Regulation rules the world. There are no two ways about it: If you’re working or operating in any jurisdiction around the world, you will be legally required to do something. That something could be as simple as holding an annual general meeting (AGM) and taking minutes, or it could be as complex as charging tax on sales and reporting tax collections monthly to the regulators. Whichever way you look at it, compliance is king in the modern world.
But that doesn’t have to mean those in charge of an organization’s compliance should be constantly chasing their tails. Far from it, actually. Left to look after itself, compliance can be a very reactive thing – you’ll find deadlines sneaking up on you, new rules and regulations tapping you on the shoulder when you least expect it. And the more reactive the compliance team finds itself being, the harder it becomes to just get on top of things. You get stuck in a reactive compliance cyclone with no break in the weather.
It doesn’t have to be this way, though. By making time to get more proactive governance processes in place – by finding the eye in the storm to get some breathing space – organizations can make a break from the vicious cycle of reactive compliance. By taking a more proactive approach to governance, the reactivity is reduced and compliance becomes less of a burden, and more of a tick-the-box exercise that you know you can ace.
What Do We Mean by “Proactive Governance”?
Think about that reactive cycle for a moment, because we’ve all been there. It’s that feeling you get when you don’t have time to plan beyond the mechanics of the schedule. Sure, things get done and compliance needs are met, but at what cost? Staff are stressed, and filings go down to the wire. It’s not a sustainable way to work.
Being proactive is the opposite. It’s when you take a strategic view of an organization’s compliance requirements, of the rules and regulations that drive those requirements, and map every control, audit, policy, procedure and task related to compliance back to those regulations. By doing this, not only will you have a clear idea of requirements, but you’ll also be able to keep track of the controlling regulations and ensure your processes can change and flex as the rules do. It’s less “Crikey, a deadline is imminent!” and more “We need to file this form by that date, according to Rule XYZ of this jurisdiction.”
To be technical about it, proactive compliance refers to the best practice of applying an anticipatory and self-motivated approach toward industry regulations and compliance standards, says Wilmac. It allows organizations to mitigate risk and protect their business and their customers.
A more proactive approach to governance helps an organization to manage and reduce risks, too – it’s about mitigating the risks inherent in financial, legal, environmental, reputational and safety matters of modern governance. When you consider the growth of compliance and risk burdens in every market around the world, and the very short lead time often given to react to changes, that proactive governance approach becomes very attractive – if only for the sanity of those doing the filing!
4 Ways to Keep on Top of Compliance Through Proactive Governance
So how can you get more proactive with governance? Self-assessing your entity management strategies are a good place to start. Who’s responsible for each entity, and what do the jurisdiction’s regulators require of that entity? Undertaking a requirements mapping exercise can help take the pulse of what’s needed, but proactive governance must be more than a one-off exercise; it must become “the way we do things around here.”
To start, get your processes in check by considering the following: a compliance calendar; clear governance workflows; regular maintenance of the corporate record; and clear roles and responsibilities.
Keep a calendar of filing deadlines
Compliance deadlines have a habit of sneaking up on you, and the risk of non-compliance is just not worth considering: huge fines, damage to the organization’s reputation, perhaps even jail time for directors. Regulators are there to make it as unattractive as possible to be non-compliant – it’s their job – but it’s relatively simple to stay on top of these deadlines by using compliance calendars. Set each deadline in the calendar, then set reminders that the deadline is approaching. Using entity management software can automate this process, and can introduce workflows and electronic filing to streamline compliance.
Have clear and efficient governance workflows
Those workflows are incredibly important because they can help to streamline and automate repeatable business tasks, minimizing room for errors and increasing overall efficiency. Once your proactive governance workflows are mapped out, you can gain essential insights into business processes and identify redundant tasks while increasing accountability and reducing micromanagement. Not only that, communication is improved as the workflow shows what’s happening and when.
Ensure everyone knows their roles and responsibilities – and is able to act
That improved communication and more transparent and proactive governance processes have the knock-on effect of clarity in roles and responsibilities. It means Director X knows he must sign off on the accounts by a certain date; the workflow lets him know it’s ready and the calendar notifications remind him to get it done. No more cries of “I didn’t know” or “I got too busy” – it’s simple, efficient and easy to remain compliant.
Make maintaining the corporate record an everyday thing
Of course, the biggest task in proactive governance is making sure the processes become a part of everyday life in your organization. It’s one thing to set up the most amazing governance in the world, but it’s entirely another thing to make sure that governance is followed to the letter, regularly, by the people who need to follow it.
The simple thing to do here – and the most proactive way you can handle governance – is by making the maintenance of the corporate record an everyday thing. By ensuring it’s checked and updated regularly, you’ll know that the compliance team has the most up-to-date information when it comes to filing time. Don’t let reactive compliance leave that team scrambling to check that Entity B’s director is still Jo Bloggs; give them the peace of mind that what the corporate record says is still true, whenever they look at it.
Get More Proactive by Harnessing Technology
It’s easy for us to sit here and tell you to be more proactive with your governance to help avoid the reactive compliance run, but governance and compliance are tricky, tricky things – and jurisdictions are not out to help make things easier for you by reducing red tape or the number of filings you need to make in a year. That means it’s up to you, the organization, to find another way to be proactive.
New processes and policies are great, but they’re also easy to ignore. That’s why so many governance and compliance teams are turning to entity management software to help get their governance into a more proactive state.
Diligent Assurance helps organizations confidently create, manage, and report on the obligations relevant to their business. This in turn helps improve governance to better ensure compliance, mitigate risk and improve decision-making.
Entity management software, such as Diligent Entities, helps organizations to centralize, manage and effectively structure their corporate record to improve entity governance. This type of software is built to drive proactive governance and to better ensure compliance, mitigate risk and improve decision-making.
Entity information, documents and organizational charts are stored in a secure, cloud-based format to create a single source of truth for governance and compliance – that’s the central repository needed to ensure all data accessed is the latest, most complete version. Compliance calendars are built-in, alongside reminders and workflows for better data, while the software also allows you to report on governance and compliance requirements and electronically file statutory forms into global regulatory bodies.
Diligent Entities integrates seamlessly with Diligent’s board portal to bring an all-in-one governance cloud, ensuring board decisions are logged and shared at entity level, while entity operations are accessible by the board. It also introduces secure messaging to enable safe and secure communications between board members, with total control over data retention.
Get in touch and schedule a demo to discover how Diligent’s Governance Cloud can help get the right information to the right people at the right time, and drive a more proactive approach to governance across the organization.