What happens when controls are continually overridden? Does that necessarily mean that companies are engaging in activities that violate the FCPA or some other law, such as Sarbanes-Oxley (SOX)? Cristina Revelo said she would start out with some basic questions, such as “How often would something be manually approved? How often are controls skipped? What are the levels of approvals that you have and what is your documentation? What are the reasons? And are you documenting how often a certain department is requiring those overrides?” While it could indicate that a company lacks a culture of compliance or that everything is an emergency, it might mean something else. It might mean that your internal controls need to be evaluated and then recalibrated. The Department of Justice calls this continuous monitoring leading to continuous improvement. Joe Oringel, co-founder of Visual Risk IQ, calls it continuous control monitoring.
However, many compliance professionals, and particularly lawyers, think once a control is in place, it’s set in stone, and it’s there forever. This derives from the unfortunate fact that, once again, many compliance professionals and most lawyers do not understand internal controls. Yet, internal controls, much like the rest of a compliance program, can and should be continually monitored and improved based on information about such things as the number of overrides. Such a review can be evidence of a management problem or a culture of non-compliance at the organization. However, it could be that perhaps the controls need to be adjusted.
Revelo emphasized that it is not simply identifying the issues but remedying them as well, “because that actually might look worse if you identify a lot of issues, but do not fix them. You are better off by remediating everything you are identifying.” From there, you can conduct a root cause analysis as to why there was failure in a control or violation of a compliance procedure. Revelo concluded, “You need to really do that in an in-depth manner and then remediate.”
Three key takeaways:
1. An internal control override is not necessarily a bad thing if proper procedure is followed.
2. Internal controls are not set in stone.
3. The key is to have a process for monitoring the controls and taking input, literally from each line of defense.
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