KnowledgeLeader Blog

Executives often cite an ability to adapt to change as the most important factor for success in today’s dynamic business environment; however, there is another equally important factor: an unwavering commitment to ethical and responsible business behavior. As many organizations already understand, a formal, written code of conduct is critical in order to transform ethical behavior into something more tangible for employees. Such a code is now a requirement for public companies, as mandated by the Sarbanes-Oxley Act and by the listing requirements of major stock exchanges.

The internet of things (IoT) is an environment in which “things” – objects, animals or people – are given unique identifiers on the internet and are able to transfer data over a network without the need for human-to-human or human-to-computer interaction. The IoT has evolved from the convergence of wireless technologies, micro-electromechanical systems (MEMS) and the internet.

What is the Second Line of Defense?

Essential to effective risk management, the lines-of-defense model is implicit in COSO’s internal control framework through the control environment, control, activities, monitoring and other components of an internal control system. It provides assurance to the board of directors, as the elected representatives of the shareholders to oversee the organization’s operations on their behalf, that risks are reduced to a manageable level as dictated by the organization’s appetite for risk. Much more than “segregating incompatible duties” and “ensuring checks and balances,” the lines-of defense model emphasizes a fundamental concept of risk management: From the boardroom to the customer-facing processes, managing risk is everyone’s responsibility.

Are You Familiar with GDPR?

The General Data Protection Regulation (GDPR) became effective May 25, 2018, and introduced strict rules for the protection of the personal data of EU citizens. GDPR expanded the scope of previous EU regulations to include any data processor or data controller that processes the personal data of EU residents. Under this law, U.S. companies have to employ data transfer mechanisms (such as Privacy Shield) if they want to continue doing business – even online – with EU data subjects.

Most, if not all, business transactions executed today touch the information technology (IT) environment at some point in their lifecycle. As organizations plan for the next calendar year, it’s logical to regard the IT risk assessment as a critical component that should be reviewed through the internal audit function.

Inventory planners and managers today find themselves engaged in a delicate balancing act. On one hand, they strive at all costs to stay competitive in a marketplace that continues to demand more customized products and faster delivery services. On the other hand, they are still obliged to keep the actual cost of maintaining such complex inventory down to a minimum. Despite the dilemma, however, companies that apply best practices know firsthand how an efficient inventory management system can transform a business. Some have even reported improvements of up to 90 percent in throughput times and defect levels.

An effective business process is built on a set of well-defined and clearly stated business objectives. These key objectives articulate the ideal performance results that a company expects from that process. To monitor a business process so it stays focused on reaching the key objectives, a company chooses appropriate performance measures. Careful selection of the performance measures takes a company a long way toward improving a business process. Thus, to build and then continually improve an effective business process, a company establishes:

Copyright pirates, brand impersonators, patent flouters and trade secret thieves are a major threat to businesses, given their increased aggressiveness towards intellectual property (IP) theft. These, and any other original creative works that have economic value and are protected by law, can be categorized as IP.

Communicating with shareholders is about capital – the ability to access either equity or debt at the lowest possible cost. By understanding investor motivation and maintaining relationships within the investment community, companies are strategically positioned to address operational funding issues proactively and thus can exercise greater control over the capital formation process. By identifying sources of capital, world-class companies can maintain capital structures through a mix of long-term debt and equity funding options at the lowest possible cost.

The audit committee of the board of directors helps the board fulfill its responsibilities to the company and its current and potential shareholders, the investment community, and other stakeholders, with respect to its oversight of the following: 

• The quality and integrity of the company’s accounting and reporting practices and controls.
• The financial statements and reports of the company.
• The company’s compliance with legal and regulatory requirements.
• The independent auditor’s qualifications and independence.
• The performance of the company’s internal audit function and independent auditors.