How to Assess the Effectiveness of System and Organization Controls in Small Businesses?

Effectiveness of System

Small businesses are reluctant to face the system and organization control audit because it is stressful. This happens because they don’t assess the maturity of their own systems and organization controls themselves or take measures to correct issues if there are any. Some might underestimate the planning and efforts required to pass these audits with flying colors. With little to no preparation, small businesses will have a hard time ensuring compliance with the SOC audit.

In this article, you will learn about the ten-step process to evaluate the maturity level of the system and organization controls.

1.      Risk Assessment

The first thing you need to do is to assess your risk. Make sure you do your risk assessment once or twice a year. This allows you to effectively identify and mitigate those risks. The risk assessment process should include evaluation of the current control environment as well as future implementations of additional controls. This will increase the strength and efficiency of your internal control environment, which will help you achieve your goals.

2.      Risk Mitigation

Once you have identified and assessed your risk, it is time to create a risk mitigation strategy. Before you devise a strategy, it is important to identify ways in which you will design risk mitigation activities. Not all risks are equal. Some might pose a bigger threat to your business while others don’t do any harm. Ones that pose the biggest worry needs to be taken care of first.

You can either accept the risk, transfer the risk or mitigate the risk by implementing controls. Try to find the root cause of the risk and disassociate with the process that is causing all the risk. You can also minimize the impact of risk so it becomes less dangerous for your business.

3.      Vendor Management

When you are doing business with a third-party vendor, you are increasing your risks. That is why it is important to lay down the rules and guidelines for vendor management in advance. This makes the risk evaluation process a whole lot easier. Take steps such as conducting meetings with vendors and independently testing vendor controls can go a long way in inefficient vendor management.

4.      Control Activities

The risk assessment process also forces businesses to tinker with the controls already present in the environment. Let’s say, you already have the best dedicated server but you want to secure it so you will have to install a firewall and tweak your password policy. It is important for businesses to know their controls and the people who manage these controls. Prioritize new controls based on how much they will impact your progress towards the achievement of organization goals.

5.      System and Asset Identification

Not all business assets are equal. Some of them are very critical because they allow you to deliver services to clients while others don’t play such an important role in service delivery. Irrespective of whether they are critical in nature or not, you should create a list of all the assets which include systems, tools, applications, hardware, and data. Once you have identified all the assets, make sure they are protected. Implement identity access management, intrusion detection, and prevention systems and file integrity scanning software to keep these assets safe.

6.      Control Environment

You might have approved or implemented new controls, but it won’t be useful until your employees start following control procedures religiously. To make this happen, businesses will have to clearly define:

  • Objectives
  • Roles and responsibilities
  • Hierarchy
  • Commitment to ethical values
  • Oversight Structures

Clearly define the roles and responsibilities of every employee so everyone knows what expected of them. Additionally, it shows commitment towards achieving the objectives. This will motivate other employees to follow the control procedures attached to the control environment.

7.      Change Control Procedures

One of the biggest challenges for small and even some mid-sized businesses is changing the control procedures. The size and scale of the organization make it difficult to create separation amongst different functional units. Unfortunately, it is highly recommended that you keep production, testing, and development separate. Differentiate between the developer and promoter access. If you can not do that, then you should look for alternatives. You can manually approve or disapprove changes in control procedures after analyzing the log every week or use a file integrity monitoring software.

8.      Defined Processes

Defining the process used to access the maturity level of your system and organocation control is pivotal for success. Unfortunately, most small business doesn’t realize that they will have to communicate these processes to employees and make sure they follow these procedures otherwise, there is no point in defining these processes in the first place. Design use case and data flow diagram to show how the information will flow through different functional units of the organization.

9.      Privacy Policy

Businesses today collect, store and process a lot of user data. This forces them to clearly tell users how their information is used. The customer has a legal right to know how their information will be used. The best way to do that is by creating a privacy policy. Write your privacy policy in simple language so that your users can easily understand it after reading it and know how their data is being handled.

10.  Monitoring

All the aforementioned steps will become useless if you don’t have monitoring activities in place to assess the effectiveness of internal controls. Implement monitoring procedures that force you to conduct an annual management review of the control environment. When monitoring control activities, focus on the following:

  • Vulnerability assessments
  • Deficiencies and deviations
  • Metric reporting
  • Physical and logical access review
  • Vendor management review

When you follow all the steps given above, your small business will be able to prepare for a system and organization control audit before the deadline and inside the budget. This boosts the efficiency during the testing phase and minimizes additional auditor requests.

How do you test the maturity of your system and organization controls? Let us know in the comments section below.