At Capco, we’re shaping the way organizations both adapt to the near-term operating environment and innovate ahead of the post-pandemic world. During the initial transition towards a fully remote workforce, financial institutions had to pivot their operational frameworks abruptly. However, as the remote environment extends into a longer-term solution, enterprise-wide risk functions must develop new strategies to build the foundation for their next-generation controls framework, promoting sustainable practices for risk mitigation and continued flexibility through emerging challenges.  

To enforce the integrity of control environments, financial regulators have communicated that all systems and controls in place pre-operational disruption must remain fully effective. Enterprise-wide risk functions must adopt a new approach to mitigate and anticipate risks that arise from previously out of scope directions to meet regulatory requirements. The critical component of the new approach should be based on the concept of risk velocity—i.e., a forward-looking assessment of the sources of risks and the likelihood of severe kinetic impact on the controls framework. As a result, we recommend that clients re-assess their operational risk and control environments to ensure that controls are effective and functional despite process adaptations.

Capco advises organizations to develop new ways of evaluating the scope of impact for risks and re-assessing the effectiveness of the associated internal controls, including the evaluation of evidence, by expanding assumptions about how controls are executed and where weaknesses can lead to failures. This mindset will encourage organizations to review their risks and controls environment in a new light that promotes the pre-emptive identification of areas where current and potential process gaps exists, and control failures are overlooked. 

At first, businesses had to prioritize normalizing their day to day activities in a new environment leading to a limited strategic view for long term effects. The reality of the new normal requires businesses to re-adjust and create new playbooks in response to the structural changes. If these new practices are implemented today, they will effectively influence the way that businesses continue to operate and boost the way all control-centric functions operate.  

Capco’s approach for a next-generation controls evaluation is based on leveraging risk velocity to predict where an organization will have increased risk exposure. Through this insight, our subject matter experts will create a tailored solution that pinpoints the exact areas of concern via accelerators. The internal control environment is changing, and we hope to help our clients adapt to changes and get ahead of any incoming disruptions.