Segregation of duties: Everything you need to know

segregation of duties sod

As a fundamental concept in internal control, segregation of duties SoD ensures that no one person has control over all aspects of a transaction in order to reduce fraud and errors. A wide range of industries, including finance, healthcare, and government, have adopted this concept. Are you curious about the evolution and versions of the Segregation of Duties SoD? The purpose of this blog is to help you understand the differences between SOD 1.0, 2.0 and 3.0

Segregation of Duties

SoD 1.0:

It refers to the original and most basic form of Segregation of Duties SoD. It involves separating and dividing individual responsibilities among different employees in an organization in a manual and administrative manner. By dividing up the various responsibilities and tasks, fraud and errors are less likely to occur.

For example, In a traditional accounting system, one employee enters transactions into the system while another approves and reconciles those transactions. The division of responsibilities between individuals reduces the chances of fraud or errors being committed by one person without detection.

Although this version of Segregation of duties SOD is an important foundation in the internal control environment of an organization, it has some limitations. It can be complex and difficult to manage, especially in larger organizations, and it may not provide the granularity and flexibility required by certain types of organizations. Additionally, it relies heavily on human oversight, so human mistakes and fraud are still possible.

To prevent fraud and errors, organizations should supplement segregation of duties SoD 1.0 with more advanced forms of SoD, such as SoD 2.0 and SoD 3.0.

SoD 2.0:

Segregation of Duties 2.0, also called “Segregation of Duties 2.0”, is an evolution of the traditional concept of Segregation of Duties SoD. By incorporating technology and automation, it improves the effectiveness and efficiency of Segregation of duties SoD 1.0.

As part of SoD 2.0, instead of using manual administrative methods to divide and separate duties among employees, organizations use technology to enforce and monitor controls. A software system can be configured to restrict access to certain sensitive information and functionality to authorized individuals, for example. Further, automated monitoring tools can detect suspicious activity and alert on circumvention attempts.

With SoD 2.0, role-based access control (RBAC) or rule-based access control is often used to implement controls, which are more dynamic and flexible and aligned with the organization’s needs. By using RBAC, permissions can be assigned depending on roles or job functions, which is more specific and adaptable than assigning permissions individually.

SoD 2.0 is a more advanced and robust version of SoD. It can be more efficient and effective in protecting against fraud and errors, and it is designed to meet the needs of modern organizations. As a result, organizations can detect and investigate potential issues more easily with increased auditability and transparency.

For organizations that want to improve their internal controls and protect themselves from fraud and errors, SoD 2.0 is a good intermediate step, but it should be augmented by SoD 3.0, which is even more advanced.

SoD 3.0:

Recent years have seen a shift towards “Segregation of Duties SoD 3.0,” which utilizes technology to automate and strengthen the process.

With technology, organizations can implement granular and dynamic controls, which is one of the key advantages of SoD. Technology makes it possible to implement controls based on roles or job functions instead of traditionally dividing up responsibilities among different individuals. A better alignment of controls with the needs of the organization is thereby possible.

One of the most critical aspects of SoD 3.0 is its ability to continuously monitor access and transactions in real-time. Rather than relying on traditional methods of detection, such as audits or reviews, organizations can identify potential issues as they arise. A real-time monitoring and analytics system can enable organizations to identify and respond to potential fraud or errors in real-time, helping to minimize their impact.

SoD 3.0 also provides capabilities for data analysis and visualization, which can assist organizations in identifying and understanding patterns of behavior as well as detecting anomalies. This analysis not only identifies potential fraud or errors, but also helps organizations understand the underlying causes.

Organizations can be better protected from fraud and errors with Segregation of Duties 3.0. Organizations can implement stronger controls by automating, monitoring, and analyzing data, and identify and address potential issues in real-time by leveraging technology to automate, monitor, and analyze data.

How ToggleNow can help you with implementing the right Segregation of Duties SoD solution?

With our expertise in SAP GRC Access Control 12.0 and Access Risk Analysis (ARA), we have become the leader in implementing and managing SoD management solutions. Additionally, ToggleNow has its own SAP Certified solution suite – Audit Arrays – which can assist organizations in implementing SoD 3.0 based solutions. Get in touch with our SMEs today!

Raghu Boddu

Meet Raghu Boddu an expert in SAP Security and Governance, Risk, and Compliance (GRC). With over 20+ years of experience in the field, Raghu has a deep understanding of the nuances and complexities of SAP systems and how to keep them secure. Raghu has worked with various clients across different industries, helping them implement effective security and GRC strategies to protect their sensitive data and meet regulatory compliance requirements. Raghu is a respected thought leader in the SAP security and GRC community, regularly sharing insights and best practices through presentations and publications. Whether you're looking to improve the security of your SAP system or ensure compliance with relevant regulations, Raghu can provide the guidance and expertise you need to succeed.

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