What is Segregation of Duties (SoD)?

Segregation of Duties is a simple but powerful concept: don't let one person control an entire critical process. By splitting important tasks between multiple people, you create natural checkpoints that catch both honest mistakes and intentional fraud. Think payroll. One person sets up the payroll run, another authorizes the payments. This way, nobody can secretly give themselves a raise or pay a fake employee. The challenge? Implementing SoD properly without grinding your business to a halt. Get it wrong, and you either leave security gaps or create so much red tape that nothing gets done.

Why SoD Matters

• Regulatory Compliance: The Sarbanes-Oxley Act (SOX) requires public companies to have strong internal controls, and SoD is a big part of that. The SEC doesn't mess around with this stuff.
• Error Prevention: When multiple people touch a transaction, someone usually catches mistakes before they become problems.
• Fraud Prevention: It's much harder to commit fraud when you need an accomplice who might not be willing to play along.

Common SoD Challenges

• The Efficiency Problem: Adding more people to processes slows things down and costs money. Small companies especially struggle because they don't have enough people to split duties effectively.
• Complexity: As businesses grow, tracking who can do what becomes a nightmare. You end up with spreadsheets nobody updates and rules nobody remembers.
• Finding the Right Balance: Too strict and nothing gets done. Too loose and you're asking for trouble.

Understanding SoD Conflicts

A SoD conflict happens when one person has access to perform multiple steps in a critical process that should be separated. For example:

• Creating vendor invoices AND approving payments
• Setting up new employees AND processing their first paycheck
• Changing customer credit limits AND processing their orders

These conflicts don't automatically mean fraud will happen, but they create the opportunity. The key is identifying these conflicts and deciding which ones are actual risks worth addressing.

Strategies for Reducing SoD Conflicts

The initial step in effective SoD processes involves leveraging role-based access control (RBAC) to accurately provision users into systems while minimizing potential SoD conflicts. However, SoD conflicts represent an inevitable aspect of business operations when evaluating cost-benefit tradeoffs. SoD violations function as safety mechanisms, enabling organizations to identify when users perform risky transactions with policy combinations containing SoD conflicts. Technically, violations occur when users gain control over more workflow steps than permitted and utilize them simultaneously across one or more transactions. This could include capabilities such as entering vendor invoices and approving vendor payments. When properly implemented, SoD utilizes internal controls to highlight these conflicts of interest and enhance safety and compliance. Managing SoD through violation monitoring focuses attention and resources on actual risk violations rather than theoretical risks identified through SoD conflicts.

The SoD Matrix Framework

SoD implementation can prove highly complex. To maintain clear accounting roles, responsibilities, and risk management, compliance managers utilize the Segregation of Duties Matrix (SoD matrix). This matrix plots unique user roles on both the X and Y axes to identify and resolve conflicts systematically. In modern organizations utilizing enterprise resource planning (ERP) software, SoD matrices generate automatically based on user roles and tasks defined within the ERP system. Each task must correspond to a specific procedure within the transaction workflow, enabling role and task grouping while ensuring no single user maintains permission to perform multiple stages within transaction workflows.

SoD Impact on IT Security

SoD creates two primary impacts on IT security frameworks:

1. IT Security's SoD Implementation Responsibility
   Creates the user roles and permissions that enforce SoD across the organization. They need to ensure that conflicting roles can't be assigned to the same person.
2. IT Department SoD Implementation
   They often have powerful access that could bypass normal controls. Classic conflicts include:
   • The same person defining permissions and assigning them
   • One person designing security systems and testing them

Segregation of Duties in Accounting

Several examples of accounting department SoD conflicts include:

• The individual preparing paychecks should not also be responsible for authorizing paychecks
• The person depositing or withdrawing cash should not be the same individual reconciling bank accounts
• The person raising purchase orders to suppliers should not be the same individual authorizing those purchase orders for payment

The foundation of accounting SoD involves maintaining multiple personnel within the accounting organization, with predefined roles that prevent SoD conflicts. Additionally, regular external auditor reviews should ensure SoD maintenance remains accurate. Critical actions such as signing high-value checks or authorizing payrolls should ideally be conducted by senior executives.

Case Study: Global Brand Achieves Complete SoD Control

A global crane manufacturer (12000 users, 3 systems) was struggling with SoD conflicts in their record-to-report and procure-to-pay processes. Manual tracking was a nightmare, and auditors kept finding issues. MTC Skopos was up and running on same day license was purchased. Within 8 weeks, they had:

• Identified all existing SoD conflicts
• Reduced high-risk conflicts by 40%
• Set up continuous monitoring

After 4 months total, all remaining high-risk conflicts were either fixed or properly controlled. The simulation feature let them test changes without breaking anything.

"MTC Skopos transformed how we handled Segregation of Duties. We can now pinpoint exactly who has access to what and when they use it and we can stay clean. This was crucial for our SAP security and audit success."

Getting Started with SoD

• Identify Critical Processes: Start with your highest-risk areas like financial transactions and user access management
• Map Current State: Document who currently does what (this is usually eye-opening)
• Find the Conflicts: Look for people who can complete entire critical processes alone
• Prioritize Risks: Not all conflicts are worth fixing - focus on the dangerous ones first
• Implement Controls: Fix what you can, monitor what you can't
• Automate the Monitoring: Use tools like MTC Skopos to keep everything in check

Conclusion

Getting SoD right is essential for managing risk and staying compliant. Yes, there's a balancing act between security and efficiency, but the payoff is worth it. Companies that take SoD seriously and use smart tools like MTC Skopos end up with better security, smoother audits, and operations that actually work.

Ready to experience the difference? [Learn more about MTC Skopos] or [contact our team] to schedule a demonstration.