How enhanced financial controls lead to smarter decision-making

Our initial efforts focussed on a thorough review of all key controls. This included checking 1000 financial controls, as well as over 800 end user computing (EUC) controls, which focus on the risks arising from complex spreadsheets and internal tools. Over 200 financial models were also tested to ensure that they worked as designed. Key to this assurance testing was our experience of internal control testing for global insurance firms, including working on US SOX projects.

We helped our client standardise their approach and gain assurance over the quality of their framework. Our team then identified what controls needed improving and worked with the client to define a remediation program, that focused on mitigating the key risks in their end user controls.

Several use cases were identified where manual uploading was slowing down systems and exposing the insurer to operational risks. Using our firm-wide capabilities in data and automation, we demonstrated how robotic process automation could help improve the speed and efficiency of their mass uploading, by automating uploads and downloads from a database system. This solution was tailored to the needs of our client, saving hundreds of hours, freeing up teams to spend more time on value-added tasks.

To improve the transparency of their reporting, we also designed, built and tested an interactive dashboard that allows the finance team to monitor testing progress and outputs for all their financial controls and end user controls. The dashboard provides real-time access, allowing them to manage risk, capture insights and substantiate key business decisions made by senior finance leaders. This has enabled them to review hundreds of data points instantly, highlighting the key issues on a live and dynamic basis. Our work also required careful engagement with the teams managing the controls, who were not used to facing such a high level of external scrutiny. We became a trusted partner and an extension of the insurer’s finance team. The key to success was an environment of mutual understanding and trust across divisions — all achieved in a virtual working environment during the COVID-19 pandemic. Our experience and adaptability allowed us to work seamlessly together, offering a huge level of flexibility to deal with unforeseen challenges.

Risk management does not need to limit innovation and productivity. Our dashboard is a key example of this, as it has enabled live analysis and understanding of controls across the business. In fact, enhanced risk management can provide a safer environment, giving firms confidence and space to innovate.

Our client now has a financial control framework that is much closer to the level that US firms must comply with. They have confidence that their controls are working as designed and have been subjected to a high level of challenge and insight. This has increased control understanding across the business. We have also enhanced the efficiency of their control testing and identified historic control failures, improving their overall business operation and management accountability.

As managements understanding of controls has improved, they have demonstrated increased accountability for control performance. Better controls mean management are more confident that they are making the right decisions based on accurate data. This will make a real difference to the client. Since US SOX was introduced, we have seen that US filers have around 90% less financial restatements, demonstrating better data. We expect the same impact for UK firms that comply with a UK SOX style regime. It also means less work for an external auditor, leading to lower audit fees. Other UK financial institutions should be giving serious consideration to their internal controls, given the benefits on offer and the possibility of a UK SOX framework being introduced.

Regulators want to see firms modernise and invest in their financial controls. It is key to ensuring public confidence that the numbers firms report on are accurate. It matters to us all, as either direct investors or through our pension investments.

Our support has not stopped there. Our team continue to work with the insurer to improve its control frameworks, suggest new initiatives, oversee and monitor progress. We are helping them raise the standard for insurers.

Robust internal controls are only increasing in importance. Insurers are continuing to use technology to boost their operations, accelerated by COVID-19. Consequently, many may look to build a completely new, SOX-compliant control system. Our client is already on the journey and is well placed to lead the way.