2025 ICBC Pub. 4 Issue 3

Strengthening Internal Controls in Community Banks By Plante Moran, ICBC Associate Member When it comes to community banking, a strong reputation and resilient operations are paramount. So is strengthening internal controls. Regular monitoring and evaluation of these controls are essential for maintaining their effectiveness and safeguarding your community bank’s integrity. Here’s how … Maintaining robust internal controls is essential to ensure operational integrity and compliance for community banking. Changes in personnel, processes or technology can introduce new risks and challenges, making it crucial for banks to have effective strategies in place to monitor and evaluate their internal controls. Here are some best practices to consider: 1. CONDUCT REGULAR RISK ASSESSMENTS Regular risk assessments are the cornerstone of a strong internal control system. These assessments help identify potential vulnerabilities and areas that require attention. When there are changes in people, processes or technology, it’s important to reassess risks to ensure that new threats are promptly addressed. This proactive approach allows banks to adapt their controls to the evolving landscape and mitigate risks effectively. 2. IMPLEMENT CONTINUOUS MONITORING Continuous monitoring involves the real-time tracking of transactions and activities to detect anomalies and irregularities. By leveraging advanced analytics and automated tools, community banks can enhance their ability to monitor a large volume of transactions or activities, focus manual efforts on anomalies and respond to potential issues swiftly. Continuous monitoring is particularly valuable during periods of change, as it provides ongoing assurance that controls are functioning as intended. 3. STRENGTHEN SEGREGATION OF DUTIES Segregation of duties is a fundamental principle of internal control that helps prevent fraud and errors. When there are changes in personnel or systems, it’s essential to review and adjust the allocation of responsibilities to maintain proper segregation. This ensures that no single individual has control over all 20 | INDEPENDENT REPORT

RkJQdWJsaXNoZXIy MTg3NDExNQ==