Like corporations of all sizes, small-cap companies are feeling pressure from many different arms of governance. Small-caps need to stay in the loop with ever-changing compliance issues. Regulatory bodies are advancing more and more requirements, many of which give small-cap companies an unfair advantage compared with their larger counterparts. As a result, small-cap companies need to focus at least some of their time and energy on advocating for concessions that will help them to stay solvent. Cybersecurity is also a major issue for corporations of all sizes. It hits small-caps especially hard because they don’t always have the funds for the high-budget cybersecurity teams that large-cap companies do.
A common discussion around board directors is that, more and more, they’re realizing the need to digitize more of their governance processes. Digital tools will help them deal with the ever-present pressures around compliance, regulation and security, which will also help to spare them from negative headlines.
Small-cap companies can’t bounce back financially as well as medium- and large-cap companies after facing unforeseen financial risks.
In this volatile market, it has become a necessity for small-cap companies to review their budgets and to give board portals and digital governance tools a higher priority in the budget than they have received in the past.
Can We Get By With a “Free” Board Portal?
The word “free” typically generates a little excitement. We all like to get things for free. But when it comes to board portals, “free” can cost you more problems than the cost of the software.
A free board portal software program isn’t going to give you the features that allow you to conduct board business, such as restricting users from different areas of the portal where they don’t need access. It probably won’t give you specific tools for various governance duties either. “Free” tends to mean free of features.
More important than that is the lack of security inherent in free portals. With security breaches being reported in the media almost daily, cybersecurity is a major issue among corporations. A free board portal product is likely to have only the most basic of security features, which in today’s world of advanced technology, just won’t keep board business safe or confidential.
Small-cap corporations may be tempted to cut corners on some applications such as email. There are many free email programs available, but the security is lacking on many of those programs as well. Hackers are busy at work looking for weak links in electronic systems where they can mine personal data and sell it either to advertisers or to criminals with the intent of stealing identities.
Boards need board tools that were designed with the needs of board directors in mind. Recent headlines tell the story of Axis Bank of India, where regulators caught bank representatives and employees discussing financial results before they were officially reporting results using the common, free messenger app WhatsApp. Regulators are investigating and requiring the bank to produce a formal report on the debacle.
Will Mostly Free Options Work?
Obviously, free options are not an option for small-cap companies. Let’s look at a couple more alternatives — low-cost board software programs and portal programs developed by in-house IT teams. Once again, they tend to look like good alternatives on the surface, but they’ll give small-cap companies many of the same problems and concerns as free board portal programs and other apps. If features are lacking, customer service with free board portal apps tends to lack even more.
For a small fee, companies can buy basic board portal programs that may have some of the features that free board portals lack. Such features are usually limited in function and in user-ability.
While these programs may seem like a viable alternative to a higher-cost, higher-quality board portal service provider, these products cannot offer the robust security measures that today’s marketplace demands. The risk of a data breach just isn’t worth the cost of these programs.
Almost-free board portal solutions don’t typically offer necessary solutions for compliance, governance, or regulatory concerns. Overall, they are of little or no value for small-cap companies.
Most small-cap companies have some semblance of an IT security team. So, what about just developing a one-of-a-kind board portal designed by techs in-house? This alternative comes with problems of its own.
In-house IT teams are likely already working overtime on their regular duties. Often, they already have a punch list of things to do when regular duties are completed. Creating, updating and maintaining a board portal can sit on the back burner for long periods until they have time to tackle it. By the time they get to it, the project may already be outdated.
While an IT team may desire to help in this way, they may lack the necessary experience and knowledge of board business to create a full-featured, efficient and secure board portal solution.
These problems may leave board directors thinking, “What’s left that our budget can support?”
The answer is an enterprise management system developed by board portal service providers for which governance solutions are their primary business.
How an Enterprise Governance Management System Benefits Companies as They Grow
Despite budgetary restraints, board directors of small-cap companies have all the same duties and responsibilities as directors of large companies. Small investment portfolios don’t equate to smaller risk.
The best solution is to digitize as much of the governance and compliance activities as the budget will allow. An enterprise governance management system developed by a professional in the governance industry offers board portal options and other governance and compliance solutions for companies of all sizes and budgets.
Enterprise governance systems offer a suite of digital tools. Consultants will explain products like the board portal, voting tools, electronic director and officer questionnaires, board evaluations, secure messaging, compliance software, minute-taking software and more, and show small-cap companies how these tools can fit into their current budgets.
Board portal consultants can also show companies how a board portal and other digital products will reduce expenditures in other parts of the budget. For example, they’ll save on the cost of time, labor and energy of producing board books. In addition, they may rely less on the costly practice of hiring industry experts because board portals automate many governance processes.
Board portal specialists will also work with small-cap companies to develop a plan to add more digital tools as the company grows and expands its budget.
There’s no question that budgets are a big concern for small-cap companies. It helps to have a budget in mind before meeting with a board portal specialist. Small-caps may find that they can afford more than they thought. With the thought of future growth in mind, it’s also prudent for board directors to increase the board budget for board portal services by some percentage every year.
What is the Governance Cloud?
Board directors are obligated to perform a host of varied duties and responsibilities. Diligent developed a suite of governance tools to help them fulfill their responsibilities accurately and efficiently. The Governance Cloud ecosystem of products includes:
- Diligent Boards
- Director and officer questionnaires (pre-filled forms)
- Board evaluations
- Resolutions and voting
- Diligent Messenger
- Diligent Minutes
- Insights (curated content and videos) (beta)
- Entity Management
As board directors, leadership teams and general counsels continue to express their needs to digitize governance processes, Diligent will be the partner to grow with them. Collectively, these tools enable corporations to achieve a fully digitized and integrated governance ecosystem to mitigate risk, plan for strategic growth and ultimately, govern at the highest level.