How Do Internal Control Components Adapt To The Digital Age?

Internal control policies and mechanisms have been critical in protecting organisations from evolving risks over the past several decades. However, as the business environment is transformed by new opportunities in the digital marketplace, it is also under threat by a new set of cyber and digital risks. Whilst the core principles of various Internal Control frameworks are still relevant, their actual implementation and monitoring need to be continually adjusted to meet the new reality.

Here are how some of the core internal control components need to adapt to the digital age:

Control environment

The digital environment is a whole different beast compared to what organisations have been used to previously. Many companies might be content with just hiring a few experts who understand this new environment, but clearly, this is not enough. The senior management team has to dive in and understand the organisation’s new cyber profile.

Risk assessment

The risk profile of the organisation can change every year. As the tools with which we do business and communicate change, so does the makeup of the risks that we face. Organisations have to be fully aware of how their operations, reporting mechanisms and compliance objectives are changing. New cyber and digital risks will most certainly have an impact on the existing mechanisms and objectives needing to be addressed.

Control activities

As the risks evolve, new procedures are developed to manage them. These procedures must then translate into control activities. The control activities to manage cyber risks must take into account the unique aspects of each technology and its limitations.

Information and communication

As more cyber risks are monitored, the amount of information that needs to be generated and reported also increases. It is important to identify that the information is critical to the internal control function and ensure that the said information remains of the highest quality. Information itself is useless unless it can be communicated effectively and to the right stakeholders internally as well as externally using the appropriate channels.

Monitoring activities

Monitoring is what determines the effectiveness of the control policies, procedures, activities and communication channels in place. The process of selecting a suitable evaluation methodology must be formalised to ensure that the control mechanism is working as intended. Deficiencies need to be identified and communicated to the relevant stakeholders. Finally, corrective action must be taken and improvements made to the process in a timely manner.


The digital revolution provides ample opportunities for companies to optimise their internal processes and even expand their business footprint. However, with these opportunities come a unique set of cyber risks and threats. Too often companies don’t take these risks seriously and it can lead to losses, legal exposure or even regulatory penalties. Companies must, therefore, make a sincere effort to update their internal control policies, procedures, and activities for the digital age. This will not be a one-off exercise either. The rapid pace of technological advancement means that the risks evolve continuously and so, therefore, must the mitigants.

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