We at Diligent Entities (formerly Blueprint OneWorld) have just wrapped up a survey we undertook with Compliance Week, which explored companies’ attitudes and approach to their legal entity management processes. The survey threw up numerous interesting responses, just a few of which we want to delve into here.
A place to start is the correlation that the survey seems to suggest between companies using entity management software and those with higher annual revenues.
'Among respondents in organisations with annual revenues of $1 billion or higher, 40 percent said they manage entities with spreadsheets, compared to 51 percent who use entity management software. Comparatively, among the 85 total respondents in organisations with annual revenues of less than $500 million, 58 percent said they still use spreadsheets for entity management, while 31 percent said they use entity management software.'
One way of explaining this is by leaning on the idea that bigger revenue streams require more advanced processes, which certainly is true. However, one might also want to look at it from the other side: having these more mature processes in place can also help to increase revenue. These two perspectives aren’t mutually exclusive; in reality, both are probably likely the case. Seen in this light, moving quickly towards using entity management software seems like a bit of a no-brainer: not only will it make managing your entities easier, safer and more efficient, it can also help to accelerate growth and increase revenue, something highlighted in our previous blog. With 72% of respondents stating that they anticipate implementing such software over the next five years anyway, perhaps it’s time to fast track those plans?
What is perhaps quite alarming, although not necessarily surprising, is the number of companies – 50% of respondents – who are still using manual entity management processes, namely spreadsheets, a method that has been shown to be both inefficient and insecure.
What really needs emphasising here is the fact that although spreadsheets are being used as the main alternative to entity management software, they aren’t actually intended to be used for this purpose. They are useful for collating and organising data, but they do not contain the kind of internal checking functions that more advanced entity management software does. As I have previously put it, ‘When you’re updating the spreadsheets, how much checking is involved? What review process have they gone through?’ It’s these review processes that are essential to strong governance functions, and it’s something that the right software will make easy. Anyone who has worked extensively with spreadsheets, even those with advanced skills, will know that the possibility of human error is always very much present. For those organisations that haven’t already, removing as much of this human error as possible by moving towards a system that really harnesses the power of automation and the cloud should be something high on the agenda.
Interestingly, the use of entity management software also appears to relate positively to companies’ approach towards compliance. 72% of those that use such software stated that they’re more likely to manage compliance proactively, a figure that contrasts with those who use spreadsheets, where the majority indicated that they manage compliance reactively.
This ties in with the theme of our recent webinar with The Chartered Governance Institute, where we stressed the importance of taking a proactive approach to governance. This strong correlation between entity management software and a proactive attitude to governance is another tick in the box for utilising these more mature systems.
A further benefit is the added security such a system will give you. In a corporate environment where cyber-security continues to sit at the forefront of organisations’ concerns – and will likely only continue to do more so – having processes in place that make meeting these regulations easy is invaluable. ‘When asked how confident they are in the security of their communication of entity-related information, those who use secure file-sharing software gave an average rating of 4.2, compared to an average rating of just 3.2 among those who use email and regular mail.’ This is compounded by the fact that using such software enables you to collaborate and file-share in a quicker, easier manner. The overarching benefits of entity management software here and above are the same: greater security, greater efficiency and the ability to do more with less.
Akbar Hussain Governance & Compliance Specialist, Diligent
For a more in-depth dive into the current challenges and future of entity management, register for our next webinar here.
Join this webinar to reflect upon some of the ways in which governance professionals are currently managing their entities and subsidiaries, and to gauge their thoughts on what the future of entity governance will look like. We reflect upon digital transformation and the impact of the rise of automation and look ahead to how organisations are likely to leverage technology and what that might mean for effective oversight.
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For more information on entity governance and how to overcome challenges, you can download Diligent Entities whitepaper here.