Integrated internal control systems: Hidden strategic opportunity for Caribbean companies

One of the most critical changes has been the expansion of non-financial dimensions that all organisations need to consider in their decision-making.

Consumer and investor expectations are changing, and disclosure regulations are changing fast. And we can expect the pace to accelerate, because the pressures to protect and restore the natural environment and to increase the positive impact that our companies are having on the wellbeing of people keeps on increasing.

Integrated internal control systems, as defined by ISO 37000 Governance of Organisations, have become a key feature of good governance.

These systems, encompassing a comprehensive suite of controls, compliance management, risk management and an internal audit function, form the backbone of effective corporate governance.

ISO 31000 on risk management and ISO 37301 on compliance management systems give organisations specific guidance for how to build out the elements of the internal control system.

Overcoming the challenges of sustainability data

The integration of sustainability data into internal control systems presents a unique set of challenges. Unlike traditional financial data, much of sustainability data is qualitative, diverse and sourced from a myriad of channels. This complexity requires a nuanced and sophisticated approach to internal controls, capable of deciphering the multifaceted nature of sustainability reporting.

Herein lies a significant opportunity for Caribbean companies. While the legislation to disclose an extensive array of over 1,000 non-financial data points came into effect at the beginning of 2024, Caribbean enterprises can strategically concentrate on the most critical and decision-relevant aspects of sustainability data. This focused approach can transform a formidable challenge into a tangible competitive advantage.

Charting a path towards strategic innovation, sustainability

Caribbean businesses are at a critical strategic decision point – wait until the regulation arrives, or innovate strategically and redefine their future.

The effective use of integrated internal control systems is instrumental in enabling informed decision-making and fostering transparency.

These systems are not merely operational tools; they are foundational elements that build stakeholder trust, a critical ingredient for enduring business success.

By strategically implementing ISO 37301 compliance management systems, Caribbean companies demonstrate a commitment to upholding high ethical standards and aligning their operational practices with global norms, thereby strengthening their strategic decision-making and resilience as well as solidifying their corporate reputation.

The integration of cutting-edge technology in internal control systems propels Caribbean companies to the forefront of operational efficiency and adaptability. This technological embrace is not just about data management and analysis; it's about effective decision-making, setting new standards in sustainability reporting and positioning these companies as pioneers in the global business community.

The special role of the finance function

Integrated internal control requires collaboration among various stakeholders, including boards, management, internal audit, external assurance and professional accountants.

Boards and management must establish an integrated internal control environment for financial and sustainability reporting.

It is within this context that the International Federation of Accountants (IFAC) has called on financial professionals, because of their particular expertise in enhancing the quality and relevance of information, improving timeliness, consistency, comparability, materiality and connectivity.

The finance function plays a crucial role in integrating sustainability information into enterprise planning, risk management, remuneration frameworks and decision-making processes to drive relevant and reliable information to senior management and boards, ultimately leading to high-quality integrated information reported externally.

Additionally, finance professionals are experienced in transactional systems for accounting and collecting sustainability data, disclosure systems, reporting processes and analytics, IT architecture, automating processes and controls, interpreting rules and standards and ensuring reporting in accordance with sustainability reporting standards.

Professional accountants, particularly those with experience in risks and controls over financial reporting, are ideally placed to create and maintain an effective internal control environment over sustainability reporting. They ensure that sustainability information is aligned with international and jurisdictional reporting requirements and standards, and co-ordinate with relevant internal audit and independent external assurance activities. This collaboration is essential for building trust and confidence in the reliability and completeness of sustainability information.

Immediate strategic action for Caribbean companies

The opportunity for Caribbean companies is clear and immediate – to adopt integrated internal control systems, adhering to standards such as those set forth by ISO 37000 and ISO 37301.

This strategic move goes beyond mere regulatory compliance: it is a proactive step towards ensuring sustainability, resilience and readiness for the future in a dynamic global business environment.

By focusing on the most impactful and decision-useful sustainability data, Caribbean businesses can significantly enhance the quality and integrity of their decision-making and reporting, securing a distinct position in local and international markets.

Integrated internal control systems are not the first things that come to mind when companies think about how to accelerate their sustainability journey beyond compliance.

For those engaged in managing over 1,000 data points across multiple locations who worry whether the data is actually used in decision-making and can withstand the upcoming audits, these are necessary solutions.

This is a strategic venture towards resilience, sustainability and global competitiveness. It calls for immediate action, strategic foresight and a steadfast commitment to ethical and sustainable business practices. By embarking on this path with determination and urgency, Caribbean companies will not only safeguard their future but also pioneer a sustainable and prosperous regional economic framework.

Dr Axel Kravatzky is managing partner of TT-based Syntegra-360 Ltd, vice-chair of ISO/TC309 Governance of Organizations and president of EUROCHAMTT.

He enables companies to flourish through integrated governance, certified management systems and transformational leadership.