Luc van Daele from Amsterdam-based legal services provider Legadex explains some of the benefits corporations can gain from following the latest technology trends to support their entity management.
As organizations mature within their entity management and compliance practices, many are making smarter use of technology to improve efficiency. This is enabling governance teams to become not only more productive but also more innovative.
There are three key trends in this area:
While setting up automated processes takes some time and investment, once it’s done, it will save many hours and transform the way a governance team works day to day.
Automating a function can seem like an enormous task, and where some clients get stuck is focusing on the bigger picture and trying to “boil the ocean”. These projects are journeys and should be broken down into stages, with incremental improvements laid out along the way.
An area where a lot of clients start is data assurance workflows – holding local controllers to account and setting up quarterly reminders for them to confirm whether data is accurate or update it.
Governance teams are often so busy that they struggle to get their heads above water for long enough to be proactive and start the transition in the first place. Before any major planning takes place, it’s often more sensible to find efficiencies, such as rationalizing entities, which will make the rest of the project easier and quicker to execute.
Another area where we’re seeing clients gain efficiencies is through automating the creation and distribution of reports that regularly need to go out to key people in the business.
One of the most important benefits of technology for entity management is the ability to create a single central source of truth that can feed into other systems, and vice versa. This tends to be more relevant for large enterprises with multiple software tools, which they can build into a legal technology ecosystem.
One example of where we’re seeing clients leverage integrations is connecting their HR software – their single source of truth for people data – with their entity management platform. When a director or officer leaves and the HR team updates its database, the relevant data controller will automatically be notified of the change, so they can ensure that the central corporate record has been updated as appropriate. Having this information up to date ensures accurate compliance and can feed into other systems, such as those for reporting to statutory bodies.
Artificial Intelligence (AI)
Larger corporations that are more advanced in their entity management maturity are making use of AI to speed up processes that could otherwise be time consuming and error prone.
For instance, tasking lawyers with checking through large volumes of routine contracts manually can be an expensive exercise, even worse if it has to be done frequently. Systems can be trained to pick up red flags for attention, so only the contracts that have been flagged need to be assessed by a legal expert. That can be especially valuable when it comes to carrying out due diligence in preparation for a merger or acquisition, giving the assurance and agility you need to move fast when the time is right.
What are the benefits?
Effective automation of entity management processes, systems integration and AI can bring a wide range of benefits, both for the governance team and the wider business:
- Better reporting, leading to improved compliance and deeper, actionable insights for business leaders.
- Access to high quality data and time freed up to analyze it will support better-informed decision making.
- Sharing insights with other individuals and teams will allow the benefits to roll out across the business.
- Enabling the governance, tax and finance functions to work together more efficiently and proactively.
- Freeing a business from the hamster wheel of their existing, human-driven governance processes, enabling it to move to more optimal ways of working.
This empowers governance teams to spend less time doing low-value, repetitive work and more on strategic, bigger picture activities such as environment, social and governance (ESG) initiatives or advising the board. It generates room to ask questions about issues like what the corporate structure might look like if the organization was to launch in a new jurisdiction or acquire another business. It will also free up time to consider working collaboratively with other functions to add value to the business, such as helping the tax team understand the best routes for optimizing transfer pricing.
Once an organization has optimized its entity management processes, it will open up opportunities to use technology to make improvements in other areas too.
Taking the time to incorporate automation, systems integration and even AI into the way your governance team works can set off a cascade of positive change in your organization. Just remember, this is a journey comprising several stages, each made up of made up of incremental steps in the right direction.