Continuous Controls Monitoring (CCM) + SoD Analytics in ERP: Do They Actually Cut Control Failures?

Enterprise Resource Planning (ERP) systems are vital to both the performance and integrity of organizations but they are prone to fraud, operational mistakes, and lapses in control. The study focuses on the question of whether the rate of control failure and financial stability of middle-market manufacturing companies can be reduced significantly through the application of continuous controls monitoring (CCM) dashboards and segregation of duties (SoD) rulebooks. Although theoretical potential of algorithmic controls has been explained in previous studies, little empirical evidence exists on the actual impact of algorithmic controls in the real world. To fill this gap, we used a quasi-experimental difference-in-differences (DiD) design of ERP logs, governance ticketing data, and accounts payable/receivable records of N=24 business units (12 treated, 12 controls) in 6 manufacturing firms during 18 months.

Findings display statistically significant decreases in the control-failure rates ( 0.42, SE=0.08, p=0.001), financial write-offs (0.127K, SE=31K, p=0.001), and the indicators of fraud in the treated and control units. The times of remediation survival analysis showed efficiency improvement in cases where real-time dashboards were faster in detecting and responding (HR=2.1, 95% CI: 1.6-2.8). The results confirm the practical efficiency of algorithmic governance tools, which can be explained by the theoretical predictions according to which automation makes processes more accountable and robust. The deliverables are standardized SoD rulebook and CCM dashboard template with SHAP-based explanation of anomalies, which provide governance practitioners with a set of mechanisms that can be implemented to enhance ERP controls.

This research paper can serve as a contribution to the literature on governance, ESG finance, and AI-based risk management because of the theory-practice gap. Although restricted to a mid-market production and narrowed-down ERP systems, the findings relate to the common issues of automation/compliance and financial feasibility.