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Segregation of Duties (SoD) is a key internal control principle designed to prevent fraud and error by ensuring that no single individual has control over all steps of a transaction. Dividing responsibilities reduces the likelihood of fraud or undetected mistakes. In ERP applications, where processes are highly integrated, the risk of conflicting responsibilities is greater. Establishing clear SoD rules is essential to protect data integrity, reduce vulnerabilities, and maintain compliance. Importantly, SoD impacts the entire organization, not just IT, because conflicts can appear across multiple functions.
Why You Need an SoD Ruleset
SoD risks occur when incompatible tasks are assigned to the same person. For example, if one user can both create and approve a vendor record, the chance of fraud or undetected errors increases. By defining SoD rules, organizations can identify these risks, strengthen accountability, and apply controls to the areas where they are most critical.
Building an Effective Ruleset
An SoD ruleset should be comprehensive but practical. It must cover enough conflicts to protect the business, while avoiding unnecessary complexity. Rules should reflect regulatory requirements, industry standards, and the organization’s unique processes and risk appetite.
Developing SoD rules typically involves workshops with business process owners and application administrators, since they understand the details of their operations. Organizations should define risk rankings to guide actions:
- Critical risks must always be remediated.
- High risks should be remediated where possible or supported by mitigating controls if remediation is not feasible.
If building a ruleset from scratch is too complex, companies can adopt standard or out-of-the-box rulesets offered by consulting firms or GRC applications. These can provide a useful baseline, but it is essential to review and tailor them to the organization’s processes so that the rules reflect actual risk exposure. This ensures stronger assurance for both internal and external stakeholders.
Examples of SoD Risks
SoD risks can appear across finance, procurement, supply chain, and other functions. The table below highlights common conflicts and the risks they pose.
In addition, when developing an SoD ruleset, organizations should consider broader categories of risks that cut across applications and processes, such as:
- Master data and transactions
- Configurations and transactions
- Transactions within the same process
- Transactions and approvals
- Transactions and audit log updates
- Transactions and reconciliations
How Crowe Can Help
At Crowe, we help organizations design and implement SoD rulesets that are both effective and sustainable. Our team works with you to identify high-risk conflicts, streamline controls within ERP applications, and ensure compliance with evolving regulations. With practical experience across industries, we provide guidance that strengthens governance without slowing down operations.