internal controls teams who invest in managing all of the above points effectively, such as by embracing real-time monitoring and auditing, will add value to their organizations in the coming year.
To conclude the article, let's reveal the fifth and final trend for 2024: The rise of internal controls supporting environmental, social, and governance (ESG). Investors (who may invest in your business) increasingly consider ESG factors when deciding where to place their money.
What does this mean? Companies that don't put in place robust ESG reporting measures stand to lose out on investor interest and funding.
Internal control processes play a crucial role in a company's ESG program - especially regarding data accuracy and transparency. And according to a 2023 report from Deloitte, the time is now to scale your internal controls environment for ESG.
If your business uses SAP ERP or S/4HANA, you have an opportunity to embrace internal controls automation so that your organization is prepared for everything 2024 throws at you, including enhanced ESG demands.
VOQUZ Labs remQ Business Inspector software operates as a SAP add-on with a library of 100+ pre-built shipped controls ready to run. We would be delighted to answer any questions you have - contact us.
Paul is a RegTech content writer & strategist with extensive experience in digital marketing and journalism. His work has appeared in the Guardian newspaper. He also holds a degree in International Relations, where he studied global sanctions compliance and cross-border finance.
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