General

Internal control is an integral part of business management that consists of rules, procedures, and practices to protect assets, maintain accuracy and reliability in financial reporting, enhance operational efficiency, and ensure compliance with laws and regulations. Internal controls are essentially a set of checks and balances within an organisation that aim to mitigate risks, prevent fraud, and improve overall organisational effectiveness. They are tailored to each organisation’s specific needs and risks, so their complexity may vary depending on factors such as the business’s size, industry, and regulatory environment. HOW TO ACHIEVE INTERNAL CONTROLS The Control Environment The control environment sets the tone for the organisation regarding the importance of internal control and ethical behaviour. It includes factors such as the management’s integrity and ethical/moral values, the commitment to competence, the organisation’s philosophy and operating style, and the assignment of authority and responsibility. Risk Assessment For Internal Controls to be effective, a business must identify its risk areas, including financial, operational, and compliance risks. A comprehensive risk assessment process involves identifying and analysing these risks to determine their potential impact and likelihood of occurrence. This allows the organisation to prioritise its efforts and resources to address the most significant risks. Identify Your Risks: Begin by identifying the potential risks and concerns related to your business finances. Are you worried about theft, inaccurate records, or perhaps unauthorised access to sensitive financial information? By understanding the specific risks facing your business, you can develop targeted internal controls to address these concerns effectively. For example, if you are concerned about theft, you might focus on implementing controls to secure cash handling procedures and prevent unauthorised access to valuable assets. Develop Procedures: Once you have identified your risks, it is essential to establish clear and documented procedures for handling financial transactions and records. These procedures should outline step-by-step instructions for tasks such as cash handling, recording sales, reconciling accounts, and obtaining expenditure authorisations. By formalising these procedures, you provide guidance to your employees on how to perform their duties accurately and consistently, reducing the likelihood of errors or misconduct. Communicate and Train: Communication is key to successfully implementing internal controls. Take the time to explain your internal control policies and procedures to your employees and ensure they understand their roles and responsibilities. Provide training sessions or materials to educate employees on the importance of internal controls and how to comply with established procedures. By fostering a culture of accountability and compliance, you empower your employees to contribute to the effectiveness of your internal control framework. Monitor and Review: Internal controls require ongoing monitoring and review to ensure they remain effective and relevant to your business needs. Regularly assess the performance of your controls and their adherence to established procedures. Monitor financial transactions, review records, and conduct periodic audits or reviews to identify any weaknesses or areas for improvement. Be proactive in addressing issues as they arise and adjust your internal controls when needed to mitigate risks and enhance effectiveness. Segregation of Duties Segregation of Duties involves dividing responsibilities among different individuals or departments to prevent any single entity from having too much control over a process or transaction. It is designed to avoid unilateral actions within an organisation’s workflow, which can result in damaging events that exceed the organisation’s risk tolerance. In short, no one person or group should be given control over a process where they have the unchecked power to overlook errors, falsify information or attempt theft. By separating key tasks, organisations reduce the risk of errors, fraud, and misuse of resources. There are some things you can do towards this. Recording: This task involves accurately recording transactions into the organisation’s records, whether financial or non-financial. For instance, having a separate individual from the one responsible for recording sales or expenses in the accounting system should be different from the individual who authorises transactions. Custody: Custody involves physically handling or controlling assets, such as cash, inventory, or equipment. For instance, individuals responsible for handling cash should be different from those who record cash transactions or reconcile bank statements. Authorisation: This involves granting individuals the authority to approve or initiate transactions. For example, only designated managers or supervisors may have the authority to approve purchase orders or expense reimbursements. By segregating duties, organisations create a system of checks and balances that ensures accountability, transparency, and accuracy in transactions and reporting. This reduces the risk of errors, fraud, and mismanagement while enhancing the reliability of information. BENEFITS OF INTERNAL CONTROL SYSTEMS Peace of Mind Strong internal controls provide the management of an organisation with peace of mind, knowing that the organisation’s finances are secure and the business is protected. When effective controls are in place, the organisation and its assets are safeguarded, transactions are accurately recorded, and risks are managed. This peace of mind allows the management to focus their time and energy on growing their business and pursuing strategic opportunities rather than worrying about the integrity of processes. Preventing Theft and Fraud Just as security guards deter thieves from targeting physical assets, internal controls act as a deterrent against theft and fraud within an organisation. By implementing segregation of duties, authorisation procedures, and monitoring mechanisms, it becomes more difficult for individuals to engage in fraudulent activities such as embezzlement, misappropriation of funds, or manipulation of financial records. This creates a culture of accountability and transparency, discouraging unethical behaviour and protecting the business from financial losses. Accurate Financial Reporting Reliable financial records are essential for making informed business decisions, securing loans, and attracting investors. Strong internal controls ensure the accuracy, completeness, and integrity of an organisation’s financial reporting, providing stakeholders with confidence in the reliability of your financial statements. By maintaining accurate records and adhering to accounting standards and principles, transparency and credibility are enhanced, enabling stakeholders to assess the financial health and performance of the business accurately. Compliance with Regulations Many businesses are subject to various regulations, including tax laws, industry regulations, and corporate governance requirements. With Internal controls in place, the organisation

There is power in a singular focus. It’s the difference between a company that merely survives and one that thrives exponentially. When every facet of an organisation rallies behind one pivotal metric, the potential for transformative growth becomes not just a possibility but a reality. Operating for growth by concentrating on one defining metric isn’t a new concept, but it’s one that’s often overlooked in the quest for immediate gains and juggling multiple priorities. We often see entrepreneurs and startups doing too much too soon instead of growing and building upon the depth of one (or a few) key feature(s) that could be a game changer with growth. Over the past decade, I’ve witnessed firsthand the remarkable impact of this strategy. Leading a company through the dynamic landscapes of agro-trading and agro-processing, the commitment to one core metric became the cornerstone of our growth. This singular focus streamlined our operations and ignited a momentum that carried us through challenges and positioned us strongly in the market. The lessons learned through this journey underscore the profound difference that operating for growth with one key metric can make. THE ONE METRIC THAT MATTERS This metric I speak of isn’t just another number on a balance sheet. It is the embodiment of the value a company delivers to its customers. By honing in on this one pivotal measure, organisations can steer their strategies with precision, ensuring that every effort propels them closer to their vision of success. Global industry leaders have demonstrated the transformative power of this approach. Take Facebook, for instance. By focusing relentlessly on monthly active users, they didn’t just track a statistic; they also gauged the heartbeat of their platform’s community. This singular focus enabled them to tailor user experiences, drive engagement, and ultimately scale to unprecedented heights. Similarly, Airbnb zeroed in on nights booked. This metric allowed them to follow closely both supply and demand dynamics, guiding them to enhance host offerings and streamline guest experiences. This fuelled their rapid global expansion. This concept of a ‘North Star Metric’, as some call it, resonated deeply with me from the get-go. Witnessing how these giants channelled their resources and aligned their teams around one defining metric influenced my own strategic thinking. It became clear that to navigate the competitive terrains of agro-trading and agro-processing, my company needed a singular focal point through which the team would channel all our energies, a metric that would unify our purpose and drive every decision. THE POWER OF FOCUS IN ACTION When a company centres its attention on one critical metric, it creates a ripple effect that aligns every facet of the business. This singular focus becomes the lens through which all strategies are crafted and decisions are made. Operations streamline processes to support it; marketing tailors messages to amplify it; every department moves in unison towards a common goal. In practice, this alignment transforms the way a business operates daily. Decisions that once seemed complex become straightforward when measured against the guiding metric. If an initiative doesn’t contribute to enhancing that key figure, it’s set aside in favour of one that does. This clarity accelerates progress and minimises wasted effort. In my experience with Maxwell Investments Group, this approach proved invaluable. By prioritising volumes traded over other immediate gains, we reshaped our strategies to maximise throughput. Our procurement team focused on securing larger quantities of agricultural produce, knowing that increased volume would strengthen supplier relationships and improve bargaining power. The sales team concentrated on expanding our distribution networks to handle greater quantities, rather than chasing smaller, high-margin deals. This focus permeated every level of Maxwell Investments Group. Meetings became more productive as discussions centred on how to move many more millions of kilos more efficiently. Marketing efforts were designed to attract partners capable of handling or helping us handle substantial volumes. Even investments in infrastructure were guided by the question: “Will this enable us to trade more volume?” By aligning our operations around this one metric, we unlocked efficiencies that might have otherwise remained hidden. The entire company moved cohesively, each department’s efforts reinforcing the others. This synergy propelled our growth and fostered a culture of unity and purpose that drove us forward. CHOOSING THE RIGHT METRIC Selecting the right metric is paramount. It must encapsulate the core driver of growth specific to your industry. Not all metrics hold equal weight across different sectors. The challenge lies in identifying the one that will propel your business forward most effectively. This requires a deep understanding of the industry’s intricacies and what truly influences success within it. In sectors like agro-trading and agro-processing, volume often supersedes revenue or margins as the critical measure of growth. Why is this the case? Because these industries thrive on economies of scale. The more volume you handle, the more efficiently you can operate, reducing costs per unit and increasing competitiveness. Focusing on revenue alone can be misleading; high revenues don’t necessarily indicate sustainable growth if not backed by substantial volume. This realisation was a turning point for us at Maxwell Investments Group. We understood that prioritising the trading of millions of kilos per unit of time would yield greater long-term benefits than chasing immediate revenue spikes. By concentrating on volume, we could strengthen our supply chains, negotiate better terms with suppliers, and meet the demands of larger clients. This focus enabled us to scale efficiently, opening doors to markets that were previously beyond our reach. Choosing volume as our North Star Metric was more than just a strategic decision. It was a commitment to a growth trajectory that emphasised sustainability and scalability. It required a shift in perspective, recognising that the sheer quantity of goods moved in our industry would ultimately lead to more substantial margins and revenue growth over time. This decision has become the cornerstone of our success, demonstrating the profound impact of selecting the right metric to guide your business. THE CEO’S ROLE IN CHAMPIONING FOCUS The drive towards a singular metric begins at the top.

Ghana might be going through a rough patch.  Yet, it is true that we have witnessed significant advancements in many sectors over the past few decades. With a diverse economy encompassing agriculture, mining, manufacturing, and a growing services sector, the nation is poised for continued prosperity. Central to this growth is the financial sector, which fuels various economic activities by facilitating transactions, investments, and the flow of capital. A critical component underpinning the effectiveness of this sector is the use of credit ratings. Understanding why credit ratings matter and how they function within the Ghanaian economy is essential for both business professionals and the general public. It helps everyone when we all understand the role of credit ratings, their importance in lending practices, and why a transparent and widely recognised credit rating system accessible at all levels is crucial for Ghana’s economic development. WHAT ARE CREDIT RATINGS? Credit ratings are evaluations of the creditworthiness of individuals, businesses, or governments. They provide a standardised assessment of the risk associated with lending money to a particular borrower. A credit rating answers the question: “How likely is this borrower to repay the loan on time and in full?” For financial institutions like banks, these ratings are invaluable tools that inform lending decisions, interest rates, and loan terms. THE ROLE OF CREDIT RATINGS IN GHANA’S FINANCIAL SECTOR 1. Facilitating Informed Lending Decisions Banks and financial institutions rely on credit ratings to assess the risk of lending to borrowers. Credit ratings provide a snapshot of a borrower’s financial health by analysing factors such as repayment history, current debt levels, and financial stability. This information allows lenders to make informed decisions, reducing the likelihood of defaults and bad debts. 2. Risk Management Effective risk management is crucial for the sustainability of financial institutions. Credit ratings enable banks to: 3. Promoting Financial Inclusion In Ghana, a significant portion of the population needs access to formal banking services. By implementing a transparent credit rating system, financial institutions can: WHY A TRANSPARENT AND WIDELY RECOGNIZED CREDIT RATING SYSTEM IS ESSENTIAL 1. Accessibility at All Levels For credit ratings to be effective, they must be accessible not just at the national level but also at regional, district, and community levels. Universal access ensures that: 2. Enhancing Transparency and Trust A transparent credit rating system builds trust between borrowers and lenders. When the criteria and processes used to determine credit ratings are clear: 3. Attracting Investment Both local and international investors are more likely to invest in an economy where financial systems are transparent and reliable. A widely recognised credit rating system: BENEFITS OF UNIVERSAL CREDIT RATING ACCESS IN GHANA 1. Empowering Individuals and Businesses Access to credit ratings allows borrowers to: 2. Strengthening the Financial Sector For financial institutions: 3. Stimulating Economic Activity IMPLEMENTING A ROBUST CREDIT RATING SYSTEM IN GHANA 1. Leveraging Technology Modern technology can play a pivotal role in developing an efficient credit rating system: 2. Collaboration Between Stakeholders Successful implementation requires cooperation among: 3. Education and Awareness Programs CHALLENGES AND CONSIDERATIONS 1. Data Privacy Concerns 2. Inclusivity 3. Standardisation NEXT STEPS Credit ratings are a cornerstone of a robust financial system. In the Ghanaian context, they hold the potential to transform the economy by promoting financial inclusion, enhancing risk management, and attracting investment. By implementing a transparent and widely recognised credit rating system accessible at all levels, Ghana can unlock new opportunities for growth and development. This initiative requires a collective effort from government agencies, financial institutions, and the public. With the right strategies in place, credit ratings can serve as a powerful tool in building a prosperous and financially inclusive Ghana. I hope you found this article insightful and enjoyable. Subscribe to the ‘Entrepreneur In You’ newsletter here: https://lnkd.in/d-hgCVPy.  I wish you a highly productive and successful week ahead!  ♕ —- ♕ —- ♕ —- ♕ —- ♕ Disclaimer: The views, thoughts, and opinions expressed in this article are solely those of the author, Dr. Maxwell Ampong, and do not necessarily reflect the official policy, position, or beliefs of Maxwell Investments Group or any of its affiliates. Any references to policy or regulation reflect the author’s interpretation and are not intended to represent the formal stance of Maxwell Investments Group. This content is provided for informational purposes only and does not constitute legal, financial, or investment advice. Readers should seek independent advice before making any decisions based on this material. Maxwell Investments Group assumes no responsibility or liability for any errors or omissions in the content or for any actions taken based on the information provided.