Ever since the 2008 global financial crisis, regulators have been taking a closer look at the financial sector, specifically the banking sector. Whether based locally, domestically or internationally, banks are having to amend their approach to entity management and governance, making their inner workings much more transparent and open to scrutiny.
Gone are the days of shells within shells and a drive for profit at all costs; in their place must be a keen attention to detail and the ability to categorically prove at any moment that governance and corporate culture are taken seriously by the bank.
This is something the Australian banking industry discovered as the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, otherwise known as the Hayne Royal Commission, shed light on internal workings in the financial sector. That investigation, held throughout 2018, found that the profit motive was king in Australian banking, and customer service relegated to second place after sales at all costs. Financial services groups were buying up subsidiaries, sharing board members and generally not paying due regard to competition laws.
As a result, the Royal Commission recommended the biggest changes to Australian banks since deregulation in the 1980s, with local experts saying that all entities should take proper steps to assess culture and governance, and deal with any problems identified. These changes are currently being debated and enacted in the Australian financial services sector.
This is not a uniquely Australian problem, though; all around the world, banks are taking another look at how they approach entity management. The result is a digitization of compliance and a more robust approach to governance in order to keep up with the increasing compliance demands of global regulators.
The impact of technology in a bank compliance environment
With all of this increased scrutiny in the banking sector, those mapping out a bank’s approach to entity management must pay close attention. One step wrong, one forgotten filing or one error-riddled document could create havoc down the line. And with regulators setting new boundaries on a regular basis, those compliance and governance processes must remain flexible and able to change quickly to keep up.
That need for streamlined processes with a degree of flexibility is why so many banks are turning to technology to update and upgrade governance and compliance. Both entity management and board management can benefit from a technological injection to get the whole organization moving in the same direction.
Easing the governance gaffes
Most financial corporates are not built to keep up with the rapid pace of change and digital disruption – they are generally large and cumbersome structures that have grown organically over many years and many jurisdictions. Yet these large structures can be unwieldy to manage from a governance perspective, with each entity working in a nuanced way and not necessarily reporting in the same directions. A lack of data, visibility and security across a bank’s entities can easily lead to governance gaffes – not necessarily as deep-seated as the issues in Australian banks, but still enough to hit shareholder value.
Banks that approach their entity management from an integrated perspective – those that work from within one ecosystem, sharing data and knowledge to ensure a coordinated approach to governance across the whole structure – are able to make better decisions, and faster ones. In a global operation, technology such as entity management software can help address the challenges of maintaining a centralized and robust framework to collect legal entity data in a consistent and timely way, and enable accurate entity and governance reporting for banking.
Streamlined entity management
That central source of truth – the one place where all entity data is held for the whole structure – can be incredibly important for a bank’s approach to entity management. By centralizing entity data, the bank can better manage and effectively structure its corporate record to improve entity governance, better ensure compliance, mitigate risk and improve decision making.
In the banking world, we find many different legal entity structures and headquarters locations, which means there is no single approach to reporting forms used to identify legal entities and associated information. Entity management software can provide a central source of truth for a bank’s entity management, regardless of the form it takes. It stores entity information, documents and organizational charts in a highly secure format, enabling reporting on governance and compliance requirements and even electronic filing of statutory forms into global regulatory bodies, ensuring better compliance and streamlining internal legal operations.
For global banks, a streamlined approach to entity management can help to ensure that all local and global regulations are handled on time by the right people. With a central view over all local entity management workings, the HQ’s legal operations or compliance team can monitor entities and make any necessary changes or amendments to operations to ensure that not only are the local requirements in check, but that those local needs are not impacting the wider structure or any other entity along the line.
Keeping the board online
Extending the central source of truth beyond the entity management team, and bringing the board online at the same time, elevates governance and compliance to world-class status. Keeping the corporate record in a secure, cloud-based format; working within entity management software across the legal entity structure; and bringing the board online for communications enables faster, smarter decisions. The board has access to actionable insights from across the legal entity structure, and efficiencies can be made in managing legal, tax and financial information.
A board management portal provides a strong partner to a bank’s approach to entity management, facilitating compliance in an ever-changing regulatory environment. It empowers banks to improve governance, which helps leadership to identify opportunities and insight, and manage risk effectively right down to the smallest subsidiary.
Finally, banks must share data and files with auditors, regulators and other third parties, which significantly raises the bar on security. Most jurisdictions around the world have very strict regulations around how financial data is handled, both to protect it against cybercrime and other cybersecurity threats, and also to ensure that customers’ personal data is not exposed.
Technology has elevated the security of banks’ communications approach substantially, enabling third-party sharing without the risk of attaching confidential information to emails or even sending documents by mail. Banks’ approach to entity management must, at the very least, take heed of security concerns, and consider the adoption of technological innovations such as esignatures and entity and board management software to streamline operations. Moving to a secure, cloud-based platform can ensure ease of sharing information without exposing data to bad actors, while still ensuring the integrity of the single source of truth for the corporate record.
Banks’ approach to entity management must be tighter and more streamlined
Entity management software and board portals can both benefit a bank’s approach to entity management. Having these technology platforms aligned and integrated makes the benefits much more tangible, which is why Diligent has created a robust, secure ecosystem for all of a bank’s entity and board management needs.
Diligent Entities and Diligent Boards seamlessly integrate with a secure file-sharing platform to create the Governance Cloud, an end-to-end technology solution to help mitigate risk and gain visibility into all aspects of entity management and governance.
Get in touch and schedule a demo to see how Diligent’s Governance Cloud can help banks to streamline and elevate their approach to entity management.