Corporate internal controls, a strategic asset

This post is a courtesy translation of my article published on August, 24th by the Italian newspaper Il Sole24Ore at this LINK

In recent years, modern organizations have undergone a radical transformation: the energy transition and global events have redefined corporate priorities and are imposing operational revolutions. At the same time, there is an increasingly concrete need for companies to deal with exogenous risks (such as cyber, health and safety, supply chain and reputation) on which current management tools by their nature have limited effectiveness.

In this context, the company control system must demonstrate the same ability of business itself to adapt and evolve rapidly, providing solutions aimed at an effective management of risks and opportunities.

Furthermore, stakeholders today attribute greater value to corporate conduct that promotes trust within the market: an invaluable asset, as also emerged in the latest World Economic Forum Annual Meeting, centered on the theme “Rebuilding Trust Amid Uncertainty”. The readiness of the internal control system is therefore fundamental in an era in which transparency and trust are not only ethical values, but strategic tools to attract investments, build customer loyalty, consolidate one's competitive position and comply with regulations.

The “invisible” effect of control

What is the link between trust and control? Traditionally, control carries a negative connotation associated with a sense of mistrust: we control because we do not trust. In fact, the most visible face of control is associated with compliance (traceability, regulatory duties and so forth). However, there is an equally crucial invisible side: the reassurance that comes from it. Knowing that risks and complexities of management decisions have been carefully assessed and handled according to best standards and practices offers a solid sense of security.

Thanks to technological evolution, it is increasingly clear how control can be a key lever for value creation. Let's think of tools such as blockchain or trust services (e.g. certified electronic e-mail, public digital identity systems, one-time password systems) which not only guarantee security and transparency, but also process effectiveness and transform control into a strategic asset for modern companies.

In other words, in addition to preventing fraud and identifying areas for improvement, the control system certifies the solidity and reliability of business operations and represents a safety net that supports the entire organization, enhancing its resilience and agility in the face of contemporary challenges.

Scalability of control systems

A modern control system must demonstrate adaptability, it must be able to respond to the size, complexity, specific risks and regulatory contexts of the organization. The strength of a scalable control lies precisely in its ability to evolve and adapt to the dynamic needs of companies, while ensuring regulatory compliance and effective risk management. This need is particularly critical for diversified corporate groups, engaged in various market segments and on distinct growth paths.

In summary, a single and generalized approach to the control system can no longer be the right path to take.

Predictiveness: innovation in business controls

By partnering with advanced technologies, predictive controls become a reality. Strengthening management monitoring requires the integration into processes of indicators capable of detecting misalignments and anomalies in real time. The use of advanced algorithms and machine learning allows precise and timely control of management activities, streamlining some of the operational controls, and allows companies to anticipate the consequences of their decisions, thus optimizing strategies.

Inspired by the concept of Digital Twin, we can imagine a "Processes Digital Twin" that predicts the impact of changes in company controls: think, for example, of the supply chain optimization process to simulate the impact of changes in suppliers or in distribution routes, anticipating possible interruptions.

Combined Assurance for a synergic and innovative control

The concept of Combined Assurance enriches the ESG criteria for the "Governance" component. It represents a strategic turning point in the coordination between control functions, focusing not only on operational synergies, but above all on mutual information flows and towards the Corporate Bodies.

These flows are fundamental not only in the planning and execution of controls, but also in the representation of results: a systemic vision of the company control structure allows its progressive optimization and an integrated and proactive management of risks, supporting increasingly informed decisions by both the Board and management.

The ecosystem of controls

The new frontier of corporate control lies into the "ecosystem". Following the concept of “Scope 3” emissions, positive and mutual contamination with the surrounding environment (suppliers and partners) can indirectly safeguard one’s own. It is essential to evolve the control system from “internal” to “widespread and cooperative”, promoting the sharing of experiences and good practices along the entire value chain. In line with Goal 17 of the 2030 UN Agenda, companies can thus form strategic partnerships to develop a common culture of control and risk management.

The path of sustainable development and the related energy transition therefore offer to modern organizations a great opportunity to transform themselves to keep on growing. From this perspective, control becomes a precious asset: it is the capital of trust.

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