basics of internal controls. it is worth stating that many of the problems at the heart of those headline cases stemmed from violations of the fundamental tenets of internal control, particularly those pertaining to operational risks. based on the headlines, it seems that boards of directors, management, auditors, and counsel need a remedial course in internal controls 101. as corporations grow larger and more diverse, internal controls become more, not less, important to the ability of management and the board to monitor activity across the company. the basics of internal controls for directors and managers are simple. directors do not serve full time, so it is important that they establish an annual agenda to focus their attention on the high - risk and emerging - risk areas while ensuring that there are effective preventive or detective controls over the low - risk areas. a board of directors has the responsibility to understand the legal, reputational, and compliance risks facing an organization ; legal professionals can assist in identifying those risks, quantifying them, and providing expertise in managing them. before a company moves into new and higher - risk areas, the boards of directors and management need assurances that the organization's governance practices are sound and effective. many of the organizations that have seen their reputations tarnished in the past few years have neglected to consider emerging conflicts of interest when the organization adds new products and lines of business. for example, if a customer service or control function must be done in an independent, fiduciary, or unbiased manner relative to other activities, appropriate firewalls must be in place before the product or activity begins. internal controls and compliance are the responsibility of line managers, who must determine the acceptable level of risk in their line of business and assure themselves that the combination of earnings, capital, and internal controls is sufficient to compensate for the risk exposures. however, supporting functions such as legal, accounting, internal audit, and risk management should independently monitor the control processes to ensure that they are effective and that risks are measured appropriately. the results of these independent reviews should be routinely reported to executive management and boards of directors. directors should be sufficiently engaged in the process to determine whether these reviews are in fact independent of the operating areas and whether the officers conducting the reviews can speak freely. where it appears that supporting functions have not been sufficiently involved, directors must demand that management adjust the processes as necessary. if the in - house legal, accounting, or audit staff believes that a supporting function has not been given adequate

reserve. in the ways we can, with the different tools we each have, our aim is the same : to make grow your own guide : entrepreneurship - based economic development is available on the federal reserve bank of kansas city ’ s website at https : / / www. kansascityfed. org / publicat / community / gyo / gyoguide. pdf. see joyce a. klein ( 2017 ), bridging the divide : how business ownership can help close the racial wealth gap ( washington : aspen institute, january ), https : / / www. aspeninstitute. org / publications / bridgingdivide - business - ownership - can - help - close - racial - wealth - gap. to find certified community development financial institutions ( cdfis ) in different geographies, see a list on the cdfi fund ’ s website available at https : / / www. cdfifund. gov / programstraining / certification / cdfi / pages / default. aspx. - 13 the economy work for the benefit of all americans. this goal is of utmost importance, and i am glad to work alongside you in striving to achieve it.