Checks And Balances

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DEFINITION of 'Checks And Balances'

The various procedures set in place to reduce mistakes or improper behavior. Checks and balances usually ensure that no one person or department has absolute control over decisions, and clearly defines the assigned duties. The existence of checks and balances within an organization prevents any one person or department from having too much power, and forces cooperation in completing tasks.

INVESTOPEDIA EXPLAINS 'Checks And Balances'

Checks and balances are important, especially in businesses where one individual can make decisions that affect company operations. That said, checks and balances can cost more money and decrease efficiency, so a balance needs to be found. By separating the duties of various employees into clearly defined roles, businesses are better able to ensure that rogue employees or executives cannot bring down a business without other employees noticing. The term is also common in the context of government.

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