Each individual member of a board, as well as non-board senior leadership, has a distinct role to play in how an organization remains compliant with regulatory responsibilities in every jurisdiction of operation. These responsibilities will often require that leader to interact with entity data, plus the legal operations team and governance processes, to meet the requirements set by local and global authorities.
In this article – part of a series looking at various senior management roles in relation to governance – we will look at the role of the head of finance in entity governance. Why does the finance department need access to entity data? And how can they leverage that entity data to meet regulatory requirements?
What Does the Head of Finance Do?The Head of Finance, or the Financial Director or the Chief Financial Officer (CFO), is often a member of the board working to create a solid foundation upon which a business can grow. The role's main purpose, according to the UK Institute of Directors, is to contribute to the attainment of the company's business objectives by:
- Providing strategic and financial guidance to ensure that the company's financial commitments are met
- Developing all necessary policies and procedures to ensure the sound financial management and control of the company's business
The head of finance will usually lead a team of finance staff looking after every aspect of the organization's money and cash flow – of course, profit and loss is their daily bread. As part of this work, the duties of a head of finance could include conducting risk assessments, approving or rejecting budgets, forecasting financial results and assessing risks in financial transactions.
They'll also provide advice and guidance on the financial strategies needed to help the company achieve its overarching business objectives – meaning they need strong analytical skills – as well as developing and controlling the annual operating budget to ensure all financial targets are met and financial and statutory regulations are complied with.
Why Does the Head of Finance Need Access to Entity Data?Charged with the financial future of the organization, the head of finance needs to leverage entity data to create insights and actionable analytics on which to base decisions. Here are just a few ways in which entity data can bring insights to the finance department.
Entity Diagramming Reveals Financial Obligations
In order to be able to give sound financial advice to the organization, either at the parent level or for distinct entities, the head of finance, first and foremost, needs to understand how the organization is structured. Here, entity diagramming can help them to visualize the company structure and to see where financial regulations may need extra attention.
For example, a company may have two entities in a jurisdiction that does not look favorably on interference in a subsidiary by a parent entity, which means the financial operations of those entities must be structured and handled carefully to show total independence from the center. Only through utilizing entity data would this obligation become clear, and automating this diagramming process can help ensure financial structuring decisions are made based on real-time entity data.
Entity Data Reveals Growth Opportunities
Those entity diagrams and related entity data can also reveal growth opportunities for the business. By leveraging entity data and analytics, the head of finance can help to shift an organization from a historical perspective to a forward-looking one.
Take, for example, an M&A opportunity. By leveraging entity data, the head of finance can see if there is room in the organization's structure for the opportunity: Will it have a sizeable impact on the local market? Will an acquisition substantially impact the organization's local financial regulatory commitments, such as a need to pay more tax or change how the entity is run?
Then there's the other side of the coin: Will dissolving an entity help improve the bottom line when times are tough? Entity data can help the head of tax to make strategic financial decisions based on real-time analytics.
Analytics Can Transform an Accountant into a Strategist
Entity data is not static, of course, and it's also not there for the good of its own health. Rather, entity data can and should be leveraged to inform financial strategy and business operations. EY and Forbes Insights recently surveyed financial executives in large global enterprises, and 57% of those group CFOs said that delivering the data and advanced analytics for business intelligence and management information will be a critical capability for tomorrow's finance function.
One of EY's respondents said: "Data science moves us from the accounting role of reporting the past to the finance role of guiding the future." By leveraging entity data, the head of finance can make truly informed decisions about the direction of the business
Entity Management Software Helps the Finance Department Meet Compliance RequirementsIn discussing the aforementioned survey of CFOs, EY said that the CFO must focus on six key areas to help put data at the heart of long-term business success:
- Making the case for data as integral to the business strategy by identifying proof of concept projects
- Aligning the analytics capability and delivery with priority business requirements
- Helping to instill the right leadership and culture
- Providing the training to help individuals recognize decision biases
- Providing easy-to-use tools for users of data
- Transforming the analytics-based insights into actions, and aligning incentives, rewards and measurement accordingly
All of this is important, but let's focus on No. 5: providing easy-to-use tools for users of data. This is where entity management software can really help the head of finance to leverage entity data to help ensure compliance with regulations.
Entity management software, such as that offered by Diligent, is designed as a one-stop shop for all entity management and entity data needs. It acts as a central repository for all entity-related information, getting the right information to the right people at the right time and in the right format for them to analyze, dissect and use to inform strategic thinking – and, in that sense, meeting No. 6 on the EY list of requirements, too.
This entity management software stores entity information, documents and organizational charts in a highly secure format to create a single source of truth – and that's important for the head of finance, who is using that data and information to make decisions about the organization's financial future. Entity diagramming pulls up-to-date entity data on directors and compliance obligations to help inform financial structuring decisions, while statutory filing requirements such as the annual accounts can be filed electronically to regulatory bodies.
The software also integrates data from multiple business units like legal, tax, finance, treasury and compliance into a single system of record, meaning each department is making its strategic decisions based on the same data – no inaccuracies, no bugs and no chance of human error.
Diligent's entity management software goes one step further: By integrating with the board portal to create a Governance Cloud, it ensures the entity data used by the head of finance's team is easily shared with the board, and the board's decisions are easily shared with the teams that will put things into action.
Get in touch and schedule a demo to discover how Diligent's Governance Cloud puts actionable insights and analytics in the hands of the head of finance and the wider business.