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SOD, Segregation of Duties

One of the toughest issues facing today’s security professionals is unquestionably managing risk successfully throughout the company. Threats can arrive in various shapes and from many different directions, and your organization’s structure or its employees’ actions can frequently increase or decrease the risk. One such instance would be giving one person or group inside your organization total authority over organizational processes or many processes within it.

What if the sole software developer had unrestricted power to send code into production? Even worse, what about if one person was in charge of both managing the inventory and keeping track of inventory transactions?

All of these possibilities increase your company’s risk level since they increase the likelihood that something bad may happen to your company. Giving one individual or group too much power over your company’s procedures invites uncontrolled mistakes and potential fraud, both of which can lead to loss of money, harm to your reputation, and compliance issues.

How can your company guard against the threat of giving one individual too much power and the consequent rise in organizational risk? In this post, we’ll talk about the internal management of the segregation of duties, which is essential for helping modern businesses reduce risk across the board.

What does “segregation of duties” mean?

One of the most important internal controls and a crucial element of a successful risk management plan is the segregation of duties (SOD). In order to lower the risk of potential mistakes and fraud, SOD stresses spreading the responsibilities of critical business processes by allocating the distinct roles of these processes to various persons and departments.

Separation of roles is intended to avoid unilateral acts inside a workflow that might lead to negative outcomes that would go beyond the risk tolerance of the company. In other words, no one individual or group should have unfettered authority over a process or asset where they may ignore mistakes, fabricate data (remember Enron?) or try to steal.

The four distinct function categories of authorization, custody, recordkeeping, and reconciliation are used to segregate the four business-critical activities under the segregation of duties. Workflow responsibilities should be sufficiently segregated with a mechanism of checks and balances so that all positions can regulate one another. In an ideal world, neither one individual nor one department would be in charge of numerous categories.

The Necessity For Segregation of Duties

Understanding that managing a firm shouldn’t be a one-person job is the cornerstone of SoD. No one individual should be in charge of any work that might result in fraud or other illegal activities that could hurt the business. In order to reduce the danger of fraud or other unethical activities, the segregation of duties is founded on the concept of shared responsibility. As a result, the crucial tasks of a vital process are distributed across several people or departments. SoD is a crucial component of enterprise risk management as well as compliance.

SoD stops control of abuse and any subsequent unethical behavior. As a result, spreading out the responsibilities of crucial procedures across several employees decreases the likelihood that any one worker or outsider — acting alone or in concert with others — might effectively complete any of the ability to follow:

  • The theft of money from the organization;
  • Committing acts of corporate espionage;
  • Starting an action to seek vengeance for perceived unjust firing, promotion, or other claimed abuse; or
  • Manipulating financial records in order to appease stakeholders, achieve profit targets, or artificially boost the stock price of the company.

Key Concepts Segregation of Duties 

SoD conflicts and SoD violations are two key concepts in the segregation of duties.

  • SoD conflicts

SOD conflict may arise when a person has the propensity to act against the interests of the firm and in their personal best interests. This only implies that individuals play numerous functions in a process, enabling them to carry out a variety of crucial tasks that may compromise the process’s integrity and, ultimately, the organization.

Organizations should look for and evaluate possible SoD conflicts to avoid such problems. It is important to put in place strict procedures to avoid disputes and shield the business from those who could commit crimes. Role-based access management is one strategy for avoiding SoD disputes. Each position should be examined by a designated individual for any SoD overlaps, both within and across roles.

  • SoD violations

When an employee improperly utilizes their position and authority to carry out unlawful conduct, generally on purpose, this becomes an SoD violation. The restriction can be in place as a result of a corporate policy or a rule set forth by the industry. Basically, a violation happens when a user has more control over a system that is permitted and then abuses that access to achieve their own gain.

A business may, for instance, establish a policy that states that the person who approves timesheets is not permitted to deliver payments as well. However, it becomes an SoD violation when someone uses a control flaw to engage in both actions for fraudulent ends.

A top executive, such as a CEO or CFO, altering financial statements in violation of SOX standards is an example of a violation resulting from an external regulation; this can result in severe penalties for the firm and a term of imprisonment for that person.

Conclusion

SoD should be evaluated in the context of risk management operations since it is a control. When identifying possible conflicts and developing regulations, it’s important to keep this important factor in mind.

For the purpose of identifying and resolving possible conflicts, processes must be closely reviewed and decisions must be taken. If any conflicts remain, compensating control has to be implemented in order to effectively manage the risk.

Due to its ability to enforce access privileges and identify conflicts as they arise, role engineering is crucial to the support of SoD rules inside an identity management system. The final and most crucial requirement for SoD is an awareness of the players, roles, and possible conflicts.

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