What are supervisory controls in a business process?
A supervisory control means exactly what you think it would mean. Supervisory controls are used to “monitor” a business process and are designed to prevent or detect issues. Supervisory controls are typically performed by the manager of a business process or executive team members.
What are some types of preventive supervisory controls? Examples of preventive controls include:
1) Hiring requirements: Hiring employees that are qualified, capable, and competent to perform the role is critical. Implementing minimum experience requirements, interview processes, and hiring decision committees can ensure the right individual is hired.
2) Proper hierarchy: Ensuring that the organizational hierarchy in a business is adequate ensures that employees are properly supervised and that a clear chain of command exists.
3) Segregation of duties: Proper segregation of duties in a business process reduces the risk of fraud or error.
4) Approval requirements: Requiring approval for certain business activities can prevent issues. Examples including hiring decisions, writing checks, executing agreements, etc.
What are some types of detective supervisory controls in a business process? Detective controls are often referred to as “the last line of defense”. Examples of detective controls include:
1) Audits or inspections: Audits can be used to evaluate a company’s business processes and ensure that proper controls are in place. This could be a financial audit, environmental audit, SOC audit, regulatory compliance, or other audits or inspections.
2) Employee performance reviews: Each employee should have an annual performance review to determine if the employee is adequately performing the job they were hired to perform.
3) Budget vs actual analysis: A key financial reporting control is to compare the actual financial results to the budgeted results. Most companies use a threshold ($ or %) and investigate if the difference exceeds the predetermined threshold.
4) Tracking of KPI’s: Every business will have key performance indicators (KPIs) that are considered critical to their business. By tracking these KPIs on a monthly or annual basis, a company can evaluate the performance of each business process. Example KPIs include new customers signed, average revenue per customer, market share, net promoter score, order fulfillment time, etc.
Supervisory controls are key controls that every company should have implemented in a business process. Other key controls include segregation of duties, data entry input controls, controls over standing data, data processing controls, spreadsheet controls and account reconciliation controls.
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