What is operational control weakness?

Control weaknesses stem from the inability of an organization to effectively implement its internal controls. Malicious individuals can take advantage of such a situation to bypass even the most seemingly watertight security measures.

The growing implementation of internal controls, the emergence of new technologies, and the incredible rate with which malware is evolving necessitate the need for closer data security control monitoring. In doing so, it will be easier for organizations to evaluate the effectiveness of internal controls that they have in place. Similarly, it will help expose weaknesses in these controls.

Internal Control Weaknesses: What Are They?

Before you even start thinking about what internal control weaknesses are, you first need to ask yourself what data security control is. Basically, data security control entails keeping sensitive data safe by implementing measures against unauthorized access. Such measures guide risk management programs by helping to counteract, detect, minimize, or avoid the typical security risks that computer systems, data, software, and networks face.

These measures may include technical controls, architectural controls, administrative controls, and operational controls. Besides, controls can be streamlined to be detective, corrective, compensatory, or preventative in nature. Data security control processes protect organizations by providing credible financial reporting as mandated by various regulatory bodies and industry standards that pertain to capital, investment, and credit risks.

For instance, Sarbanes-Oxley Act of 2002 (SOX) section 404 requires yearly proof that companies truthfully report their financial statements and procedures to ensure effective fraud mitigation. Similarly, companies are required to prove that they have addressed any uncertainties related to financial aspects such as stocks.

What Are Technical Control Weaknesses?

Technical security control focuses on both hardware and software. Weaknesses in an organization’s technical control framework typically arise from alterations in technology, or configuration and maintenance failures. The “Heartbleed” Vulnerability report of 2014 highlighted the common technical control weaknesses in SSL, which expose data to malicious actors.

Operational Control Weaknesses

Operational Security (OPSEC) entails monitoring operations in view of implementing a risk management program. Typically, operational control weaknesses result from human error. When individuals mandated to conduct operations fail to abide by established policies and standards, an organization’s operational controls get weakened.

Incident response is a time-sensitive operational control. You will only realize its peak effectiveness by ensuring rapid intervention. When the interval between an incident and the necessary invention increases, the efficacy of incidence response equally reduces.

What is an Administrative Control Weakness?

Also known as procedural controls, administrative security controls involve consistent failure to streamline daily operations to established regulations. A scheduled backup routine is a significant procedural control that pertains to disaster recovery. Failure to ascertain the viability and integrity of backups exposes an organization to the ever-looming risk of media degradation. In such a situation, it will be difficult for the organization to recover from the catastrophic outcomes of human error fully.

Architectural Control Weaknesses

Generally, security architecture entails creating an integrated framework that highlights and addresses risks that arise within an organization’s integrated IT environment. Weaknesses in either documentation or design are detrimental to the organization’s security structure foundation.

Unforeseen hardware replacement is more prevalent in organizations that are more prone to architectural control weaknesses. This arises due to the circumvention of the regular change management process. These replacements are often urgent, something that creates a window for missed patches, configuration irregularities, and other forms of implementation oversights.

How Risk Management Supports Internal Controls

The inherent values of GRC focus on clarifying risks so that an organization can comply with standards and regulations while consistently monitoring to ascertain that all processes work. Efficient corporate risk management entails creating a structure that supports procedures that protect an organization’s resources and assets.

Contrary to what many people think, risk management isn’t a one-off undertaking. Implemented controls need to evolve with the evolution of the threat landscape. Malicious actors often modify their tactics. This highlights the significance of maintaining peak effectiveness since it makes it easier to reassess risks throughout an organization’s information system life cycle.

The Importance of Consistently Monitoring Internal Controls

Continuous monitoring of internal controls provides organizations with real-time insights on vulnerabilities and threats that they face. Although malicious actors evolve malware and ransomware continuously to avoid dedication, consistent monitoring helps the management team to adequately respond to threats that can negatively affect an organization’s business and risk assessment processes.

The continuous monitoring of internal controls requires you to leverage internal audit and ongoing activities. This will ensure that your organization embeds all its procedures within its operational setup. For instance, these detective measures can help internal analysts to evaluate operational effectiveness.

Automation can go a long way in reducing the burden of continuous monitoring. As an organization scales, the number of internal controls that need to be monitored also grows. Technology use will undoubtedly increase the overlap between different control types. For instance, cloud migration has made unauthorized access both an IT and operational risk.

Have any thoughts on this? Let us know down below in the comments or carry the discussion over to our Twitter or Facebook.

Editors’ Recommendations:

A1.      For purposes of this standard, the terms listed below are defined as follows -

A2.      A control objective provides a specific target against which to evaluate the effectiveness of controls. A control objective for internal control over financial reporting generally relates to a relevant assertion and states a criterion for evaluating whether the company's control procedures in a specific area provide reasonable assurance that a misstatement or omission in that relevant assertion is prevented or detected by controls on a timely basis.

A3.      A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

• A deficiency in design exists when (a) a control necessary to meet the control objective is missing or (b) an existing control is not properly designed so that, even if the control operates as designed, the control objective would not be met.
• A deficiency in operation exists when a properly designed control does not operate as designed, or when the person performing the control does not possess the necessary authority or competence to perform the control effectively.

A4.      Financial statements and related disclosures refers to a company's financial statements and notes to the financial statements as presented in accordance with generally accepted accounting principles ("GAAP"). References to financial statements and related disclosures do not extend to the preparation of management's discussion and analysis or other similar financial information presented outside a company's GAAP-basis financial statements and notes.

A5.       Internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that -

Note: The auditor's procedures as part of either the audit of internal control over financial reporting or the audit of the financial statements are not part of a company's internal control over financial reporting.

Note: Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

A6.      Management's assessment is the assessment described in Item 308(a)(3) of Regulations S-B and S-K that is included in management's annual report on internal control over financial reporting. 2/

A7.      A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

Note: There is a reasonable possibility of an event, as used in this standard,  when the likelihood of the event is either "reasonably possible" or "probable," as those terms are used in Financial Accounting Standards Board Statement No. 5, Accounting for Contingencies ("FAS 5"). 3/

A8.      Controls over financial reporting may be preventive controls or detective controls. Effective internal control over financial reporting often includes a combination of preventive and detective controls.

• Preventive controls have the objective of preventing errors or fraud that could result in a misstatement of the financial statements from occurring.
• Detective controls have the objective of detecting errors or fraud that has already occurred that could result in a misstatement of the financial statements.

A9.      A relevant assertion is a financial statement assertion that has a reasonable possibility of containing a misstatement or misstatements that would cause the financial statements to be materially misstated. The determination of whether an assertion is a relevant assertion is based on inherent risk, without regard to the effect of controls.

A10.    An account or disclosure is a significant account or disclosure if there is a reasonable possibility that the account or disclosure could contain a misstatement that, individually or when aggregated with others, has a material effect on the financial statements, considering the risks of both overstatement and understatement. The determination of whether an account or disclosure is significant is based on inherent risk, without regard to the effect of controls.

A11.    A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting.