achieving the right control mix. This investment in the beginning
of the project helps eliminate controls that are no longer needed in
the new environment or are not required by a regulator after further
Embedding controls from the design phase supports the effort
to further standardize, streamline and automate business processes
across the organization and, ultimately, lowers the overall cost of
implementing controls. The longer companies wait to implement
controls, the more costly it can be. Building controls in during the
design phase can be the most cost-effective. When you get to the point
of go-live and system operation, implementing controls can involve
retrofitting existing functionality, retesting and retraining users on
new functionality and controls—all of which increases the cost.
The controls team continues to leverage internal controls
throughout the integration process by testing controls as part of the
overall testing process and training users in controls operation and
oversight as part of the overall training effort.
Overall, risk evaluation and embedding of controls in the process
from day one allow the utility to develop a more efficient and effective
control environment, which drives greater achievement of synergies
and successful integrations while balancing the need for speed in the
transaction and transformation processes.
3. Ensure controls team proactively addresses areas requiring
special attention during the integration process by considering
their impact to people, processes and systems.
• People: The controls team must understand the power of culture.
They must understand that different cultures, risk tolerances and
internal control processes can affect integration speed and the effectiveness of resulting business process, including adoption of
new processes and controls to address the new risk profile. The
controls team analyzes these differences, clearly defines risk and
control objectives and develops an approach to turn “you” and
“I” into “we”, therefore, facilitating the integration process. Ultimately, the risk and control resources help eliminate some of the
common cultural differences and identify what needs to change in
the organization to bring cultures together, driving better control
execution and effectiveness for the resulting organization.
Knowing the importance of data, and the challenges that impact
the user community and data integrity when data cleansing and
conversion are not performed correctly, the controls team must fo-
cus on involving key business contacts who understand the data
and can help develop processes for the to-be environment. Appro-
priate controls are implemented over cleansing, conversion and
validation processes. Key business contacts provide insights on
differences that affect conversion. For example, for work orders (a
key input to the asset unitization process), data elements are usu-
ally different among the companies being merged. This requires
cleansing existing work orders to fit the to-be data model prior to
go-live to reduce issues with asset unitization down the line.
If key business contacts and control specialists are not involved
and control processes are not set up outlining validation processes,
these differences would not be identified until after go-live. Rectifying them at that point would be more costly and cumbersome.
• Processes: Given the importance of certain processes (e.g., reporting) and the impact of the integration on these processes, the controls team must evaluate how key inputs are different between the
companies, how these are being changed in the to-be environment
and determine control requirements to deal with these during the
integration and for the to-be environment. The controls team collaborates with the finance organization to develop an accounting
policy playbook that evaluates differences and their impact to data
conversion, transaction recording, and operational and financial reporting. Key questions the controls team asks during design to understand these differences include: How are meters classified when
first recorded; are they inventory or assets? How are purchase requisitions (PRs) and orders (POs) maintained in the system? What
PRs and POs need to be migrated? What is the level of detail used
to make purchasing decisions, investment decisions, etc.? The controls team understands the differences between the companies and
assists in the creation of harmonization routines to bridge these
differences. In addition, the controls team enables the development of to-be processes based on the integrated entity’s policies
and reporting requirements. Ultimately, this leads to a streamlined
design of subsequent processes such as account reconciliations and
automated and manual journal entries. In addition, it provides the
foundation to achieve completeness and accuracy of information
and reporting that management can use to make decisions.
• Systems: The controls team must ensure that risks are addressed
not only for the to-be processes but also throughout the integration
by designing and implementing interim/bridge controls that leverage system functionality. Between day one and system integrations, financial and other key data from the different systems needs
to be fed into the general ledger to create financial statements and
other key reporting. The controls team develops system-enabled
controls around account mapping and interfaces to detect and resolve issues with account mapping and data transfers, ensuring the
reports are accurate and complete.
It is important for the controls team to provide the right access to
systems while also restricting this access appropriately and ensuring conflicting duties are segregated during the transformation. In
addition the team must integrate organization design. For these
reasons, the controls team must consider access early in the process. This is achieved by developing user monitoring processes to
address the risk of broad access during transition and stabilization
and by resolving existing issues as part of the new process and sys-
In this constantly shifting landscape, M&A can be a crucial tool for the long-term survival and strategic growth of businesses in the sector.