Traditionally, many financial institutions conducted their audits periodically, checking a box for regulatory compliance. However, over time, this scheduled approach has led to outdated information for teams to work with and potential violations that are not caught and dealt with on time.

To mitigate the effects of periodic audits, continuous monitoring became necessary. However, it is extremely time-intensive and requires vast resources to sustain this kind of operation. That is where AI-driven GRC software comes into play.

Teams are investing in continuous controls monitoring to ensure that any compliance issues are dealt with swiftly.

Overview of Continuous vs. Periodic Audits

To better understand the benefits of continuous controls monitoring versus a periodic audit risk model, it is important to define what dimensions are crucial to efficient auditing. Compare the two approaches to compliance monitoring by means of our table below.

Dimension Continuous Monitoring Periodic Audits
Frequency Real-time or near real-time, ongoing throughout the year Conducted at fixed interval (quarterly, semi-annually, or annually)
Approach Proactive, forward-looking, integrated with internal control systems Retrospective, reviewing past activities and transactions
Technology Leverages automation, AI, data analytics, and continuous data feeds Primarily manual or semi-manual processes
Scope Focuses on high-risk areas with continuous transaction and process monitoring Broader scope covering entire organization or department for defined period
Detection Speed Immediate identification of anomalies and control weaknesses Issues discovered only after audit period concludes
Cost Structure Higher initial setup, significantly lower ongoing compliance costs Lower setup costs, higher cumulative audit and remediation expenses
Data Coverage 100% transaction monitoring capability Sample-based testing, typically examining limited transactions
Audit Readiness Maintains constant audit-ready state Requires extensive preparation time before each audit
Resource Allocation Automated processes free staff for strategic activities Labor-intensive, requires significant personnel time
Fraud Prevention Stops fraudulent activities as they occur Detects fraud only after significant damage may occur

Read on to discover and understand some of the far-reaching benefits of implementing continuous controls monitoring.

Real-time Risk Detection

According to RegScale, monitoring risks on a continuous basis can reduce exposure by up to 40%. This is because it allows compliance teams the time to not only detect possible issues, but respond to them as they happen, before incurring financial and reputational losses.

Using a system or digital platform that works around the clock to scan through operational processes, and flag potential weaknesses gives leadership and stakeholders an immediate alert to potential compliance breaches.

Optimized Resources

Compared to traditional audit processes, continuous monitoring reduces the manual effort required by compliance teams. These periodic audits may seem lower in cost in terms of initial setup, but down the line, intensive resources are required for:

  • Gathering various documents
  • Extended staff hours or external hiring
  • Remediation procedures

A guide to continuous monitoring by Anaptyss Inc. found that this approach has the potential to reduce compliance and audit costs by 75% as compared to traditional or manual monitoring.

Improved Data Accuracy

Due to the resource-intensive nature of periodic audits, they rely heavily on sampling data to draw conclusions about the entirety of the set. While this combats the resource issue, it opens the possibility of errors or fraud.

An automated system that conducts continuous monitoring, however, can conduct analyses on all transactions to identify patterns, improving data accuracy. This is not a criticism of the role of compliance experts, but rather an invite to team members to free up their time to take more strategic actions rather than funnel all their expertise into the essential aspects of the audit process.

Stakeholder Confidence

Investors, customers and regulators are looking to organizations to demonstrate that they have a proactive approach to risk management. With the help of intelligent systems to conduct continuous monitoring, external audits and regulatory examinations become streamlined. This is due to:

  • Centralized dashboards
  • Extractable insights
  • Audit documentation trails

Implementation Considerations

Considering shifting over to organization-wide continuous controls monitoring? This requires commitment from all business units, plus a careful planning process. This approach begins with:

  • Identifying critical processes
  • Prioritizing key controls
  • Alignment with business objectives

Another critical aspect is selecting the correct platform to integrate into your existing operations. Software like Predict360 can be easily deployed and scaled across organizations allowing for an easy transition to continuous controls monitoring. However, organizations need to be prepared for a culture change, fostering a deeper collaboration between business units.

Monitoring your organization’s data continuously offers you real-time visibility, proactive risk management, and substantial cost efficiencies. While periodication, their limitations make them insufficient as a standalone approach.